UK Sudan Trade & Investment Forum

CTC GROUP PRESENTATION

DOING BUSINESS IN SUDANA PRIVATE SECTOR PERSPECTIVE

December 2017

Sudan | Diversely rich country

GDP $95.6 BILLION

• LARGEST ECONOMY IN EAST AFRICA (6TH IN AFRICA)

39.6M POPULATION

• OVER 50% ARE BELOW 25YRS

$2,140 GDP PER CAPITA

• HIGHEST IN EAST AFRICA

200 MILLION ACRES OF ARABLE LAND

100 MILLION LIVESTOCK POPULATION OIL & GAS RESERVES

MINING – 2ND GOLD LARGEST PRODUCER IN AFRICA

VAST UNDERGROUND WATER RESERVES POWER & IRRIGATION – THE RIVER NILE

▪ Unilateral American sanctions for 2 decades 1997 - 2017

▪ European and American public opinion greatly affected by the Western media

▪ Darfur crisis after Nifasha Agreement of 2005

▪ Limited impact of sanctions until 2011

Post Separation of South Sudan 2011:

▪ Loss of 80% + of foreign currency earnings + rapid currency devaluation

▪ Large penalties imposed on international banks dealing with Sudan

▪ Sanctions become in effect Multilateral

▪ Effect compounded by banks “overcompliance” and “derisking”

▪ Significant reduction in the number of banks dealing with Sudan

▪ Greatly increased effect of the American sanctions on the economic position of Sudan 2013 onwards

▪ Significant impact on Sudanese civil society at multiple levels [health / education / income levels etc]

Economy | Background

Sudan | Economy

Source: World Bank 2016

FX Timeline | 2010-2016

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

CBOS Published Rate (USD)

Open Market (USD)

Jul ‘11Independence of South Sudan

Apr ‘12Economic impact of South

Sudan cessation - losing 90% of govt revenues

Sep ‘13Government lifts subsidies on fuel as part of austerity measures

Jul ‘14Inflation peaks at 47%

2016Severe difficulty in accessing hard currency pushes USD to close at SDG 19.65

2010‘Oil Economy’ period of currency stability helps Sudan through global financial crises

SDG 3.32

SDG 6.74

SDG 8.15

SDG 8.99

SDG 11.70

SDG 4.65

SDG 2.64

Doing Business in Sudan

Challenging Business Environment:

• Weak Governance and Regulatory Framework

• Impact of sanctions and their after effects on Banking and Financial transactions

• Currency devaluation – repatriation of profits

• Ranks low on TI Corruption Perception Index

• Poor infrastructure and support services

• Land Ownerships Laws

Foreign Direct Investment

• FDI in Sudan has steadily grown over the last ten years.

• FDI 3.4% of GDP, second highest FDI to GDP in the region

• FDI mainly in extractive industries - oil and mining 74% of FDI 2000 and 2010.

• China, Malaysia, and India, account for more than 95% of FDI inflows in oil sector.

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Alg

eria

Egypt

Lib

ya

Moro

cco

South

Sudan

Sudan

Tunis

ia

US

D M

illi

on

FDI Sudan 2012-2014

2012 2013 2014

CTC Group

• Founded in 1956 as The Central Trading Co. Ltd

- 60 years + of doing business in Sudan

• Managed to navigate 2 decades under challenging

external / internal environment

• Diversified multi-sector, multi-company Group

• >1,500 local + expat employees

• > 1,000 staff operating exclusively in the

Agricultural sector

• Largest private sector company operating in the

field of agriculture in Sudan and has been active in

the sector for over 60 years

Independent, Socially Responsible, Engaged private

sector:

• Dedicated to doing business “the right way”

• Believe in the potential and Invested in the future of the

country

40years + relationships with leading multinationals

• Creative solutions to overcome

challenges and sustain relations with

partners:

Manage currency devaluation risk by setting up

tools for “hedging” SDG

Focus on exports to manage currency availability /

payment risk

Implement ethics policies to manage reputational

risk

Setup complete supply chain infrastructure to

manage logistics risk

Corporate governance, management systems and

succession planning to manage continuity risk

Working to improve the image of Sudanese Private Sector

• Strongly believe in the vital role of the

private sector in addressing national

problems :

Nov 2015 CTC Group sponsored and hosted the

first ever privately funded US Congressional

Delegation visit to Sudan in partnership with HDI

Delegation with high ranking members of congress

Visit at critical time in US – Sudan relations

For the first time in decades had the opportunity

to “see for themselves”

Assess first hand impact of sanctions on private

sector / civil society

Engaged in US – Sudan dialogue throughout the

following 13 months

Visiting CTC Digital Nursery – Krt North Meeting leaders of the political opposition

Meeting Minister of Foreign Affairs Speech at the National Assembly [Parliament]

CTC Group Focus on Agriculture: Technology Transfer Centres

TTC NETWORK

Khartoum | Sinnar | Medani | Al Gadarif | Kadugli | Al Obied

Facilitate the efficient transfer of agricultural

technology to the farming community in

Sudan’s major agricultural areas through:

• Localization of modern agricultural

technologies and facilitating their

implementation

• Building farmers’ capacities and developing

their level of expertise

• Smoothening the supply of inputs,

machinery, implements, and spare parts

• Providing agricultural advice to farmers by

national and international experts

• Act as a main hub for providing the needed

after sales

Technology Transfer Centres

Supporting farming community

CTC Group established "Technology Transfer and Application Centres“ – first of their kind to be setup by the private sector to

facilitate the efficient transfer of agricultural technology to the farming community throughout the agricultural cycle

Seed Preparation

Post-Harvest

Harvesting Stage

Land Preparation & Irrigation

FertilizationPest & Weed Control

Mechanized solutions

Agro-Technology Packages

With impressive results

Al Rajhi Project – Northern State

• Total area:

- 1,140 feddan

- 529 hectares

• Full Agrotechnology package:

- GAP – Good Agricultural Practice

- Quality Seeds

- Agrochemicals and FertiliserTractors

- State of the art machinery Harvesters / Balers

• Harvest Averages:

- 22 bags per feddan

- Up 40% on average yield increase

Also with small scale farmers

❖ Higher yields/Feddan

❖ Lower cost/Feddan

❖ Better quality (export)

❖ Expansion of planted areas

❖ Farming becoming profitable

❖ Improved bank terms for Farmers

❖ Created auxiliary job market

❖ Many prefer Farming to Mining

130

266

400

0

100

200

300

400

500

2001 2013 2015

Sorghum Yield per Feddan

16Years

of Progress

Gum Arabic Processing

• CTC Group is a specialist commodity exporter and has a strong focus on developing the exportation of Gum Arabic –

Sudan exports 80% of world supply

• Significant value addition through quality local processing and establishment of reliable supply chain infrastructure

• In working with our clients, CTC Group setup a processing facility in Port Sudan to capture some of the value add locally

while guarantee quality export to global markets

Economic & Investment Reforms

Government commitment to structural and fiscal

reforms implemented to stabilize economy and ensure

sustainable growth

Focus on key sectors:

• agriculture,

• agri industry,

• encouraging export oriented business

“The authorities have endeavored to maintain

fiscal restraint while preserving social spending,

and are focusing on addressing key structural

impediments in the economy to encourage private

sector activity and attract FDI” –

IMF Sudan Country Report No. 16/324

Series of investment reforms to encourage foreign

direct investment and the ease of setting up business

The Sudanese Investment Law is designed to encourage

and protect foreign investment with special consideration

on nondiscrimination as well as having a superiority

status over other laws.

Sector Investment Incentives

AgricultureBanking

Exemptions: VAT + CustomsBPT reduced from 30% to Zero

Any size of land

PetroleumInfrastructure

Industry

Exemptions: VAT + CustomsBPT reduced from 30% to 10%

MiningIndustry

Exemptions: VAT + CustomsBPT reduced from 30% to 10%

World Bank Ease of Doing Business Index:

Sudan Ranked 160 / 189 in 2015

159 / 189 in 2016

Sudan | Post Sanctions

“Revival Beckons for Sudan as U.S. Lifts Economic Sanctions” - Bloomberg, 30th January 2017

• Banking Community Engagement:

– Have engaged in several forums inviting banking officials to interact with US officials including OFAC to clarify

“risks” of doing business with Sudan

– Reengagement by regional and international banks aligning with sanction removal

– Employing a risk-based approach Vs. wholesale “derisking”

• International Trade and Development Organizations:

– Sudan to renegotiate debts and reactivate memberships

– Potential availability of institutional funding and finance

– Potential availability of Export Guarantees /Insurance for Sudan Business

• International Business Community:

– Reevaluate Sudan’s risk profile – move from sanctions risk to reputational risk

– Reinitiate dormant/expired agencies impacted by sanctions as first step

– Products that were previously restricted due to US content now open for business

Need to manage expectations

Source: BMI Research Sudan Country Risk Report Q2 2017

▪ The economy in Sudan is unlikely to significantly

improve over the short to medium term on the back of

Sanctions Relief, largely on account of on going

designation as State Sponsor of Terrorism (SSTL)

which will limit debt relief and borrowing capacity in

capital markets

▪ Banks likely to ‘watch and see’, focusing on risk-

based approach rather than wholesale de-risking, with

small / middle sized regional banks leading the way

▪ Without meaningful improvement in governance,

FDI is likely to remain lower than what is needed to

drive significant economic growth to ensure broad based

prosperity

-

5.00

10.00

15.00

20.00

25.00

30.00

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

CBOS Published Rate (USD)

Open Market (USD)

Jul ‘11Independence of South Sudan

Apr ‘12Economic impact of South

Sudan cessation - losing 90% of govt revenues

Sep ‘13Government lifts subsidies on fuel as part of austerity measures

Jul ‘14Inflation peaks at 47%

2016Severe difficulty in accessing foreign currency is pushing USD higher vs SDG

2010‘Oil Economy’ period of currency stability helps Sudan through global financial crises

Jan 2017Optimism towards lifting

of US economic sanctions begin to push USD lower

Jul 2017Decision to delay sanction relief creates panic

Dec 2017USD peaks at SDG27

FX pressures continue

Sudan | Unique Opportunity

• Agro and Livestock Industries – enhancing export value e.g. agro-processing

• Oil & Gas

• Extractive Industries – UK’s long history in the continent/industry

• Consultancy & Design Services

• Education

• Power Generation

• Financial Services

• IT services and e-commerce infrastructure

• Unique Opportunity - Market reintegrating with the Global economy after 20 years

Yet agriculture still remains key

Global Unutilized Arable Land

[excluding forests and reserves]

Agriculture | Value add locally

Sales

Logistics

+

Distribution

Processing

+

Value Add

Farming

• Cultivation of Crops and

livestock

• Seed propagation

• Equipment & Inputs

• Irrigation

• Training & Development

(Best Practice)

• Processing or

manufacturing

increasing the value

add that stays in

Sudan

• Port Facilities

• Storage

• Cold Chain

• Air, Rail and Road

• Marketing & Sales

regionally

• Commodity Exchanges

• Finance and Insurance

• Agriculture: 31.3% of GDP

• Employs 80% of the occupation force directly and indirectly

• Represents $29.9bn in value today

• Potential to increase 4.8 times if more value add is achieved locally before exports leave our shores.

Thank You