Sentry Press Release
London / Washington, DC
Sunday, May 16, 2021 – As French President Emmanuel Macron today convenes in Paris an international conference on investment in Sudan, The Sentry is warning of the continuing threat to a successful civilian-led transition from the economic and institutional legacy of Bashir-era corruption.
The new briefing report, “Sudan Struggles to Control Its Parastatals,” details an array of business operations largely controlled by military and security services. The report further spotlights how private companies in the mining, commercial, and construction sectors incorporated by several commanders of the notorious Rapid Support Forces (RSF) are often contracted by the RSF in breach of conflict-of-interest principles and an absence of government oversight and regulation. The RSF is an official security force unit with a record of mass atrocities and human rights abuses, originally formed under the Bashir regime from members of the genocidal Janjaweed militia.
Dr. Suliman Baldo, Senior Advisor at The Sentry and report author, said: “The Sudanese Transitional Government continues to make encouraging progress toward fulfilling the promise made to the Sudanese people of a democratic, peaceful, and prosperous Sudan. But this progress risks being undone unless it is rooted in a tangible shift away from the opaque and corrupt system operated for decades by the former regime. The transitional government must deal with this legacy with more resolve than it has shown to date.”
Oliver Windridge, Senior Advisor at The Sentry, said: “As the international community readies to welcome Sudan back from isolation at the Paris Conference, many of the kleptocratic systems and practices that were active under the deposed regime of President Omar al-Bashir have survived and continue to cripple the economy two years after the demise of Bashir. The international community must play its part by identifying and holding to account those who resist the necessary move towards open, transparent, and democratic civilian-led government.”
Selected report excerpts:
- On April 5, with very little fanfare, the Ministry of Finance published a “preliminary list” of the public companies and corporations owned by various state institutions. The publication of this list was a concession to both domestic and international pressures, but transparency and anticorruption campaigners in civil society, the media at home and abroad, and Sudan’s international partners must seize this opportunity to press for more comprehensive transparency, robust reforms, and oversight controls of all parastatals, particularly security sector companies.
- Parastatals are one of the main reasons that Sudan’s government controls only 18% of the resources generated by government agencies and their economic activities.
- Sudan’s parastatals are rife with internal governance irregularities, and they lack fiscal transparency and accountability for the public funds in their custody. Many are operating unlawfully. Of 431 active parastatals identified by an earlier government technical committee formed shortly after the fall of Bashir, only 12 delivered their revenue and business profits to the Ministry of Finance, and 400 did not regularly submit to the audits of the National Audit Chamber.
- According to the Deputy Auditor General in 2019, 80% of parastatals were in breach of Sudanese laws regulating government contracting and procurement, and 105 were not properly registered in the Commercial Registry, as their paperwork lacked information on items such as “scope of work” and “corporate headquarters.”
- The second in command of the RSF, Lt. Gen. Abdel-Rahim Dagalo, and RSF officer Maj. Algoney Dagalo, both brothers of RSF commander and Deputy Chair of the Sovereign Council Gen. Mohamed Hamdan Dagalo (known as Hemedti), have incorporated several private companies in Sudan and the United Arab Emirates. Several of their companies are known to have carried out projects for the RSF, according to international investigative reporting.
- In explaining the absence from the most recent list of parastatals linked to the RSF, both the minister of finance and the adviser on governance explained that none were found during the ministry’s canvassing for public companies and corporations.
- The public continues to endure tremendous pressure from hyperinflation and severe shortages in essential commodities and services, and the purchasing power of median households and businesses is melting away by the day. Without more decisive action to eliminate the legacy of kleptocracy responsible for much of Sudan’s economic woes, the government will risk losing broad popular support and inviting a storm of national protests like those that overthrew President Omar al-Bashir.
Report recommendations:
To the government of Sudan:
- Introduce reforms targeting the leveling of investment and commercial activities to promote fair competition between parastatals and the private sector.
- Immediately remove all exemptions from taxes and customs, as well as other subsidies and monopolies granted to security sector and other public companies and corporations.
- Enforce the closure of all off-budget accounts held by parastatals, national funds, and government corporations, and bring off-budget accounts under a national Treasury Single Account.
- Thoroughly reform the Commercial Registry to ensure comprehensive identification of the beneficial ownership of all companies to match similar reforms happening around the world.
- Engage with the Extractives Industry Transparency Initiative (EITI), Open Government Partnership (OGP), and other similar international groups to access expertise and capacity building and to ensure the government’s own efforts are in line with best practices.
- Strengthen the human and financial resources of the Ministry of Finance’s Directorate of Public Enterprises and Corporations and empower it to enforce the Ministry’s control of the finances of all public sector enterprises and corporations.
- Subject all parastatals to random and periodic audits by the National Audit Chamber or another auditor appointed by the civilian government.
- Require that all parastatals submit a comprehensive yearly report, including financials, to the prime minister’s office
- Commission reputable international and domestic business and financial consulting companies to conduct thorough studies of the capital, assets, equities, and liabilities of public entities targeted for privatization or continuation as government entities.
- Task the consulting company or companies with recommending, based on findings, the appropriate structure and business strategies for running the targeted companies under strict financial transparency and compliance requirements for a limited time, after which the decision about privatization, continuation, or liquidation can be made.
- Have the Ministry of Finance oversee the activities and budgets of all parastatals, including those linked to the security and defense sector, until such steps are taken.
- Expedite the establishment of the permanent Anti-Corruption Commission under the recently adopted act mandating its institution.
- Pursue accountability, whether through the courts or otherwise, for officials responsible for corrupt activities.
- Redouble asset recovery investigations to ensure that the government can show tangible results and potentially aid in delivering development and essential services to the population.
- Unify the Sudanese regular forces, paramilitary groups, and units of JPA signatory armed movements, per the Security Sector Reforms mandated by the recently signed Juba Peace Agreement (JPA), to reduce the disproportionate budgetary burden of expenditure on the defense and security sector and free up resources for the improvement of basic public services.
- Subject the private companies of RSF commanders to the same scrutiny that SAF, GIS, and Ministry of Interior companies will eventually be subjected to, as the RSF is in receipt of substantial national budgetary allocations.
To international partners and financial institutions:
- The Friends of Sudan donor group and other bilateral and multilateral aid countries and agencies should Encourage Sudanese authorities to ensure the compliance of all parastatals with Sudanese fiscal transparency requirements by opening their books to the Ministry of Finance and submitting to its control all revenues from services to the public and business transactions
- The US, UK, and EU should be prepared to designate for sanctions any spoilers undermining these processes.
- International Financial Institutions (IFIs) and bilateral and multilateral aid agencies and countries should Extend capacity building interventions to assist the government bodies that are steering the privatization of viable publicly owned companies and corporations and the liquidation of others, in particular the National Audit Chamber, the Directorate of Companies and Corporations at the Finance Ministry, and the Financial Intelligence Unit.
- IFIs and international and regional banks engaged or considering engagement in Sudan flag the international transactions of all public enterprises that resist the oversight of the Ministry of Finance and the National Audit Chamber as susceptible to money laundering and terrorism financing and as possible conduits for illicit financial flows to and from Sudan.
- International and regional banks engaged or considering engagement in Sudan should carefully monitor and designate private companies owned by RSF commanders when warranted as entities linked to politically exposed persons and subject their international transactions to heightened scrutiny to ensure their compliance with all Sudanese laws and international know-your-client banking standards.
Read the briefing report “Sudan Struggles to Control Its Parastatals”: https://thesentry.org/reports/
About The SentryThe Sentry is an investigative and policy team that follows the dirty money connected to African war criminals and transnational war profiteers and seeks to shut those benefiting from violence out of the international financial system. By disrupting the cost-benefit calculations of those who hijack governments for self-enrichment, we seek to counter the main drivers of conflict and create new leverage for peace, human rights, and good governance. The Sentry is composed of financial investigators, international human rights lawyers, and regional experts, as well as former law enforcement agents, intelligence officers, policymakers, investigative journalists, and banking professionals. Co-founded by George Clooney and John Prendergast, The Sentry is a strategic partner of the Clooney Foundation for Justice.
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