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After boom years, some Chinese firms run into trouble in crisis-hit Sudan

Author: AJOT | Jul 09 2013 at 08:00 PM | Category: International Trade  

When Chinese clothing wholesaler Chan Cui Xiao signed a deal with a Sudanese businessman to export colourful bed sheets to the African country he was confident of making good money.

A few months later he is in serious financial trouble - he shipped his goods to Sudan but did got paid and has rushed to the country to try to track down his local business partner.

The Sudanese had sent him credit and bank financing letters, and as Chan had done business that way in Egypt and other Arab countries he thought it was safe to export his goods.

“I made a loss of $200,000 but have been unable to find the Sudanese guy. The phone number and address he gave me seem wrong,” said Chan, sitting in a stuffy clothing store run by a fellow Chinese in the town of Omdurman, north of Khartoum.

Chan is not alone in losing money. There are at least 10 Chinese clothing wholesalers in Omdurman’s dusty fashion market who say they have not been paid by Sudanese partners. Some of them have come over from China to sell off their merchandise from stalls set up in front of the single-storey white brick buildings that line the unpaved market street.

Others are busy filing legal suits, although a weak Sudanese legal system means they probably stand little chance of getting their money back, analysts say.

Sudan has been scrambling to contain an economic crisis since it lost the bulk of its oil production when South Sudan seceded in 2011.

As oil revenues were the main source of budget income and of foreign exchange reserves needed to pay for imports, many Sudanese importers are now struggling to get their hands on dollars to pay foreign suppliers.

Financial losses cited by Chinese traders and businessmen raise concern about the African country’s ability to revive its economy.
China is Sudan’s main trading partner and its lifeline as Western firms have shunned the country since a U.S. trade embargo was introduced in 1997 over Sudan’s human rights record. It bans firms operating in the United States from doing business with Sudan.
Chinese firms, undeterred by conflicts, corruption and galloping inflation in Sudan, are building transport and telecommunications infrastructure and supply the country with consumer staples from soap to power sockets to underwear and rice.

There is no sign yet that bigger Chinese companies are pulling out, but if financial problems continue to increase the risk of doing business, that could slow or even jeopardize Sudan’s plan to attract more foreign investment to develop its mineral and agricultural resources and overcome international isolation.

Hotel Slump
At a high-level bilateral meeting in Beijing last month, state media from both countries praised the depth of ties.

But for many private Chinese entrepreneurs, most of whom came after the end of Sudan’s civil war in 2005, Sudan’s depleted finances are creating a difficult business environment.

“We hardly have any projects in Sudan anymore and are now moving staff to Kenya where business is much better,” said the head of a mid-sized private Chinese building company.

He asked not to be named as he fears problems with the Sudanese government, which still owes his company money for construction work for ministries in Khartoum over the past two years.

“We used to have 40 Chinese staff. Now we’re just 10,” he said, sitting in his office in a large but mostly deserted building in southern Khartoum. “Sudan is no longer an important market for us.”

China, though, does have an interest in Sudan overcoming its economic crisis as it has investments in South Sudan’s oil production, which has to be exported through Sudan.

Sudan resumed oil exports last month - after a 16-month shutdown due to a row with South Sudan over pipeline fees - with the sale of a cargo of oil produced by China National Petroleum Corp, which dominates the oil industry in both countries.

In January, China extended a $1.5 billion loan to Sudan via st