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Thursday, 23 November 2017

Issues in Development: The Urgent Necessity Is a Commodity Exchange for All Exports and Not A Gum Arabic Bank

On  Sunday 20th. August the 4th.Gum Arabic forum was held in Holiday Villa to discuss two main issues

, a) Gum and Duty free areas and ,b) the idea of a Gum Arabic Investment Bank. The forum is organized by a private company and financed by the French Development Agency. One does not understand the role of this private company (organizer) and who owns it since the financing of these forums seem to be availed by the French Development Agency!!This is not the issue.
My main concern is how the proposed idea of a Gum Arabic Bank as presented by Dr.Fatah El Rahman M.Salih of the Financial Investment Bank was discussed and  defended by the Chairman of the session Dr. Abdel Magid, the Secretary General of the Gum Arabic Board!! One is not against the idea of establishing a bank to specialize in Gum Arabic (GA) but one is for a more purposeful and beneficial  institution which will immediately help improve the conditions of 13 million Sudanese who live and thrive on this important natural gum belt and in which  about 5 million are the real producers. Moreover, the world demand is about 500,000 million tons and Sudan exports no more than 60-80 tons. No need to mention the wonders of GA but it seems that its development is passing through a process of politicization by some corners who care for themselves rather than the noble national objective of the real producers of GA, who do not according to a World Bank report get more than 10% of the export price. According to some producers it is much less than 7%. If the producers of this important commodity get such a small percent of their efforts why should then go on producing GA? Or for that other crops.
First let us see which idea is viable , urgent and more meaningful for the producers of this important commodity; an investment  bank or a modern Commodity Exchange  a la Ethiopia Commodity Exchange? If we look at the various development banks that were meant to help producers in Sudan one will definitely find that most of them did not deliver the goods in a satisfactory manner i.e. help in reaching the intended  targets. Take for example the bank which was supposed to develop  livestock of the country. Did it convert the Sudan into a meat and hides and skins exporting country? Did it help to raise the level of living of nomads? Another example is the Real Estates Bank. What did it do to help solve the acute housing problems in Sudan? What about the Industrial Development  Bank? Did it really transform Sudan into an industrial state through conversion of its natural resources as happened in South Korea? Let us even look at the Agricultural Bank of Sudan. Did it really convert the Sudan into a strong agricultural country feeding itself and others? Although these development banks had more advantages than investment banks, what can an investment bank for GA do to help the producers, but only help its shareholders! Such a bank will have limited advantages and will not solve the financial problems of the producers. That is why the licensing authority which is the Central Bank of Sudan should really study carefully the viability of such a bank.
After a number of years observing  the marketing problems of GA and other export commodities one came to the conclusion that the present system is out of date and that a new system has to be adopted to insure that producers of GA, Oil Seeds Sorghum etc. are getting their real worth of effort so that they shall continue produce these commodities. An investment bank for GA which is a viable idea yet it will not be possible to expect that it can help improve the conditions of the producers, because it will be operating on the basis of profit as any other  bank. Its main resources will be from its shareholders who will not accepts except a  profitable institution. Moreover, it will be a long time before it enhances its financial capabilities before starting operation. It will be the most logical priority for the following reasons;
a)The Commodity Exchange (CE) shall need a huge infrastructure of proper modern stores and transportation ,where the export crops shall be stored properly, This will take away the worry of storage  by the producers and insure a modern method of  securing the quality exports crops.
b) Establishing a CE shall be taken care of by the government through loans from financial institutions who will be keen to help because the  CE shall improve the country’s foreign exchange resources since all resources shall pour into the central bank.
c) About six or seven  reputed banks will be part of the CE in order to perform the financial  process of buying and selling in the trading floor. These very banks can become the depositor of the producers as well as the buyers .They will therefore, be keen to help the producers since they will benefit from these operations.
d) The  CE shall achieve a very important objective and that is gradually reducing intermediaries and brokers who buy cheap from the producers and sell high or smuggle it to neigbouring countries .The 90% margin between the producers’ price and the international prices will gradually go to improve the conditions of the producers. They do not need to be helped by any bank as long as they will get through this marketing system a decent rightful income. In this case they will devote their energies to GA and other export crops. This kind of improvement was actually realized by the Ethiopian model.
e) The management of the exchange shall include government as well as all players in the field of production and exports of export crops.
Lastly as long as producers are not given their worth of their toil and efforts the agricultural production of the country shall not be enhanced and we should not expect to achieve the motto of the 5 year plan of making the country a strong producing  export  country. Improve the existing  marketing system by removing brokers and intermediaries, provide the producers with their full rights,  then you shall observe a real improvement in the life of the majority  of Sudanese who are at present being treated unfairly. They have the right to a decent living. They are the majority of the Sudanese working and living in agriculture and other human activities !!!