Increase in Precious Metal Production During War

Dr. Haitham Mohamed Fathi

The government has announced an increase in gold production to 64 tons in 2024, especially since the previous year’s production was 42 tons, amid a severe shortage in government operations and the country being in a continuous state of war for two years. Many factors have made this increase in gold production possible. The Sudanese economy now relies on gold as one of its main sources of income, despite the environmental and economic challenges associated with mining, such as smuggling, environmental issues, and economic disparities.

The traditional gold mining sector is now a vital part of the Sudanese economy, employing over two million people and accounting for about 80% of the country’s total gold production. This type of mining is spread across 14 of Sudan’s 18 states, serving as a livelihood for many, especially those who lost their jobs due to the ongoing war. Workers in this sector manually extract and process gold using primitive tools like mills and metal detectors, particularly as the country recovers from the shock of the April 2023 war. Additionally, six major foreign companies have returned, and national businessmen, who had suspended their commercial activities, have entered the traditional mining sector.

With investments slowing down and economic activities like real estate and manufacturing at a standstill, Sudanese capital has shifted towards traditional gold mining. The economic vacuum created by the destruction of factories and the interruption of business activities has led many people to turn to mining, which has had a cascading effect on many related industries. A large number of workers who lost their livelihoods have moved towards gold sites, either for traditional mining or other occupations in the gold market.

There has been a noticeable rise in global gold prices in recent times. Therefore, the government must expedite the creation of a gold exchange, as this step has been delayed despite having a clear project and plan for the past ten years. Approximately 50% of the gold produced (almost) is smuggled abroad, as miners aim to sell it at global market prices. This widespread smuggling significantly reduces the economic returns from gold exports, thereby diminishing its impact on the country’s economy.

If smuggling is curtailed, gold revenues could reach $7 billion annually. This is because the exchange would reduce the smuggling of about 100 tons of gold produced each year, allowing for the creation of reserves in the central bank.