chapter 9 The Development of Entrepreneurship in Sudan Yagoub Ali Gangi and Hesham E. Mohammed Introduction Entrepreneurship is one of the important driving forces for an economy. It can generate job opportunities, invent technology, introduce new products, enhance economic growth and promote socio-economic development for countries (Gangi and Timan 2013; Gangi 2015). Countries with an improved entrepreneurial ecosystem and a high level of entrepreneurial activity tend to be economically developed and their people are socio-economically well off. Consequently, many developed countries throughout the globe have rec- ognised the importance of entrepreneurship and made efforts in this regard, including allocating significant resources for its development. As part of these efforts, many studies have been carried out to identify the state of entrepre- neurship in those countries and determine the main factors that contribute to their development. However, the case in developing countries is somehow different. Few countries have realised the importance of entrepreneurship for their economy. Therefore, few studies have been undertaken to examine the state of entrepreneurship development and its driving forces in those coun- tries. As is the case in most developing countries, studies on entrepreneurship development in Sudan are rare. Moreover, Sudan is not covered by the Global Entrepreneurship Monitor (gem) reports. As a result, there is no adequate in- formation about entrepreneurial activities in Sudan and there is a literature gap in this field of study. The little evidence available about the state of entrepreneurship in Sudan indicates that Sudan is entrepreneurially underdeveloped. A study undertaken by Gangi and Timan (2013) has indicated that the entrepreneurial environ- ment is poor and suffers from various weaknesses. Moreover, the World Bank’s Doing Business reports ranked Sudan at the bottom of the listed countries. Indeed, different studies undertaken by the World Bank reveal that entre- preneurial activities are very low compared to other countries in the region (World Bank 2015). The main objective of the present chapter is to explore the state of entrepreneurship in Sudan. Moreover, it aims to examine the role of national factors in shaping and constraining the entrepreneurship state in Sudan. © Yagoub Ali Gangi and Hesham E. Mohammed, 2017 | doi 10.1163/9789004351615_010 This is an open access chapter distributed under the terms of theYagoub CC BY-NC-ND Ali Gangi and 4.0 Hesham license. E. Mohammed - 9789004351615 Downloaded from Brill.com09/27/2021 04:11:47PM via free access 210 Gangi and Mohammed Background on the Sudanese Economy Sudan is a lower-middle-income country with a gross domestic product (gdp) per capita income of about $us 1500 and, in 2015, a total population of 39 mil- lion, with an average annual population growth rate of about 3 per cent. This high population growth rate has resulted in a relatively young population and a high proportion of the labour force being of a productive working age. An average of about 55 per cent of the total population are between the ages of 15 and 64 years, and creating enough jobs for them is a major challenge (African Economic Outlook 2015). Moreover, about 66 per cent of the total population lives in rural areas with little access to quality education and health services. Thus, a large proportion of Sudanese suffer from illiteracy, poverty, unemploy- ment, high mortality at birth and low life expectancy. These factors have result- ed in Sudan been ranked very low in terms of human development indicators. Furthermore, Sudan economy is characterised by public sector domination of the productive sector, leaving limited room for the private sector to expand. Even the slim private sector is largely dominated by informal sectors, which remains the most important source of production and employment (Country Watch 2015). The main characteristic of the Sudanese economy is that it depends largely on the agricultural sector and it can be described as an agricultural economy and largely driven by natural resources extraction. Historically, and for a long period, agriculture has been the main source of economic activity in Sudan. It used to contribute more than 50 per cent of gdp, more than 90 per cent of for- eign currency and provided employment opportunities for more than 80 per cent of the population. However, at the beginning of the twenty-first century, the situation has changed, with the exploitation of petrol and Sudan embark- ing on the export of crude oil. The contribution of agriculture to gdp has grad- ually fallen to around 35 per cent by the end of 2010. During the period 2000 to 2010, the oil sector drove much of Sudan’s gdp growth and the economy boomed on the back of rising oil production and high oil prices. Thus, petrol became the main source of foreign currency and its contribution equated to over 70 per cent of total value of exports. But after South Sudan’s secession in 2011, Sudan lost most of its oil fields. Since then, it has struggled to stabilise its economy and compensate for the loss of foreign exchange earnings. As a result of this shock, gdp growth dropped from an average of 6 per cent before 2011 to less than 3 per cent in 2014, and the rate of inflation increased from an average of 10 per cent to 36.7 per cent for the same period. Sudan has experienced a central economic planning system for most peri- ods since its independence in 1956. This planning system has resulted in the Yagoub Ali Gangi and Hesham E. Mohammed - 9789004351615 Downloaded from Brill.com09/27/2021 04:11:47PM via free access <UN> The Development of Entrepreneurship in Sudan 211 Table 9.1 Macroeconomic indicators Indicator 1990 2000 2006 2007 2008 2009 2010 2011 2012 2013 2014 gdp (current 12.4 12.2 35.8 45.8 54.8 53.1 65.6 67.5 62.3 66.4 73.8 price billion us$) gdp growth −5.5 6.3 10.1 11.5 7.8 3.2 3.5 −2.0 −2.2 3.3 3.1 Inflation 66.2 9.9 9.4 6.7 14.2 4.0 19.6 21.0 27.6 36.7 29.9 Agriculture % 40.6 42.2 29.8 26.7 25.8 26.3 24.6 25.4 28.8 29.2 29.2 Industry % 15.3 20.8 27.8 30.6 33.4 24.6 28.4 27.4 22.4 20.9 20.4 Services % 44.2 37.0 42.4 42.7 40.8 49.2 47.0 47.2 48.8 49.9 50.4 Source: World Bank 2016 emergence of a large public sector that dominates economic activities, leav- ing limited room for the private sector to evolve. Therefore, historically, the contribution of the private sector to Sudan’s economy has been smaller than is the case in other developing countries. For example, the World Bank (2014) estimated the share of the private sector in non-hydrocarbon gdp to be 70–75 per cent for both Egypt and Tunisia, and its share in employment to be 60 per cent for Egypt and 80 per cent for Tunisia (Adly and Khatib 2014), whereas in Sudan the share of the private sector in gdp was estimated at an average of about 30 per cent during the three decades following Sudan’s independence (World Bank 2014). However, this share has gradually increased since the mid- 1990s, reaching an average of about 55 per cent during the period 2000–2010 (World Bank 2014). Recently, the contribution of the private sector to the na- tional economy has significantly increased. According to the African Economic Outlook (2014), the private sector is the main source of employment in Sudan, providing about 75 per cent of jobs and about 70 per cent of foreign currency proceedings. This change in the private sector share can be attributed to the government’s decision to embark on liberalisation policies in the mid-1990s, which opened the way for the emergence of a productive private sector. Since Sudan’s independence in 1956 until the mid-1990s, private sector eco- nomic activities have largely been dominated by individual activities rather than corporate activities. For example, in the traditional agricultural sub- sector, small-scale production activities are carried out by individuals on their own land using family members as labour. This practice is traced to the land tenure system in Sudan where agricultural land is distributed in small lots between villagers. Moreover, many rural residents lack the necessary Yagoub Ali Gangi and Hesham E. Mohammed - 9789004351615 Downloaded from Brill.com09/27/2021 04:11:47PM via free access <UN> 212 Gangi and Mohammed entrepreneurial skills to undertake these activities at a larger scale. Individual economic activities are also applicable to retail trading, where individuals own and run small shops buying different commodities all over Sudan’s villages. The main problem associated with such individual economic activities is that they operate at very limited scale and employ primitive technology that is characterised by low productivity. Enterprise activities exist in the modern agriculture (mechanised and ir- rigated); manufacturing (food processing, clothes and furniture) and services (banking, insurance, export and import of goods, education, and health) sec- tors. These sectors consist largely of small firms employing a limited number of workers. Until the late 1980s, the majority of firms were publicly owned. How- ever, after the liberalisation and privatisation policies of the 1990s, the situa- tion has started to change. The United Nations Industrial Survey (unido 2013) has found that 96 per cent of industrial firms are privately owned. Moreover, the enterprise sector as a whole consists largely of private limited liability com- panies and sole proprietorships.