Wheat, a major staple cereal crop in the Sudan is targeted by numerous government policies. The most unpopular policy was the self-sufficiency policy that replaced cotton by wheat in the Gezira scheme leading among other factors to destroy the entire production system in the project. The result is that the production continued to decline while consumption is in the rise (Figure 1).
The steadily increasing consumption of wheat is driven by rural-urban migration and the changes in consumption preferences of the people due to the overall wave of urbanization. Hence, wheat is turning key staple food especially in cities leaving the government with no choice other than subsidizing its more than 2.5 million metric tons of imports annually. The costs of subsidy are growing high for the already vulnerable government budget and several issues of corruption and lack of subsidy effectiveness are constantly being raised. The government is trying to reduce the imports burden by encouraging domestic production
The wheat subsidy
About 2.6 million metric tons (MTs) of subsidized wheat is imported by the three major wheat importers in the Sudan, namely, Sayga, Weeta and Seen. The imported wheat is subsidized within the government poverty alleviation strategies and the subsidy is meant to guarantee:
1) A fixed price for the consumer of SDG 0.33 per bread (70 grams). 2) Supply of wheat flour to bakeries at the price of SDG 120 per 50 kg sack. 3) Wheat subsidy is provided to the major milling companies in the form of a preferential exchange rate to import wheat grain. Companies should deposit the value of their desired amount of wheat imports in local currency to their accounts with Central Bank of Sudan (CBoS) and receive the equivalent foreign currency required for imports (Figure 2).
According to Akhbar Alyoum Newspaper(2015), the applied exchange rate is 2.9 SDG/$, which is almost 50% lower than the official exchange rate and the difference is to be counted as the subsidy. The official exchange rate in the Sudan is 6.3 SGDs/US$ (CBoS, 2016), which is far below the black market exchange rate of more than 12.1 SGD/US$. This means that the selected milling companies receive at least 9.0 SDGs in each US$ they withdraw from their CBoS’s accounts for the imports of wheat. The subsidized wheat flour is then delivered to the bakeries through the companies’ agents all over the country. The bakeries are then expected to sell each 70 grams’ bread to the consumers at the price of SDG 0.33.
What is the problem?
The effectiveness of this subsidy scheme depends on many factors, but importantly the entire chain including importing, milling, distribution to agents, transportation and delivery to bakeries across the country need to be working transparently. Unfortunately, the following problems are constantly reported leading at the end to considerable shortages in the supply of wheat bread: 1) Consumers: bread is not available, not according to the designated size/weight or not according to the normal quality (mixed with cheap local flour).
2) Bakeries: wheat flour is not available in the amount they require, the subsidized flour is far below what they need and therefore, they are forced to mix it with local flour. 3) Agents: the subsidized flour they receive is less than what they are supposed to. Not all the subsidized flour is sold to bakeries, but in the black market. Experts claim that considerable informal trade (internal and across borders) of wheat flour exists. 4) Milling companies: importing ships are arriving in Port-Sudan, but companies are unable to claim their imported amounts because the CBoS is unable to provide them with sufficient foreign currency to claim their imports. Hence, they supply 60% or less of the mandated wheat flour.
Open questions
1) Given the problems in implementing the subsidies and the losses of public funds due to these difficulties, would completely removing the subsidy and saving the public fund for the government lead to drastic implications on the Sudanese households with their different income and regional groups? 2) More than a decade ago, there was a government policy aiming at assuring self-sufficiency in wheat by cultivating large areas in the Gezira scheme by wheat. Would channeling the amount of the current subsidy to domestic wheat producers in northern Sudan and financing large scale cultivation projects there improve the livelihood of the Sudanese people? 3) Due to the long chain through which the subsidy is injected starting from the importers and through the way down to consumers and the difficulties facing the government to reduce corruption and smuggling, would it be better that the amount of subsidy been distributed in the form of food coupons to low income households while leaving the rest of the chain without any intervention?
These open questions among other related in the context on food, energy and water in the Sudan shapes the themes of our current research on this country.
