Between a Rock and a Harsh Policy: The Dilemma of Corporate Governance and Business Ethics in Sudan

Author(s): 

This article is based on a speech that Dirdeiry M. Ahmed, Ph.D.,
delivered in Khartoum, Sudan on August 7, 2017.

In Sudan’s legal culture, the business community is very much viewed as the source of corruption, not a victim. According to Sudan’s successive penal codes (1925, 1974, 1983, and 1991), bribery and breach of trust become a concern when they are committed by a government official or against a government entity. Even after actions by private individuals or against private entities were criminalized in more recent codes, lighter punishments were imposed on the perpetrators. Additionally, as of the 1970s, when the country adopted socialist policies that culminated in confiscating private businesses, rules regulating competition were very much curtailed and have since begun to erode.

However, these are the least of the woes of Sudan’s business men and women considering taking on corruption. By isolating Khartoum, the international community unintentionally insulated the country from international discourse that inculcates the markets of the developing world with universal values pertaining to corporate governance and business ethics. To be sure, the harm caused by the detachment of Sudan’s business sector from evolving world trends is greater than what befalls the sector as a result of misguided domestic legal policies.

In this presentation, I am arguing that the Sudanese business community is very much caught between unforgiving, sometimes punitive, local legal culture and uncaring, somewhat insensible, international policies of isolation and neglect. Yet the business community in this country—cognizant that it is bound to lose if antiquated policies and laws reign unchecked—has undertaken some important initiatives to help improve the situation.

Five factors currently determine the ethics of doing business in Sudan.

First, in recent years, Sudan has enjoyed rapid economic growth, mainly due to striking oil and the mining of gold and other minerals. The public sector, particularly at the state level, was barely prepared to deal with the resultant windfall in terms of putting in place robust legal frameworks to guarantee equal and transparent opportunities among those competing for government projects. Huge development projects that included highways, bridges, dams, airports, seaports, university campuses, hospitals, electricity plants, irrigation schemes, and agricultural projects were awarded—sometimes without clear criteria. Telecommunication licenses, petroleum and gas concessions, and mining contracts that were on offer were not always competitive.

Even when there are rules and better practices at the national level, projects offered by state governments are governed by embryonic state regulations that are not easily verified but very easy to bypass. Unresolved conflicts between national and state powers and bureaucratic methods of government accounts always mean that there is no transparent or straightforward way of doing business. As a result, the new business and investment openings increased the possibilities for corruption and introduced the private sector to new levels of scarcely disguised unethical practices.

Second, Sudan suffers from long-running internal conflicts and political instability. When a country faces structural problems of statehood, a culture of dodging institutions and discounting them as inherently inefficient becomes endemic. This makes it difficult for national commitments against corruption to trickle down through the government apparatus to help create a corruption-free culture in the local business community.

Third, the principles underlying good corporate governance and business ethics engender universal values. The United Nation’s (UN) Universal Declaration of Human Rights and covenants have established a global consensus on the applicability of shared moral principles for doing business. These values are now reflected in landmark instruments on ethical business behavior. The individual right to equal treatment, for instance, is expressed in the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention, the UN’s Convention against Corruption, the World Economic Forum’s Partnering Against Corruption Initiative, Transparency International’s Business Principles for Countering Bribery, and the International Chamber of Commerce Rules of Conduct to Combat Extortion and Bribery, among others. These instruments inform the anti-corruption sub-culture in so many countries, but not in Sudan. Sudan’s pariah status means that it is very much underprivileged in participating in the current universal human rights discourse and global business gatherings. As a result, Sudanese businesses can by no means access universal standards.

Fourth, isolation of Sudan has secluded the country from the efforts exerted by advanced economies aimed at combatting corruption in business. Legislation such as the United States’ Foreign Corrupt Practices Act and the United Kingdom’s Bribery Act not only help eradicate corruption within the countries where they are promulgated, but by placing legal responsibility on multinational companies for the behavior of their suppliers and distributors in global chains, they support efforts to combat corruption in low-income countries. An isolated country like Sudan does not benefit from the ripple effect of such far-reaching regulations.

Fifth, most of Sudan’s current business partners come from parts of the world that care little about combating corruption or observing business ethics. On the contrary, business coming from parts of Asia, the Middle East, and Eastern Europe look for partners who are influential, able to penetrate the system, and find shortcuts. Businesses promoting themselves as law-abiding and observing bribe-free approaches are not normally the ideal partners for investments and financiers coming from those regions. In fact, such law-abiding businesses are viewed as lacking influential connections at best or losing touch with reality at worst.

In light of the above, it is safe to say that creating a corruption-free business atmosphere in Sudan is a complex goal that draws into play multifarious factors and several players. The business community should prepare for the lifting of U.S. sanctions by working hard to reduce the current levels of corruption. Yet this ambitious goal cannot be achieved by government intervention alone. The anticipated return of Sudan to international trade and capital markets, as well as ending the country’s internal wars and conflicts, could prove to be the most effective means for addressing this problem. Russia, for instance, recently joined the World Trade Organization (WTO)—something that Sudan still aspires to. In the context of Russia’s WTO accession, many firms and business associations are now making anti-corruption commitments in an effort to become more competitive and attractive to external partners for trade and investment. Upon joining the WTO, for example, Sudan must commit itself to a host of rules dedicated to open, fair, and undistorted competition that ultimately reshape the relationship between business and government, and require greater transparency and impartiality.

The key question remaining is how to make such commitments enforceable. After all, good corporate governance, business ethics, and combating corruption are not only about global conventions and statements; they are also about meaningful actions and the personal commitment to raise ethical standards. In this regard, the business community in Sudan does not sit idle. Efforts to update the legal frameworks and prepare the scene for the forthcoming change are represented by the repeal of the fossilized Companies Act of 1925 and the promulgation of the new Companies Act of 2015. Likewise, the National Investment Encouragement Act of 2013 forms another milestone in the effort to fight corruption in the business sector.

The Sudan Companies Act of 1925, based on the English Companies Act of 1908, did not take into account the differences between the two countries or their disparate business communities. Yet that fossil survived for 90 years without change. This long tenure could be attributed partially to the fact that the Companies Act of 1925 remained largely a dead letter for the better part of its existence. However, as of the 1980s, the Sudan business community gained the sophistication required for adopting incorporation as the preferred form of doing business (to replace the historical family partnership or the sole trader model), at which time the problems of that obsolete enactment started to show. To address this situation, the business community led an initiative in coordination with the Ministry of Justice and a group of informed business lawyers to write a new companies act.

That process took a couple of years and ultimately produced the current, more relevant Companies Act of 2015. The current Companies Act of 2015 regulates the formation and administration of small private companies and public companies, having in mind the requirements of operating within the current globalized world. It outlines the relations in a company not necessarily chaired by the father or elder brother; and hence contains a clearer statement on the duties of promoters and directors. In the same vein, it is legislation that caters to the requirements of minority shareholders. It also takes full consideration of third parties in the event of liquidation to ensure that a company outfit is not abused as a tool for deceit. The new enactment also freed the law from bureaucratic hurdles and streamlined the company registration and scrutiny processes, helping to minimize the impact of various loopholes and technicalities that were only of use to profiteering, corrupt civil servants.

Additionally, the Sudanese government has sought, with the help of the business community, to promote foreign direct investment through the National Investment Encouragement Act of 2013. The act serves to fill the gaps particularly created by Sudan’s absence from the WTO and lack of bilateral investment treaties (BITs). It assures the same standard of equal treatment between Sudanese and foreign investors and provides for guarantees to eliminate any discrimination in this regard.

When dealing with corruption in Sudan, there are no simple answers. However, we must remember that in the case of this country, business is more of a victim than a culprit. All the more, the Sudanese private sector can be a force for developing solutions to the corruption problem. But it needs to be welcomed first by the international business community, integrated into world efforts aimed at combating this affliction, and taken for a prospective partner. The business sector cannot act alone. It needs a helping hand from credible government institutions. If the country remains conflict-ridden and secluded, it will be very difficult for it to galvanize the will and ability required to address corruption. But if all those players act simultaneously and coherently, we may soon talk of “corruption in Sudanese businesses” as a problem from the past.

Dirdeiry M Ahmed, LLB (Khartoum), LLM (London), MSt (Oxford), Ph.D. (Leicester), is the Managing Partner of Dirdeiry & Partners, a law firm in Khartoum, Sudan. He was Agent and Counsel of Sudan to the Abyei boundary arbitration (Sudan/South Sudan oilfield’s boundary delimitation) at the Permanent Court of Arbitration, The Hague 2008-2010; The Rapporteur of the all-inclusive Sudan National Constitutional Review Commission 2005; Ambassador of Sudan to Kenya and Permanent Delegate to the Intergovernmental Authority on Development (IGAD) East Africa Peace talks on South Sudan 1999-2005. Cambridge University Press published his monograph, “Boundaries and Secession in Africa and International Law: Challenging Uti Possidetis” (2015).

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