Beyond Common Perceptions

Interview with:

General Manager of the Gum Arabic
You are trying to achieve five short term goals: to provide finance, reduce the financial cost, guarantee production, support the country's export revenues in foreign currency and finally, to protect the environment. Can you elaborate on these targets?

These are in fact the five main reasons behind establishing the company, and these are the problems that the country faced before the establishment of the company in 1969. Gum Arabic in Sudan is very unique. Internationally, Sudan produces more than 80% of the total production of this crop and it contributes to the world market of gum Arabic by more than 75% to 80% of the total exports. There is no other product that Sudan dominates like the gum Arabic market, and therefore whenever gum Arabic is mentioned, the name of Sudan comes up. We export animals, meat, sesame, groundnuts and other products, but there is none as gum Arabic. 5 million Sudanese are involved in this production, which represents about 1/5 of the country's total population. Moreover, the product comes from dry arid zones, and without these trees that are making a boundary between the semi fertile land and the desert, there would be a very quick desertification in the Sudan. The tree itself (Acasha Senegal) fertilizes the land by giving Neutrogena, and if you go anywhere in the tree zone you have better crops, the land grows grass and other trees. All of this is a defense against desertification coming from the North. Therefore when we speak of the uniqueness of the tree, we speak of the uniqueness as a source of crop, in production of other cash crops, and as a tree that helps to protect people's own fragile environment. The tree doesn't need foreign components, which is a very significant factor for a developing country. You don't have to fertilize it, you don't have to water it or to add chemicals, it grows naturally, and with minimum effort you collect the gum.

Gum Arabic has a large range of commercial use; which ones are you relying on the most to ensure sustainable growth in the future?

Gum Arabic is used basically in production of high quality sweets, chocolates or high brand sweets, and this is how it was traditionally used in Europe. It is transported from Sudan through a Red Sea port called Soukin, and then to Europe; later on, its use in medicines begun because gum is a good instrument for making a capsule. Like for sweet production when mixing sugar and cornflower, using gum puts them together. It's a holding agent for sugar and other materials. Whenever you have something difficult to swallow then you put it inside and then you coat it, and after you swallow it is absorbed. This was introduced by Gum Arabic long time ago, and now it is widely used. Being a natural organic product, it's used in many cosmetics, and later on it was used in beverages, because it enables you to stabilize two liquids together. For example if you mix oil and water, or a flavor which is oily and then water, and you want to make them one stable liquid, the gum can do that job. It is so significant that the gum is demanded by the US for the production of Pepsi Cola and Coca Cola and you cannot have Pepsi or Coca without gum. This is why in the US embargo the gum is excluded.

More recently, we also discovered that we could use gum as a preserving agent for fresh meat, whether fish or poultry, and the idea came to us from Egyptian fishermen who were taking fish from near the boarder of Sudan to the north down to Cairo. It takes a long time and they want to have the meat or the fish reaching Cairo fresh, so instead of washing the fish with hot water you have to use a solution of gum Arabic to coat the fish with it. That keeps the fish fresh until they reach Cairo. We discovered that people are using this also in Thailand for this industry. If you use the gum solution, you wash the meat with it and put it inside you package. It stays longer in the shops before you cook it.

It is tested in fresh juice that if you use the gum the juice stays fresh longer.

Our doctors say that gum is useful for curing some of the kidney problems, and we are now using it in the Sudan kidney center and the University of Khartoum with good results, although the research is still in the beginning. We feel it's a promising area. They also discovered that it might be useful for enabling the body to absorb more iron from food. Although gum doesn't contain iron, by using it you would have a greater capacity to absorbing iron. We feel this could be a good discovery because we have a large number of children who have deficiencies in iron taking causing anemia, and Sudan is a number one country with this disease.

We also heard that gum is being used in Europe for some abdominal problems, so we are trying to double-check this information. The most important thing that Europe witnesses now is the BSE, the mouth disease and the pollution of the GMOS which is being used as a substitute to gum Arabic. Now if people do not want to use gelatin because it's from a lamb, the gum would be the best substitute. Gum is a stabilizer and GMOS are to be used to save these functions, but all of them are being modified genetically, and people are moving away from them to gum Arabic, which is natural, organic and helping. Luckily Sudan has the potential to produce six or seven times more than what is done today, in fact enough what is needed by the international consumption. We are speaking of about 50.000 tons. Sudan is selling about 30.000 out of that total, and the remaining is sold by Nigeria and Chad. Sudan can produce today more than 300,000 tons giving the existing increase rate. If people feel that there is a need for more than what is produced, we have the lands and we have the chance to produce more trees to provide the increase in supply of the market. Despite of this, we feel that the source represented by gum Arabic should be ranked in second place after petroleum discovered in the country. We feel that it is something related to environment and we have to preserve it from the deflections in the land and the desertification. We don't want to have production that would affect people, forcing them to move from rural to urban areas, because a decline in production would follow a decline in exports. So it's also a holding agent to the people of the production areas.

Do you think that the international consumers are fully aware of gum's benefits? Do you think they would be able to work out other substitutes to GMOs in Europe?

This is a difficult question. Consumption patterns and culture vary from a society to another. Unfortunately not all of them are quite aware of the significance and importance of gum Arabic. Italy is quite aware of gum Arabic, but if you go to Germany or France you don't feel this strong awareness. We think that in the long run people will become more and more aware of their own health and they'll be looking for natural products.
You have increased profits by 683% in 1997, 1455% in 1998, around 2000% in 1999, 3000% in 2000. Are you expecting similar figures in 2001? How can you explain this tremendous growth?

The reasons are very simple. When speaking percentages, figures can be misleading. The paid capital is very small, not more than 2-3% of the total volume the company is involving. We rely mainly on finance, and we have an accumulated capital coming from the profits during the past ten years. Whenever you achieve any volume profit you relate it to the base. If you are working in millions of dollars and you have a capital of only one million, whatever profit you have from your activity coming from finance and exporting you relate it to the small base and you'll have a huge percentage. We have about 150 million Sudanese pounds of capital and we are dealing with about 80-90 billion Sudanese pounds, and we have profits of about 8 billion Sudanese pound. We are moving now to increase the capital base.

What is exactly the shareholding structure?

70% is owned by the private sector and 30% by the government. The company started as a 100% private company, but in early 70's the country had what we call the confiscation move. Some people had shares in our company and the government confiscated them. When later on the government paid back the money to the people it retained some shares, and that's how it became the owner. The capital base is about 158 million pounds, 15.8 million dinars, but the authorized capital is 400 million dinars. Our shares are bought and sold in the Khartoum Stock Exchange. If I speak of the period when I came to the company, January 1998, the final value of the share of 1.8 dinars jumped to18.3 dinars, which is more than 10 times. It reflects the demand of the society.

You mentioned that gum Arabic was excluded from the embargo. To what extent exactly is the US embargo hindering your expansion and competitiveness in the international markets?

We have clients in Europe as well as in the States, and we have a good relationship with some of the long-term users of gum Arabic. Embargo is a government-to-government kind of relationship, and we don't feel that trade and commerce should be involved in. We feel that Americans, causing embargo on a trading base, are penalizing its own citizens, those who are consuming gum Arabic. The gum would be going to the States anyway, direct from Sudan or through intermediaries, agents or Europeans. The only difference between before and after the embargo, is that before the embargo customers in the States and consumers were getting this product at a cheaper price, and after the embargo they have to pay a premium because of the longer route that the gum has to take or because of the different steps that are needed to be taken before the gum reaches the American ports.

Is this affecting your competitiveness?

No, because we provided the gum directly before the embargo, and today we are doing that indirectly, so somebody is getting gum from us and he is selling it to the States at a higher price, so the consumers in the States are paying a higher price. Because of that premium in the price, consumers and processors are pushed to go to something else. We are now providing gum at prices that would preserve the markets until this embargo is over. We don't want to lose the consumers in the States, and we don't want to penalize our consumers there. We would like to continue the sustainable flow of gum into the States, because otherwise we push them to the substitutes, which have no quality and which might not be that good in the long run. We are very keen not to lose gum because of embargo.

Many Asian countries draw a clear line between what is trade, commerce and the politics, and this is why Sudan initiated the so called eastwards policy. Are you planning to establish a processing factory in partnership with any Asian company? Isn't one of the main obstacles in Asia that companies and consumers need to be educated on the benefits of using the gum Arabic?

Traditionally we have very strong relations with Asia, especially with Japan. We are trying to regain our agents in China who left the market because of high prices. Sudan increased prices, I think unreasonably, and most of the Asians found it not economical enough to continue importing gum from Sudan. So they left for other substitutes like gelatin and CMC. We have direct links with Malaysia, and we had also the opportunity to visit Singapore, South Korea, Thailand, Vietnam and Hong Kong. We feel that we have to tell people about the quality of gum Arabic and that some of the substances they are using in a form of powder is gum Arabic. We would like them to import directly from a Sudanese processor of gum and then use it. We established agencies in Malaysia, Singapore, Thailand, South Korea and China, and we feel that there is an intense potential with big market and population. Gum has a future in Asia, maybe far more than what we used to have in Europe because of the volume of Asian population. We do hope that by establishing processing units in Sudan we would be able to transform gum into forms that are known in Asian countries. Today what they get is gum as powder form, and they don't know that this powder is gum Arabic. We want to give them the same form and packing that they are used to. We couldn't open the Asian markets in the past because we didn't have processing units that put the gum in the forms they understand. We must continue to see how we could create the chances, and together with the Asians we could establish the facilities either for processing or distributing.

Note: World Investment News Ltd cannot be held responsible for the content of unedited transcriptions.

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World INvestment NEws, 2002.
This is the electronic edition of the special country report on Sudan published in Far Eastern Economic REVIEW.
September 5th, 2002 Issue.
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