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 recognised 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 entrepreneurship 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 countries. 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 information 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 environment 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 entrepreneurial 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.
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 million, 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, unemployment, high mortality at birth and low life expectancy. These factors have resulted 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 foreign 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 embarking on the export of crude oil. The contribution of agriculture to gdp has gradually 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 periods since its independence in 1956. This planning system has resulted in the
Since Sudan’s independence in 1956 until the mid-1990s, private sector economic 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
Enterprise activities exist in the modern agriculture (mechanised and irrigated); manufacturing (food processing, clothes and furniture) and services (banking, insurance, export and import of goods, education, and health) sectors. These sectors consist largely of small firms employing a limited number of workers. Until the late 1980s, the majority of firms were publicly owned. However, after the liberalisation and privatisation policies of the 1990s, the situation 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 companies and sole proprietorships. The number of common stocks companies is very limited and they operate mostly in banking and insurance services.
The State of Entrepreneurship in Sudan
Generally, there is no precise data available on entrepreneurial investment projects or entrepreneurial activities in Sudan. The Global Entrepreneurship Monitor (gem) survey, which provides data on entrepreneurial activities for many countries of the world, does not include Sudan. Also, the Central Bureau of Statistics (cbs) in Sudan does not publish data on entrepreneurial activities or any other relevant variables for this field of study. Finally, there has been no comprehensive survey that covers all aspects of entrepreneurship in Sudan.
To deal with this challenge, we used the available data from different sources to draw a picture of the actual situation of entrepreneurship in Sudan. First, we used the data on newly registered business, which is published by the Companies Registration Authority of the Ministry of Justice, as an indicator for entrepreneurial activities. There are, however, some reservations about these data as a measurement tool for entrepreneurial activities, because there are a considerable number of new firms that have been registered but have not yet begun business. A counter argument to these reservations is that registration of any new firm can be taken as an indicator of a new business idea and as an indicator of the intention of the firm’s owner to transfer his business idea into actual business.
The data in Table 9.2 indicate the total number of newly registered limited liability or sole proprietorship companies in each year during the period 2005–2014. As the table depicts, there is a large variation in the number of newly registered firms in each year. For example, the number of newly registered companies of limited liability was only 494 in 2005, but increased in four years to 1,257 in 2009. The same pattern occurred for sole proprietorship firms, where the number of new registrations increased from 894 in 2005 to 3,936 firms in 2009. Thus, when adding the number of companies of limited liability to the number of companies under sole proprietorship we get the total number of newly registered firms, which indicates a rising trend over the same period. The highest number of births of new firms in terms of absolute number occurred in 2013, with a total of 8,475; but it fell to 6,527 firms in 2014. The highest percentage growth rate of newly registered firms was witnessed in 2009 and 2010 (133 per cent and 39 per cent respectively). This observation can be taken (with reservations) as an indicator for a dynamic phase in the development of private enterprises in Sudan during these two years, which represent the most prosperous years for Sudan’s economy in its modern history. This is based on the assumption that the birth of new firms involves new business ideas that emerged from a creative and innovative process. In this vein, as more and more people create new business ideas and decide to turn them into actual businesses, the state of entrepreneurship will evolve. However, this alone should not be taken as sufficient evidence of a favourable environment for the founding of new firms or an indicator of a healthy entrepreneurial state, because many of these newly registered businesses may not start-up their business at all or they fail at an early stage. To clarify the state of entrepreneurship in Sudan, another
Table 9.3 depicts the available data on the total number and density of micro-, small-, and medium-sized enterprises (msmes) in Sudan in comparison with a number of African countries. The selection of these countries is governed by the availability of data on these variables. As we observe from the table, the number and density of msmes in Sudan lags behind the selected countries. At the time when the density of these firms was only 0.7 in Sudan, it reached 87.4 in neighbouring Kenya and 74.6 in Tanzania. Even when we compare Sudan with the other selected countries, we find that it has the lowest number as well as the lowest density of the msmes. This reflects an underdeveloped state of entrepreneurship in Sudan in comparison with some other African countries.
This raises the questions, why is entrepreneurship in Sudan underdeveloped? And why does it always lag behind other countries in the region? Can this underdeveloped situation be traced to the poor entrepreneurial environment? Or can it be attributed to the lack of entrepreneurial skills in Sudan? Moreover, what are the factors that lead to the backwardness of the entrepreneurial environment in Sudan? To answer these questions, two publications by the World Bank on the state of entrepreneurship and the business environment will be reviewed.
The World Bank publishes the dataset on entrepreneurial environment for 189 economies in its Doing Business report. This dataset covers ten aspects of the lifecycle of a business: starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting minority
Sudan ranks 159 out of 189 economies in the ease of doing business reports of 2016, moving down five places from the 2011 ranking of place 154. During a period of five years, Sudan failed to improve or to maintain its position on eight out of nine topics. In three of the eight indicators in the ranking, Sudan has significantly dropped by more than forty places. In the areas that Sudan’s performance has worsened, the biggest drop was under the heading of registering the property, where it dropped from 40 in 2011 to 89 in 2016. The only area in which Sudan has succeeded to improve its ranking is enforcing contracts.
In addition to the Doing Business report, the World Bank carries out an Enterprise Survey study for different economies to examine the factors that shape the business environment in these countries. The Enterprise Survey for Sudan was conducted in 2014 by a team of experts from the World Bank. This survey aimed to fill the gap in information related to this sector. It covered the following sectors: manufacturing, services, and transportation and construction. Public utilities, government services, healthcare, and financial services sectors are not included in the sample. The areas covered in enterprise surveys include: infrastructure; trade; finance; regulations; taxes and business licensing; corruption; crime and informality; finance; innovation; labour; and perceptions about obstacles to doing business.
The estimated values of these indicators reflect that Sudan’s infrastructure condition is poor; the Graft Index (measurement of corruption) rating is high; the financial services are weak; regulations, taxes and business licensing are inefficient; trade operations, innovation and technology are lagging behind. The spread of crime imposes some additional costs on firms (Word Bank 2014). This implies that the poor business environment in Sudan has played an important role in constraining the development of entrepreneurship in recent years. Nevertheless, the state of the business environment in Sudan is better than the average of the neighbouring sub-Saharan African countries in 2016. 1 Foreign investors are not as afraid to take risks as they are elsewhere in the region. This is one reason for the major inflow of a large amount of foreign direct investment into Sudan in recent years, and particularly during the period 2004 to 2008.
Contextual Factors that Shape the Entrepreneurial State in Sudan
Entrepreneurial activities in any country are embedded in an environment and are influenced by interaction with its contextual factors. These factors can either promote or hinder the business environment and thus affect the entrepreneurial activities in a positive or negative way. Previous research in this field recognised the importance of contextual factors in creating a conducive business environment and, therefore, fostering the state of entrepreneurship development. The most important factors that are widely identified by the literature are economic, financial, political, administrative and regulatory, and finally cultural factors. These factors formulate the entrepreneurial environment and thus influence the willingness and ability of people to become entrepreneurs (Gnyawali and Fogel 1994). In what follows, these factors are discussed in the context of Sudan.
Economic Factors
The economic environment is one of the most important factors that influences entrepreneurship development in different ways. Firstly, the
In Sudan, the impact of the economic environment in entrepreneurship development has been mixed. Its different elements have played a varying role in entrepreneurship development. Firstly, the economic conditions have passed through different stages of development. During the 1990s (before the petroleum extraction and export), the macroeconomic condition was generally characterised by instability, where the rates of inflation were high, the rates of economic growth and per capita income were relatively low. On the contrary, during the period between 2000 and 2011, the economic performance was characterised by relative stability, where rates of inflation were low, economic growth and per capita income had rapidly grown and exchange rates had continued to be stable (see Table 9.1). However, the period after 2011 can again be characterised by poor economic performance. The rate of inflation soared to about 37 per cent, the exchange rate deteriorated from 3 Sudanese pounds per us dollar in 2010 up to about 10 pounds in 2015, and economic growth dropped from an average of 6 per cent before 2011 to an average of 0.5 per cent after 2011. Table 9.6, presents a comparison between Sudan’s economic performance and other African countries.
As can be seen from Table 9.6, Sudan is rich in natural resources (land area). The land area is about 1.8 million square kilometres, which ranks second
Based on this, we can argue that Sudan possesses the key raw materials of success, including a youthful population, natural resource endowments and some aspects of economic stability. These elements could have contributed positively to facilitating entrepreneurial activities in Sudan during the last three decades. However, there are some other economic aspects that undermined the evolution of entrepreneurship and thus contributed negatively to its future development. These included the instability of economic conditions, which has manifested itself in high rates of inflation and devaluation of exchange rates.
Financial Factors
Finance plays an essential role in the development of entrepreneurship in any country. The most important constituent of any successful investment project
Access to finance is claimed to be one of the main factors affecting the development of entrepreneurship in developing countries. The lack of finance in many developing countries is believed to be the most important challenge confronting entrepreneurs in Sudan. Bearing in mind the low per capita income in Sudan, most people have limited personal savings and lack the required capital to start their own business. Moreover, the government usually lacks the sufficient financial resources to provide loans to entrepreneurs. Thus, entrepreneurs have no other option than to seek external financing for their investment projects. One source of external finance is the commercial banks. However, this option is associated with many difficulties. One of these difficulties is related to entrepreneurs themselves; that is, many entrepreneurs are not regarded as creditworthy or do not have the necessary collateral to obtain finances for their projects. The second difficulty relates to the banking system in Sudan, which has a limited amount of capital. Moreover, most banks charge high interest rates due to the high risk associated with new business projects.
To tackle the problem related to the financing of small projects, the Central Bank of Sudan established a microfinance unit in 2007. The main objective of this unit is to provide flexible forms of finance for entrepreneurs who have a business idea and are looking for finance opportunities. Since its establishment, the microfinance unit has helped many entrepreneurs and contributed significantly to promoting entrepreneurship in Sudan. However, it has also experienced significant criticism. One of these criticisms relates to the amount of finance available, which, it is claimed, is very small and inadequate for covering the total costs of investment projects. Another criticism relates to the limited extent of its coverage. In addition, its services are limited to a small percentage of potential entrepreneurs.
Political Factors
The political environment in any country plays an important role in encouraging or discouraging entrepreneurial processes. It determines the set of rules and policies that govern entrepreneurial activities, and the overall atmosphere in which firms can operate. This factor is generally comprised of many
As shown above, the political environment includes many factors and it is hard to review all of them here. To deal with this challenge, the authors interviewed political economist, Mohamed H. Ahmed about the impact of the political environment on entrepreneurship and business development in Sudan. This interview is summarised in the two paragraphs below.
Sudan, like any newly independent country, witnessed a humble start-up of businesses in its post-independence era in the 1950s. However, by the end of the decade, the political struggle over Sudan’s economic orientation had become deeply disputed between the rival liberal and communist parties. Yet, the business sector was growing and benefiting from intact infrastructures and a sound civil service tradition that was left by British rule (1899–1956). In early 1969, however, Numeiri took power on behalf of the Communist Party. This dealt a heavy blow to the laissez-faire mood of the economy due to the nationalisation of the private sector, although the regime made a quick shift back to the free market ideology, following the logic of the Cold War swings, after Numeiri liquidated the communist leadership and hence worsened relations with the Soviet Union. But the damage had already been done to the business sector and there was capital flight from Sudan. In sum, the business formation has never moved away from being dominated by the service sector and the manufacturing sector remained humble.
Post 1989, there was a mushrooming of business registrations due to the growth of the service sector and encouragement from the government for the private sector to take the lead in many areas that used to be publicly financed as a result of the discovery of oil by 1998. The sudden bonanza that followed encouraged both internal and external entrepreneurs to seek opportunities in Sudan’s economy, especially in oil related fields. That steady growth was helped by the stability of the foreign exchange rate and the flexibility of the investment laws, tailored to attract foreign investment. All this was taking place despite the problematic political relations of Sudan with many international players, primarily the us, which still considers Sudan to be a state that supports terrorism and, consequently, has maintained an economic blockade on the country since 1993. This us embargo, together with worsening relations with other influential countries, impacted on the international business sector
Regulatory and Administrative Factors
One of the most significant obstacles facing investors is the high level of bureaucracy and complexity of the administrative procedures at both the federal and state levels. In spite of the existence of the unified Investment Encouragement Act 1999, amended in 2007, and the adoption of a single outlet policy by the Federal Ministry for Investment for registering a new business, the committee found that, in practice, an investor wanting to register a new business must complete 56 steps in most sectors, and 66 steps in the agricultural, animal, health services, mining, and hotel sectors. That is to say, instead of completing the registration of a new business in one outlet, the investor has to do it in 56 to 66 places.
In cases where an investor has to amend his company statute to include a new type of investment, this process may take up to six months. If the investor is a foreigner, it might also take months to achieve security clearance in the home country.
In spite of the existence of the Federal Investment Act, it has been found that a number of state and federal authorities possess some authority related to investment business, delegated to them by the Federal Investment Encouragement Act, which defeats the idea of a single outlet for completing registration procedures.
Cultural Factors
Culture is another important factor that explains cross-country differences in entrepreneurship development. Hofstede (1991) proposed that national culture has six dimensions that shape people’s personality and behaviour. Four of these are believed to influence entrepreneurs’ decision-making: power distance; individualism versus collectivism; uncertainty avoidance; and long-term orientation. Power distance is defined by Hofstede as the perception of the degree to which people accept unequal distribution of power among individuals in a given society. Individualism refers to the degree to which people prefer to act as individuals rather than as members of groups, whereas collectivism emphasises a strong social framework in which people expect others in their group to cater to them. Uncertainty avoidance is defined as the degree to which people in a country prefer structured over unstructured situations. Long-term orientation and short-term orientation refers to the importance given to the future, on the one hand, and to the past and present, on the other hand. In long-term orientation countries, the society encourages serious, long-lasting commitments. In short-term oriented countries, individuals are interested in protecting existing personal safety and stability.
As far as the impact of culture on entrepreneurship development is concerned, low power distance, individualism, low uncertainty avoidance, and long-term orientation are associated with entrepreneurial activities and innovation (Shane 1995; Thomas and Mueller 2000; Jones and Davis 2000). Low power distance cultures do not encourage people to work harder to gain more power in society. In a national culture that scores high on “collectivism”, individuals’ ability to achieve their dreams are hindered by their caring for others. Also, in cultures that score highly on uncertainty avoidance, people have an increased level of anxiety about uncertainty and ambiguity, which is a situation people usually find themselves in when they engage in an entrepreneurial activity. Long-term orientation in the business context is related to pragmatism. Although Hofstede’s dimensions do not explain exactly what will happen in a certain situation, they can help us better predict what is likely to occur.
Unfortunately, Sudanese culture is dominated by “collectivism”, high “uncertainty avoidance”, “short-term orientation” and “low power distance”. This is certainly the conclusion of Adam’s (2016) study on the impact of culture on strategic decision-making in Sudan. Thus, the cultural aspect may be considered a barrier to Sudanese people engaging in entrepreneurial activities.
Risk aversion is common in Sudan. Consequently, many young people lack the confidence to establish their own business for fear of failure, and its severe legal and social consequences. Moreover, risk aversion causes many people to prefer secured rent-seeking jobs to entrepreneurial activities. This is reflected in the attitudes of many Sudanese families, who send their children to schools and universities to be educated and earn certificates in order to secure jobs in the public or the private sector. Moreover, this risk averse attitude causes some Sudanese investors to imitate others in their investment projects. Consequently, innovative entrepreneurs are often discouraged by others who imitate them (Gangi and Timan 2013).
A Case Study of Two Firms
As shown in the previous section, the entrepreneurial environment in Sudan is very complicated and it is influenced by the interaction of many contradictory national factors. These factors represent both opportunities and challenges for entrepreneurship development. In this section, we try to understand how firms in Sudan have dealt with these challenges and opportunities. A case study of two firms is undertaken for this purpose. The selection of the firms is governed by data availability and permission of the firm owners.
Dajin for Poultry Products
Dajin for Poultry Products was established in 2005 as a joint project between the Ministry of Agriculture and Livestock of Khartoum State and Mico Company for the Poultry Industry. The latter was a private company, founded in 2003 by a successful entrepreneur and veterinary physician, Sanosi Hassan Sanosi. Sanosi initiated the business idea and served as managing director of Dajin for about ten years. The company project was started with just four production houses, with a total production capacity of 700,000 birds per year. However, in less than ten years its production capacity multiplied by more than 14 times (from 0.7 million in 2005 to 10 million birds per year in 2015). In addition, its production units were integrated to include ten houses for mother chicks, a
The main objectives of the company were: to promote poultry production and generate a substantial qualitative change in the poultry sector in Khartoum state through productivity enhancement and integration of different production cycles; to support the government policy of self-sufficiency in food production; to generate job opportunities and contribute to building the capacity of national labour by improving their skills in this profession; to encourage investment in the agricultural sector by utilising the available resources in productive activity; to increase the per capita consumption of chicken in Sudan and change the consumption behaviour of Sudanese society towards chicken; and to realising a reasonable profit for the owner of the company.
Having completed its ten-year strategic plan (2005–2015), Dajin has been described as one of the fastest growing companies in Sudan. By doing so, it succeeded in fulfilling a great achievement for both shareholders and the national economy. In the following section, we will summarise what Dajin has achieved during the last decade.
On the financial side, the company has succeeded in implementing its expansion plan with the minimum possible cost and sold all its products at a reasonable price for both producers and consumers. The company has raised a total profit of around $us 56 million during the last ten years for the shareholders. This profit enabled the company to pay back all its commitments to creditors on time. On the economic side, the company has stimulated the banking sector in Sudan by borrowing a total of $us 227 million for the project operation, creating around 600 direct jobs and ten times this number in indirect employment opportunities. Moreover, it contributed to the economic growth of the national economy by producing more than 50 million birds. Furthermore, the company has contributed to the government budget by paying taxes (of about one million dollars). On the technical side, the company has contributed to enhancing technological advancement in poultry industry by importing modern technology; establishing breeding houses with varying capacity ranged between 28 to 70 thousand birds; creating opportunities for technical training and research experiences for university students and other researchers. Finally, the company has provided a social contribution to the rural area, where the project is located, and to Sudanese society at large. To this end, the company has achieved the following: contributed to establishing a number of public service institutions, such as schools, medical centres and electricity stations; contributed to organising the residents of “Ahamda” villages (the project area) into a cooperative association and paying all expenses of the
An interview was carried out with the entrepreneur who established the company and served as a general manager for ten years. This interview indicated that, at the time of its establishment, the company was confronted with many challenges, the most important one being the difficulty of finding a suitable source of finance for its investment projects. This was mainly because the company was recently established and did not have adequate assets to provide collateral to the banks. The company solved this problem by cooperating with its partner, the government of Khartoum state, which provided a letter of guarantee that covered the total amount of its investment projects and extended it for five years. The letter enabled the company to get the required finance for all its operations. Another challenge that faced the company was the lack of the necessary infrastructure (for example, paved road, electricity supply) in the project area. Again, the company used its communication channels with the Khartoum state government to solve this problem. On the other hand, there were many factors that contributed positively to the development of the company. One of the most important factors was the economic and political stability that characterised the period between 2005 and 2010, which had witnessed a good economic performance and stable political situation, enabling the company to start-up and grow rapidly.
kmk Company
Mr. Khalid Elhasan was a young engineer who graduated from the University of Khartoum in early 1990s. After graduation, Mr. Elhasan engaged in several small business activities, unlike most of his peers, who preferred rent-seeking activities and joined the public sector and private firms as employees to earn a fixed income.
After failing to establish a number of business activities, Elhasan set up a small company named kmk. The name is an abbreviation of his name and that of his partner. The company started business in 1998; its main business is selling electrical appliances to trade union members and middle-income groups. This kind of business already existed in Sudan, but kmk introduced payment by instalment and started to sell commodities on a credit basis. According to the company instalment policy, customers must repay the value of their purchase in 12 equal instalments. This kind of arrangement enabled employees with a limited fixed income to own the electrical equipment that they had
kmk began business with a small number of employees; two of them were graduates of accounting, a third of economics and a few others were non-graduates. Elhasan was the general manager and the chairman of the board of directors, which was composed of Elhasan, his partner and two other names. The partner was a silent partner, providing financial support but with no part in the operations. After the expansion of the business, Elhasan began to feel that he was losing control. He talked to a friend who was a university business lecturer and asked him to help formulate a business plan and organise the company. However, Elhasan was too busy to follow through on the advice, because he was wrapped up in running the business as a one-man show. He was always complaining of the lack of competent assistants to help him run kmk.
In spite of the above-mentioned difficulties, the company performed well and made huge profits. Elhasan succeeded in getting the agency of a famous Chinese electrical appliances producer, which was a remarkable gain for the company. Driven by moral and strategic motivations, Elhasan decided to enter into importing and selling automobiles, vans and rickshaws to his customers. The vans and rikshaws are wanted for business purposes, i.e. transportation of others. The company also planned to sell these new commodities using the same mode of finance, in this case with 48 monthly instalments. However, this kind of new business was risky due to the ongoing deterioration of the value of the Sudanese currency, a situation in which the seller loses a large percentage of the repayment value of the commodity. kmk succeeded in overcoming this risk by inventing a new mode of finance for its car imports. The financing mode was a blend between a letter of credit with deferred payment and partnership with banks. The credit letter with deferred payment was covered by the local insurance companies. Since kmk was not in a position to secure local collateral, it convinced one of the Sudanese commercial banks to enter into partnership in this transaction. By involving the commercial bank in this business, kmk managed to avoid the risk of currency devaluation, since the bank financed the transaction in part by using the current accounts of its clients. Current accounts are interest free in an Islamic economy such as Sudan.
kmk imported more than 1000 automobiles, vans and rikshaws and delivered them to its customers. This move annoyed the automobiles agents in Sudan, who lobbied government officials and they managed to get a decree issued to confine the import of automobiles to official agents only. kmk decided
Case Study Analysis
The data obtained from the companies’ documents and the interviews carried out with the general directors shows that both companies had been confronted with many obstacles. The difference between the two companies lies in the ways in which they tackled these challenges. For example, Mico had overcome the finance problem by seeking support from its partner, the government of Khartoum State. kmk decided to confront the finance problem alone or with a private sector partner, and that is why it failed. The lesson that can be learned from the experience of these companies is that collaboration between the public sector and the private sector to establish joint ventures would help to overcome those challenges generated by the complexity of the business world.
kmk invented a new mode of finance for its operations, i.e. a letter of credit with deferred payment and partnership with local commercial banks. This mode of finance enabled the company to offer credit sales to customers to be repaid in monthly instalments for up to 48 months, and thus the company managed to overcome the dilemma of the deteriorating local currency.
When the operations of company were of a limited scale, Mr. Elhasan succeeded in running the business and achieved sizeable profits. But when business expanded, Mr. Elhasan was overwhelmed by the amount of work due to his centralised decision-making style. Moreover, Mr. Elhasan had no training in business management, so he failed to address the importance of developing a business plan. It is also clear that the lack of competent managerial staff contributed to his failure.
The main reasons for kmk’s failure can be attributed to failure of the company management to adapt to the external environment represented in the elements of competition and the political environment. The company could have developed some proactive strategies to deal with those elements instead of being retroactive.
Conclusion
The objective of this chapter was to examine the current status of entrepreneurship development in Sudan and to investigate the role of national factors in shaping this status. Generally, in Sudan there is lack of precise data available on either the entrepreneurial investment projects or entrepreneurial activities. The World Bank reports that were consulted revealed that Sudan’s infrastructure condition is poor; the rate of corruption is high; the financial services are weak; regulations, taxes and business licensing are also inefficient; trade operations, innovation and technology are lagging behind. Despite these conditions, the state of the business environment in Sudan was better than in many other countries in sub-Saharan Africa. However, the unfavourable business environment in Sudan has played an important role in constraining the development of entrepreneurship in recent times.
It has been clear from the presentation of the case studies that an entrepreneurial business has a high chance of succeeding if it allies with or is supported by a public sector entity. The future of entrepreneurial activities in Sudan depends largely on improvement of the political and economic conditions, which have resulted in high rates of inflation and devaluation of exchange rates. The government needs to revise and fine tune its regulatory and institutional measures to facilitate and expedite the procedures of starting new businesses. As far as the cultural barriers are concerned, we believe that training and development of potential entrepreneurs can result in changing their attitudes and equip them with the necessary skills to manage an investment project successfully.
The authors recommend that more in-depth research be conducted in the area of entrepreneurship development in Sudan, especially in light of the limited sources of data. Further research should focus in detail on revealing the relative importance of the different contextual factors and their impact on the entrepreneurship development in Sudan.
References
Adam Tarig S. (2016). “Impact of Culture on Strategic Decision Making: Exploring Culture and Strategic Decision Making Process in the Sudanese Context”, Unpublished PhD Thesis, University of Khartoum, Sudan.
Adly A. , & L. Khatib . (2014). “Reforming the Entrepreneurship Ecosystem in Post-Revolutionary Egypt and Tunisia”. CDDRL Policy Briefs.
African Economic Outlook (2014). Sudan. Retrieved from www.africaneconomicoutlook.org.
African Economic Outlook (2015). Sudan. Retrieved from www.africaneconomicoutlook.org.
Amos A.O. , Oluseye O.O. & A.A. Bosede . (2015). “Influence of Contextual Factors on Entrepreneurial Intention of University Students: The Nigerian Experience”, Journal of South African Business Research, 2015, DOI: .
Castaño M.S. , Méndez M.T. & M.Á. Galindo . (2015). “The Effect of Social, Cultural, and Economic Factors on Entrepreneurship”, Journal of Business Research, 68(7), 1496–1500.
Country Watch. (2015). Country Review: Sudan. Retrieved from http://www.countrywatch.com.
David F.R. (2013).Strategic Management Concepts and Cases: A Competitive Advantage Approach. Edinburgh Gate: Pearson Education Limited.
FitzRoy P.T. , Hulbert J.M. & A. Ghobadian . (2012). Strategic Management: The Challenge of Creating Value. Abingdon: Routledge.
Gangi Y.A. & E. Timan . (2013). “An Empirical Investigation of Entrepreneurial Environment in Sudan”, World Journal of Entrepreneurship Management and Sustainable Development, 9(2/3), 168–177.
Gangi Y.A. (2015). “The Role of Entrepreneurship Education to Achieve MDGs in Sudan”, International Journal of Sudan Research (IJSR), 5(1), 41–55.
Hayton J.C. , George G. & S.A. Zahra . (2002). “National Culture and Entrepreneurship: A Review of Behavioural Research: Entrepreneurship”, Theory & Practice, 26(4), 33–52.
Heritage Foundation (2013). Index of Economic Freedom. http://www.heritage.org/index/pdf/2013/countries/sudan.pdf.
Hofstede G. (1991): Cultures and Organization: Software of the Mind London: McGraw-Hill.
Jones G.K. & H.J. Davis . (2000). “National Culture and Innovation: Implications for Locating Global R&D Operations”, MIR: Management International Review, 11–39.
Mack J. & J. Pützschel . (2014). “The Influence of Contextual Factors on the Entrepreneurial Process: A Multiple-Case Study of Sustainability-oriented and Commercial Entrepreneurship in Central America”. Unpublished MSc. dissertation, Umeå School of Business and Economics, Umea University.
Rusu C. (2014). “Culture-moderator of the Relationship between Contextual Factors and Entrepreneurial Outcomes”, Managerial Challenges of the Contemporary Society, 7 (1), 63–67.
Shane S. , Venkataraman S. & I. MacMillan . (1995). “Cultural Differences in Innovation Championing Strategies”, Journal of Management, 21(5), 931–952.
Steven L. (2010). Private Sector and Enterprise Development: Fostering Growth in the Middle East and North Africa. Cheltenham: Edward Elgar.
Thomas A.S. & S.L. Mueller . (2000). “A Case for Comparative Entrepreneurship: Assessing the Relevance of Culture”, Journal of International Business Studies, 31(2), 287–301.
UNIDO (2013). Industrial Development Report. Sustaining Employment Growth: The Role of Manufacturing and Structural Change. Vienna: UNIDO.
World Bank (2006). Sudan Review of Administrative Barriers of Investment, World Bank, Washington, DC.
World Bank (2007). World Development Indicators 2007. Washington DC.
World Bank (2009). Sudan Investment Climate Assessment. World Bank, Washington, DC.
World Bank (2011). Doing Business Report: Making a Difference for Entrepreneurs, Economy Profile: Sudan, Washington, DC.
World Bank (2013). The World Development Indicators. Retrieved from http://data.worldbank.org/country/sudan.
World Bank (2015). Doing Business Report: Doing Business in a More Transparent World, Economy Profile: Sudan, Washington, DC.
World Bank (2016). Doing Business Report: Measuring Regulatory Quality and Efficiency Economic Profile: Sudan, Washington, DC.
In 2016, the World Bank’s Doing Business report shows that six of Sudan’s ten neighbours were doing (much) worse: Chad ranked 183, the car 185, the drc 184, Eritrea 189, South Sudan 187, and Libya 188 out of 189 countries. Only Ethiopia (146), Egypt (131), Uganda (122) and particularly Kenya (108) were doing better, although three of those experienced a deterioration of relative positions on the global scale during the last five years: Egypt from 94 in 2011 to 131, Ethiopia from 104 to 146 and Kenya from 98 to 108. Uganda’s position was stable at rank 122 (World Bank 2011 and 2016).