Somalia, synonymous with decades of conflict, is letting the world know that it is turning a corner and open for business.
A two-day gathering of investors in the capital Mogadishu heralded hope. Years of instability served as a distraction and masked the country’s massive potential, which could easily turn it into an economic hub.
The first-ever of its kind, the investment conference brought together representatives of the Federal Government of Somalia, international partners and citizens from across the country.
It served as an opportunity for the world to witness, first-hand, progress made by Somalia on the political and economic front.
In his opening remarks, Somali’s President Hassan Sheikh Mohamud said: “The world has been supporting Somalia in the last three decades in terms of humanitarian assistance. Here today, in front of you, I’m appealing to the world at large, […to] help Somalia in investment so that Somalia can be free from the scourge of poverty which cascades a lot of other problems, among them extremism.
Having a good economy, reducing the poverty level is the ultimate goal of the Somali people and Somali government in the path of reaching a prosperous country.”
President Mohamud returned to power for the second time having first served as Somalia’s president from 2012-2017.
Situated on the most eastern tip of the African continent also known as the “Horn of Africa”, Somalia has for millennia been the gateway to Africa for trade.
Somalia borders the Gulf of Aden to the north, the Indian Ocean to the east, Kenya to the south, Ethiopia to the west, and Djibouti to the north-west. Somali communities are also found in Ethiopia, Djibouti and Kenya.
In some ways, this investment conference might have just provided the much-needed impetus Somalia needed to begin the journey of rediscovering its lost glory.
In sum, the Somalia government’s pitch to investors revolves around the huge investment potential in the ICT and energy sectors, backed by a sound investment climate made possible by business-friendly policy and legal framework.
It comes at a time the country’s agriculture, propelled by strong domestic consumption, is on the recovery path.
An inflow of Foreign Direct Investment (FDI) linked to diaspora remittances has been registered, delegates heard.
Similarly, investments in the financial, telecommunications and construction sectors have spiked, various presentations made at the meeting suggested. The country has also acceded to international and regional trade mechanisms such as the World Trade Organisation, and the African Continental Free Trade Area (AfCFTA).
Growth projections from the African Development Bank (AfDB) forecast GDP growth to rise from 2.9% in 2021 to 3.2% in 2022. The government’s own data shows the economy growing consistently, rising from 2.8% in 2018 to 2.9% in 2019. Inflation decreased from 5.1% in 2018 to 4.4% in 2019.
According to the Somalia’s High Frequency Survey (HFS), 2019, whose findings were made available to delegates, 70% of the country’s population are youth, which offers Somalia an opportunity to reap the demographic dividend.
The survey shows that over 60% of foreign investors say they have seen a general improvement in all of the main factors for their investment decision. Nearly 70% of those surveyed cite ease of doing business, and 66% say they see an improvement in the investment climate.
A recent World Bank Group foreign investor survey shows that 56% from the private sector saying it was less difficult to invest in Somalia with the current investment legal framework.
Investor confidence in Somalia appears to have improved since 2016, when investors rated the environment as ‘poor’, to 2020, when they said it was ‘good’.
During the conference, two sectors—energy and ICT— were show-cased as offering the best investment opportunities, with quick turnaround. The country’s 9th National Development Plan (2020-2024 lists energy as a national priority, stating its importance as a key enabler of sustainable economic growth. Energy powers industries and enhances productivity in the agricultural and manufacturing sectors.
To this end, Mogadishu seeks to increase energy supply of both renewable and fossil fuel sources. It hopes this will push access to energy from 15% to 45% of the population by 2020, or 6% growth in access every year.
Because of a strong demand for electricity, as evidenced by the expansion of independent power producers and the establishment of micro grids in a growing number of cities across the country, the government of Somalia has prioritised the development of an energy policy, strategy and regulatory framework as well as a National Investment Strategy (NIPS) to facilitate private sector investment in alternative renewable energy.
Having a good economy, reducing the poverty level is the ultimate goal of the Somali people and Somali government in the path of reaching a prosperous country.
It is also exploring the possibility of technically viable cross-border energy with neighbouring countries. With over 3,000 hours of sunlight per year, Somalia has one of the highest radiation rates globally. Its potential for solar energy is immense. So is wind power, which potentially can generate 30,000 to 45,000 megawatts of power annually.
Hydro-power opportunities for small hydropower plants (100-220 megawatts), investors heard, have potential along Somalia’s Shabelle and Jubba rivers.
But ICT could be the goose that lays the golden egg for Somalia. It has one of the most active mobile money in the world, outpacing many African countries. About 88% of Somalis above the age of 18 owned a SIM card in 2020, participants at the conference heard. Some 83% of those SIM card holders used mobile money technology.
To cultivate this sector, the government has developed an ambitious ICT regulatory framework. The communication law approved by parliament in 2017 paved the way for the establishment of the National Communication Authority (NCA). The Ministry of Communication and Technology also developed the National ICT policy and strategy (2019-2024) to speed up Somalia’s use of ICTs and to open the sector for new business opportunities, thereby achieving the set socio-economic goals. The NCA’s licensing framework and regulations are designed to spur investment.
In sum, the Somalia government’s pitch to investors revolves around the huge investment potential in the ICT and energy sectors, backed by a sound investment climate made possible by business-friendly policy and legal framework.
Away from boots on the ground, Somalia’s search for the elusive economic development might just prove to be the silver bullet.
