Dividends of peace: Look yonder, Somalia is now ripe for business

Kenya- Somalia map

A map showing Somalia and part of Kenya. 

Photo credit: Fotosearch

Thanks mostly to Kenyan military and the African Union Mission to Somalia (Amisom), whose intervention has greatly pacified the Horn of Africa country, Somali people are gradually getting back into the fold of viable trade and investment destinations.

Kenya’s largest company, Safaricom, recently started operating in Ethiopia, offering technology and telecommunications services. The gigantic telco joined a growing list of Kenyan firms, mostly commercial banks, that have invested in neighbouring markets.

Somalia is a ripe investment destination, too, with the most promising sectors being energy, banking and financial services, agribusiness, ICT and manufacturing. These have been identified as potential growth drivers.

Germany and the United States remain the main investors in Somalia—courtesy of bilateral trade agreements between the Horn of Africa country and the two Western nations, alongside Turkey and the United Arab Emirates (UAE). Investors from Kenyan and other neighbouring states in the Horn and the larger Eastern Africa would be in good company.

To attract even more investors from the region and beyond, Somalia is rolling out ambitious infrastructure projects including better roads with financial and technical support from development partners such as the African Development Bank.

The federal government in Mogadishu has in place a 10-year infrastructure spending plan of $1.1 billion (Sh134 billion) targeting to modernise airports, ports, road networks and bridges across the country. It is also the government’s priority to tighten security.

Currently, the Somali economy relies heavily on agriculture, cash remittances from overseas, investments in telecoms, and a growing real estate and construction sector. For the country to get to the next level, increased foreign direct investment (FDI) is needed. FDI is crucial for driving growth, creating jobs and enabling technology and skills transfer.

In March, the government, with support from the World Bank Group, launched an online business registration and licensing system. That has made it easier and faster for entrepreneurs to register new businesses and get licences.

Golden opportunity

On the energy front, Somalia offers a golden opportunity for investors.

And the energy to drive the transformation of Somalia from a war-torn to a developing nation will mostly be green. Being among the regions that have borne the brunt of climate change, the Somali people would naturally know the need to transition to clean energy.

Somalia gets 310 days of sunshine per year, which is perfect for generating solar power. In comparison, Germany has less than 150 over the same period, half of Somalia’s, yet is has an installed capacity of over 40,000 megawatts of electricity from solar sources alone.

At the same time, Somalia has the highest resource potential in Africa for onshore wind power and could generate up to 45,000MW, according to a study by the African Development Bank (AfDB). The country has strong winds with speeds reaching 11.4 metres per second—almost double the 6m/s needed for power generation. That offers wind power investors a huge market opportunity.

Besides providing a conducive environment and incentives for private investors, the government seeks to collaborate more with development partners towards reviving the energy sector. The World Bank recently announced a $150 million electricity recovery facility set to increase access to cleaner, low-cost power for 1.1 million Somali households.

As Somalia’s economic activity gains momentum and the market size expands, demand for energy, ICT and financial services, as well as manufactured goods, is set to rise, presenting a strong business case for investors and development finance institutions.

Somalia is, meanwhile, implementing economy-wide and sectoral reforms. For example, the country has partnered with the International Finance Corporation (IFC) on legal, regulatory and institutional transformation of business registration, alongside electricity legal reforms.

The reborn Somalia is ready to take off together with its investors.

Mr Dubo is the director of SomInvest, Somalia’s investment promotion office. [email protected]. @Mohamed_Dubo