The Republic of Somaliland is strategically located in the Horn of Africa bordering countries like Ethiopia, Djibouti and Somalia. This part of the continent has been the Gateway to Africa for business and trade for centuries. Somaliland is a politically stable country and has the potential to become the most successful economy in the horn of Africa. In addition, the government has taken measures to improve the business climate and boost investment in every sector.
Somaliland has really young population, 71% are below 30 years old (4.5 million in 2018). The capital city is Hargeisa and major cities include the port town Berbera and livestock centre Burao.
In this article we present you the most promising sectors that offer the greatest chance of profitability and regarded as priority sectors by the government.
Somaliland is still a pastoral society but has experienced a fast process of urbanization, the percentage of the population living in the cities exceeds 50% and nomadic communities constitute 34% of the total population. However, half of the population is classified as agro-pastoralists because most of the population is engaged in crop production or livestock rearing.
The government of Somaliland aims for an efficient and advanced agricultural sector to ensure food security. The Agriculture is a factor of economic development and the sector is important since the majority of the population obtains their livelihoods from farming and livestock activities.
This sector present many opportunities for future investors since it can generate high returns with the appropriate technology and adequate investments. Moreover, the land available for cultivation and farming is virgin and anything that is cultivated will be organic.
Somaliland has a rich coastline along the Gulf of Aden and the Indian Ocean. This coastline hosts an extensive list of fish species such as various species of tuna, albacore, lobster, swordfish, shark etc…. The average annual value of the potential fish catch is estimated at 32millions dollars.
The fisheries sector is the least exploited sector in Somaliland while the agro-pastoral system and livestock sector remained the backbone of the economy. However, this sector presents many opportunities and can even be a solution for severe drought. For example, during the severe drought from 1974 to 1976 the government adopted a policy that resettled drought-affected people along the coast. The resettled people were encouraged to take up fishing. This policy led to the construction of Berbera Cold Storage and the Fishing Centers in Zeila and Berbera.
An estimated 3000 tons of fish are caught per year but Somaliland has an estimated potential catch of 190,000 – 210, 000 tons of fish.
Somaliland’s potential can be illustrated by assessing the status of fishing sectors of nearby countries like Yemen which shares the same sea with Somaliland.
Yemen produced 230,000 – 180,000 metric tons between 2006 and 2008 (World Bank 2009).
We can assume that Somaliland would produce the same amount or more if the fishing sector is exploited.
To improve this sector, there is a need for reliable and efficient infrastructure. In Somaliland there are limited cold storage and ice production facilities which are necessary for fish exportation. Major investments opportunities exist for foreign investors to invest in cold storage, blast freezers, block ice machines. There is also the possibility to expand and invest in local boat manufacturing especially large vessels that are more save at sea, have better fuel efficiency and can store huge amount fish hygienically.
There is also a growing demand for fish in local markets that is caused by changing consumption patters. Fish became a good substitute for camels and goats meats which are three times as expensive as the price of fish.
3. Energy sector
According to the Ministry of Investment, “the government is prioritizing energy investment from private and public sources and is confident that major investment opportunities exist to upgrade, diversify and modernize this important sector”.
Electricity is an important factor for Somaliland economy and investing in renewable energy will support greater access to electricity.
Renewable energy comes from natural sources such as the sunlight and the wind which are constantly replenished. Their availability depends on time and weather but Somaliland has good wind resources, recent estimations suggest that 50% of Somaliland has regular windspeeds suitable for electricity energy production. Regarding the sun exposure, Somaliland has around 3000 hours of clear and consistently sunshine per year which translates to 8 to 8.5hours of sunshine per day.
However, the electricity generated from renewable sources is hugely underexploited by providing less than 2% of current national electricity. As mentioned before, this country has huge potential to increase its renewable energy capacity in solar and wind generation. This potential is promoted by the government to provide sustainable, affordable and reliable electricity to the people and at the same ameliorate social and economic development.
The sector of renewable energy is very promising sector that will ensure a good return on investment for investors. Recent study shows that investors in wind can start making more money than investors in diesel generation within 3 years of investment and installation. Investors will have the opportunity to exploit Somaliland wind power resources by investing in wind turbine infrastructure which can installed quickly, is low in maintenance cost and ensure a very swift payback period.
Geologically, Somaliland is similar to oil-rich Gulf countries, the whole region of Horn of Africa is known to have untapped oil reserves. Most of these reserves are estimated to be located in the north of the region, it also contains offshore blocks bordering Somaliland. Indeed since the beginning of 20th century, the existence of oil and gas in Somaliland was established. It is estimated that the total size of blocks is equivalent to the whole Kurdistan region of Iraq.
Somaliland is also well placed given its location on the edge of major shipping routes, especially in the Gulf of Aden which is transit pole for seaborne oil. This strategic location is an ideal place for international oil companies’ investment.
Somaliland government wants to attract investors and international oil companies (IOC) who have the technical and financial capacity to start oil exploration.