Germany Trade & Investment opportunities in Somaliland

Somaliland – the other Somalia

Der Spiegel identified a “miracle on the Horn of Africa” ​​and a “boom”. Somaliland is also considered attractive to foreign companies, especially when compared to the rest of Somalia.


By Ulrich Binkert | Bonn

Around 20 companies from the logistics sector from Somaliland will visit Hanover, Hamburg, Bremen and Bremerhaven at the end of May 2022. From a German point of view, business opportunities are mainly related to the port of Berbera, which the Emirati concessionaire DP World is currently expanding. Somaliland – what is it?

Somalia and Somaliland

Under international law, Somaliland is a constituent state of the Federal Republic of Somalia. In fact, however, the area has been developing on its own since declaring independence in 1991, amid Somalia’s disintegration into a “failed state”. The two areas were already separated before Somalia’s independence in 1960, Somaliland as a British colony and the other areas of Italy. Somaliland is only recognized diplomatically by Taiwan, but there are close ties with the United Arab Emirates, among others.

Due to the lack of international recognition, authorities in Somaliland had to pay for education, health and the police themselves and set up a functioning tax system for them. This strengthened the sense of community. Here it was possible to disarm militias and reconcile clans. Changes of power are reasonably orderly.

Authorities “are further”

“Somaliland and Puntland (which also operates very autonomously) are more stable and more advanced in terms of the rule of law and democracy than the other federal states of Somalia,” according to an internal assessment by official observers. This is possibly one reason why foreign oil companies in Somaliland are likely to drill a first exploration well as early as 2023. And for the fact that authorities in Somalia’s capital, Mogadishu, are arguing about licenses to be granted for suspected offshore deposits. The diaspora of Somalis abroad, which is important for investments, also finds a better business environment in Somaliland. The Somaliland Diaspora Office in Hargeisa estimates the number of Somalilands abroad at one million, almost a quarter of the population at home.

Strategic location helps

According to press reports, according to a 2016 contract, Ethiopia wants to conduct 30 percent of its foreign trade via Berbera. This would be at the expense of Djibouti, now the virtual monopoly port for Ethiopia’s sea-based imports and exports. There, Berbera concessionaire DP World was forced out of an ongoing concession in 2018. A sister company of DP World has also modernized Berbera Airport, and a “road corridor” to Ethiopia is currently being built with money from the Emirates.

Security situation is relatively good

Somalia is considered a no-go area for most German business people, and the country is colored deep red on travel safety maps. However, the north-western tip, Somaliland, appears much brighter on more accurate maps. “We don’t necessarily have to visit Mogadishu,” says a German expat who occasionally looks to Somalia from Kenya to sell his food processing equipment. “But Somaliland is accessible.” Benedikt Böhm has also been to Somaliland several times. “This is one of the safest countries in East Africa,” says the managing director of DHYBRID from Gauting near Munich. His company has installed a hybrid power grid of energy storage and photovoltaic systems in Berbera. In the port city and Somaliland’s capital Hargeisa one can move freely, but "

Good accessibility

Somaliland is easily accessible with the two international airports Berbera and Hargeisa. Hargeisa currently has daily flights from the Ethiopian capital Addis Ababa and several times a week from Nairobi and Dubai. Europeans can obtain a visa on arrival in accordance with Somaliland’s immigration regulations. According to the Federal Foreign Office, an invitation is required as proof of the purpose of your stay.

Economic power higher than in the rest of Somalia

Economic performance in Somalia can only be roughly estimated in the absence of reliable statistics. What is clear, however, is that it is very low. The International Monetary Fund put it at US$471 per capita for 2020, only Madagascar, Mozambique and Burundi were even lower. For Somaliland, the local statistics office in Hargeisa arrives at just under US$ 700. Over a quarter of Somalia’s population lives in Somaliland. This means that the gross domestic product (GDP) per capita there, in purely mathematical terms, is almost twice as high as in the rest of Somalia.

Somalia and Somaliland 2020
indicator Somalia Somaliland
Population (millions) 14.8 4.2
GDP (million US$) 6,965 2,927
GDP per capita (US$) 471 697

Source: International Monetary Fund; Somaliland Central Statistics Department; Calculations by Germany Trade & Invest

German companies are practically non-existent

“That must be the other German company in the country,” says a German consultant who occasionally travels to Somalia, jokingly, when he hears about the hybrid power grids from Germany in Mogadishu and Berbera. Companies find the small Somalia market and official travel warnings unattractive. However, there is also a “huge lack of information and understanding,” says Somali-American adviser Hodan Hassan in Kenya’s capital, Nairobi. In June 2022, Hassan and her company DAI are organizing a trip for European development banks to Somalia and – primarily – Somaliland.

Business opportunities very limited, but available

In Somalia including Somaliland, inexpensive solutions are usually required. This is the case in the construction industry, whose machines, according to the SomInvest funding agency, only come into the country used. Little is happening when it comes to expanding the infrastructure, but with its expanded port in Berbera and the planned transport corridor to Ethiopia, there is still a lot going on in Somaliland. The largest known and secured ongoing individual project in Somalia’s rudimentary water supply is in Somaliland, with a KfW project in Hargeisa.

There is no processing industry worth mentioning in either Somalia or Somaliland. The country has to import practically all industrial goods, and food processing is only rudimentary.

Major industrial companies in Somaliland
company product Remarks
National Steel Industries , Hargeisa steel products “over 1,000 employees”; belongs to Somaliland National Industries
Lass Group , Hargeisa food, drinks according to industry estimates, “will not be able to carry out any major investments in the foreseeable future” due to a lack of funds; Companies at a location 25 km outside of Hargeisa because there is water there
- SBI Coca-Cola and other drinks since 2010; “Somaliland’s largest beverage factory”; over 100 employees
- Lis Dairy products produced since 2017; over 60 employees
- Miiran juices produces since 2018
U-Fresh, Hargeisa Beverages; food over 60 employees
AADCO paper products " only paper mill in Somaliland and Somalia "; around 50 employees
Somtuna tuna under construction; scheduled to start operations in mid-2022; around 400 employees planned; Equipment already procured
National Flour Mills, Berbera grain mill according to industry information: Yemeni investor, not yet producing and is still building individual plants
Boodhari Mills , near Hargeisa grain mill in operation

Source: Somaliland Ministry of Investment and Industrial Development; Research by Germany Trade & Invest

Around 20 companies from the logistics sector from Somaliland will visit Hanover, Hamburg, Bremen and Bremerhaven at the end of May 2022. From a German point of view, business opportunities are mainly related to the port of Berbera.

A few things lost in translation but otherwise Kudos, we should be doing this all across the globe!

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Somaliland: logistics hub for markets in East Africa

Interview with Abdillahi Aareh, Minister of Industry and Investment in Somaliland

Port service providers and logistics companies in Hamburg and Hanover had exotic visitors in August 2022: a delegation from Somaliland campaigned for commitment in their region on the Horn of Africa, which had declared itself independent of Somalia in 1991. The port of Berbera there has an efficient container terminal after a comprehensive expansion by the Emirati logistics giant DP World.

Somaliland's Digital Minister, Abdillahi Aareh, at a meeting.

Abdillahi Aareh

Industry and Investment Minister of Somaliland, Abdillahi Aareh, campaigned for investors for the port in Berbera.

In the future, Berbera is to handle a large part of the foreign trade of neighboring Ethiopia, which today runs almost exclusively via Djibouti a few hundred kilometers to the north-west. The EU Commission in Brussels is also keeping an eye on Berbera - as the end point of a “strategic corridor” through East Africa.

In an interview, Industry and Investment Minister Abdillahi Aareh reports on the locational advantages of the port of Berbera and other expansion projects, including a free zone that is already under construction and a cement factory. The development of business relationships has high priority in Somaliland and is successful despite the lack of international state recognition. The Somaliland diaspora abroad, which is also active in Germany, brings numerous investments with it.

Pragmatism beats politics

Portrait of Abdillahi Aareh, Minister of Industry and Investment of Somaliland Abdillahi Aareh

Abdillahi Aareh, have you already been able to get German investors interested in the planned Berbera logistics hub?

We are in conversation. A free zone around the port is under construction and several foreign companies have already invested there, even if I don’t know of any German ones: Toyota, Hyundai or Caterpillar, but also beverage manufacturers and a paper processor. They can all also serve our neighboring country as well as South Sudan and other markets in East Africa via the road corridor to Ethiopia.

Is it actually possible for a foreign company to do business in a country that is only internationally recognized as a state by Taiwan?

Ask foreign investors like DP World, I understand they have higher profit margins in Somaliland than anywhere else. Somaliland is a nation where business matters are a top priority. There are also Somali companies that do good business in Mogadishu, for example, and vice versa. Everyone is very pragmatic about it. There are even official representations of Great Britain and the United Arab Emirates in our capital Hargeisa, as well as an embassy from Ethiopia and one from Somaliland there.

Do German providers even find paying customers in Somaliland? The country is considered very poor and is not connected to the international banking system.

Plans are underway to build a cement factory here. Not only is the feasibility study complete, the investors are also likely to be able to raise the almost $300 million required. And entirely from local financial sources. Somali and foreign traders make good money here and abroad.

So Somaliland’s diaspora abroad plays a big role in development?

Absolutely. The diaspora runs an estimated 60 percent of our local business community. “Foreign” companies in Somaliland very often hide Somali people living in the Emirates, in North America or in Europe. They see good business opportunities in their old homeland and want to develop our country. German companies can also use this diaspora in Germany for business contacts.

Are you actually also part of the diaspora?

no I grew up about 100 kilometers west of Hargeisa, near the Ethiopian border, and have always worked and studied in Somaliland. Only my master’s degree was completed abroad, in Malaysia. However, some of my ministerial colleagues are from the Somali diaspora overseas.

Where do you see good business opportunities for German companies?

First in mining. Our earth contains many minerals that an industrialized country needs. There are also rich fishing grounds off our long coastline; national investors with foreign partners are currently building a fish canning factory in Berbera. We also offer good conditions for the production of food and beverages, most of which we have had to import so far. Coca-Cola has been producing near Hargeisa for years, and several industry companies are settling in the Berbera Free Zone. There are also opportunities in agriculture and animal husbandry.

Market opportunities even in agriculture

In agriculture? Somaliland is making a name for itself with a famine and yet it is very dry, isn’t it?

Sure, but around 40 percent of our area can be developed agriculturally, we have fertile soil. There are indeed areas with significant rainfall. In the west of the country, for example, near my home, it is around 400 millimeters a year (Berlin: around 580, editor’s note) . The problem is that too much of this precipitation is wasted and not used for agriculture. Local and foreign companies have already invested in our agriculture, albeit on a small scale.

Somaliland was a British colony and after Hamburg you were in London for a few weeks. Why do you explicitly hope that German companies will get involved?

Germany set up technical training here around 50 years ago, with very lasting and positive effects. There is the idea that German companies carry out their projects with 100% commitment and punctuality. We want to benefit from that.

Coming back to the “transport corridor” from Berbera to Ethiopia, is it really in operation yet?

At the moment, depending on the arrival of the ships, 50 to 200 trucks drive from the port to Ethiopia every day. That’s about a tenth of the traffic from Djibouti to our neighboring country. The first part of the road from Berbera to Hargeisa is completed. The repair of the route to the Ethiopian border should be completed by the end of 2022, as should the complex Hargeisa bypass. On the Ethiopian side to Addis Ababa the corridor has been completed.

Trucks to Ethiopia can drive through

Do the trucks have to wait long at the border with Ethiopia?

No, with proper papers they can actually drive through without a long wait. In order to be able to make better use of the Berbera Corridor, Somaliland is striving to conclude a comprehensive trade and transit agreement with Ethiopia. So far we have been working here on the basis of individual bilateral agreements. However, we believe that both Somaliland and Ethiopia are determined to reach the trade and transit agreement, provided the outstanding technical issues are resolved.

The interview was conducted by Ulrich Binkert from Germany Trade & Invest in October 2022.

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