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.
05/03/2022
By Ulrich Binkert | Bonn
- Somalia and Somaliland
- Authorities “are further”
- Strategic location helps
- Security situation is relatively good
- Good accessibility
- Economic power higher than in the rest of Somalia
- German companies are practically non-existent
- Business opportunities very limited, but available
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
Abdillahi Aareh