New ways of doing things in a tough neighbourhood
‘You see,’ says President Muse Bihi Abdi, pointing to an area to the east on the giant map of Somaliland covering the one wall of the presidential briefing room in Hargeisa, ‘in this area, clan members think “I have a gun, I am the government”’ explaining why the area is spotted with Al-Shabaab fighters and his government continues to battle to establish governance. This statement has echoes in the observation of the 19th century traveler Richard Burton of the Somali that: ‘every man his own sultan’. The restive east notwithstanding, a great deal has been achieved by the hitherto unrecognized Republic of Somaliland since its re-proclamation of independence in 1991. Three decades before, in June 1960, Somaliland gained its independence from its colonial master Britain before making an ill-fated decision to join former Italian Somaliland five days later. This union was then envisaged to incorporate French Somalia (now Djibouti), the Somali-dominated. Ogaden region of Ethiopia, and a piece of northern Kenya. That never happened. Instead, following a bitter civil war that saw the forces of Somali President Mohamed Siad Barre employ Rhodesian mercenaries (among others) to bomb and strip the capital of Hargeisa, the Somali National Movement booted out the occupiers, and set about creating the conditions for stability which have endured since. A domestic peace process was constructed around five major internal meetings, starting with the Grand Conference of the Northern Peoples in Burao, held over six weeks and concluding with the declaration of Somaliland’s independence from Somalia on 18 May 1991. In 2002, Somaliland made the transition from a clan-based system to multi-party democracy after a 2001 referendum, retaining an Upper House of Elders (Guurti), which secures the support of traditional clan-based power structures. Regular elections and a regular turnover in power between the main political parties have characterized the local politics.
The Somaliland government budget is just over US$300 million, three-quarters of which is spent on salaries and operational expenses.4 Annual GDP is estimated at little more than US$646 per capita. Electricity is five times more expensive than in neighboring Ethiopia, at US$1kw/h, reflecting the dominance of monopolies, which also define the banking and telecoms sectors.
Immediate challenge Somaliland faces is the transformation of its economy from one based on pastoral livestock herding to one capable of generating employment to deal with the challenge of out-of-work youth, a potential threat to stability. These reforms will require a sector-by-sector transition from the old way of doing things to a more modern approach, as outlined below.
Minerals: From artisanal to commercial production
Somaliland is believed to have large untapped mineral resources including the largest untapped deposit of gypsum in the world, gemstones, precious metals including gold and industrial metals including copper and lead. Mining is, to use the words of Omer Yussuf Omer, the Director of Minerals, ‘very primitive’ and traditional. There is some interest from international players with Chinese and Indian firms taking the lead. Chinese firms mine jade while Indian firms are about to begin exploration. Any mining deeper than 20 meters requires a mining permit and the state only takes a royalty off exported minerals. The challenge of scaling up mining is daunting. Any large-scale commercial mining requires an input that is in short supply – water. In addition, Somaliland has no commercial mining tradition, know-how or skills. ‘We have no mining culture, we are just starting to exploit resources,’ says Omer. Nonetheless, the Somaliland government remains optimistic that it can attract foreign investment and expertise and those minerals could contribute a lot more to growing the economy and employment. Legislation to regulate mining is also stuck in Parliament.
The Berbera Corridor: Integrating logistics
Captain Hersi Jama Hassan, deputy harbormaster of Berbera Port is walking down the dock. The temperature is a blazing 37 degrees Celsius – cool for this part of Somaliland, which hits a high of 45 degrees in July. ‘In 1968, the Russians built this part,’ he says as he walks down. A little further on he says: ‘This part was added by the Americans in 1984.’ Finally, he arrives at the end of the dock where young Somalilanders on a training programme are welding giant yellow construction beams. ‘DP world is going to extend the port from here,’ he says.
The Russians, who used the Berbera airbase as a forward operating station during the Cold War, the Americans, who tried to establish a foothold, and now the Emirates, bear testimony to the strategic significance of the port on the Gulf of Aden. With the Suez Canal to one side and easy access to the Indian Ocean to the other, the port is positioned to become a key logistics hub. Should oil be struck in Somaliland, the addition of an oil terminal free of the geopolitical problems that beset the Straits of Hormuz could make Berbera even more significant. Little wonder that the UAE’s DP World is investing some US$442 million in extending the port after a deal that gives it a 30-year concession with the automatic option of extending this for a further 10 years. Ethiopia holds a 19 per cent stake in the port development, giving it a vested interest in moving goods via Berbera.
Energy: From diesel to solar
A major constraint on the Somaliland economy is expensive energy, which is largely produced by diesel generators and then transmitted through an inefficient ‘micro-grid’ system. The plethora of small generators has been consolidated into larger companies such as Sompower, but the grid remains fractured. The result is that Somaliland has one of the highest – if not the highest – cost of electricity at between 70 US cents a kilowatt hour and a dollar a kilowatt hour. By contrast, the cost of electricity in neighbouring Ethiopia is just 20 US cents a kilowatt hour. In addition, some 30 per cent of energy is lost during transmission due to the inefficiency of the micro grids. The potential for renewable energy is enormous. Somaliland has high solar radiation and an average of 11 hours of daylight throughout the year. In addition, it has an average wind-speed of 12m/second. Although there are several small initiatives – the ministry of energy and minerals building in downtown Hargeisa relies solely on solar energy, for example – only 2 per cent of electricity comes from renewables. The priorities are two-fold: To reduce the cost of power generation by introducing renewables and other sources – for example, gas, should exploration confirm that this resource is available – and to build an integrated national grid that transmits power much more efficiently.
Oil: From exploration to production
The license to explore two oil blocks was awarded to Genel Energy in 2012. Exploration in 2015 confirmed that there is potential in SL-10B and SL-13 and the Odewayne block with estimated oil reserves of one billion barrels in each. A further study of seismic data and analysis of the basin has, according to Genel, ‘led to the maturation of a prospects and leads inventory for the SL10B13 block (Genel 75 per cent working interest and operator) which confirms the longstanding view that the block has significant hydrocarbon potential. A number of potentially high impact exploration targets have been identified within play types directly analogous to the prolific Yemeni rift basins. The company says it will initiate farm out – assigning blocks to developers – once these prospects have been quantified in late 2019. There appears to be a very real prospect that game changing oil production might get underway in the near future. In the words of Energy and Minerals Minister, Jama Mahamoud Egal, ‘Most people are looking at our ministry because they see it as the only sector where growth can occur. The optimism over the possibility of oil in Somaliland derives from the fact that it shares the same geology as the oil fields on the Arabian Peninsula. ‘The oil is there, it is just a matter of when we get it,’ says Egal. Formal exploration drilling is set for 2020 when the country will finally know if the promising fields can deliver. To prepare for this eventuality, the ministry has produced several pieces of legislation including the Petroleum Bill and the Petroleum Revenue Sharing Bill to create a legal and regulatory environment for the nascent oil industry. However, the legislation has been stuck in Somaliland’s slow moving Parliament. There is the danger that oil will visit the ‘resource curse’ on Somaliland, creating a small extremely wealthy elite with profits moving offshore and creating few jobs for locals who do not possess the skills needed for the industry, which is not, in any event, labor intensive.
Fisheries: From small boats to commercial vessels
Despite possessing an 850-kilometer coastline, which is reputed to have large stocks of fish, which could be sustainably harvested, Somaliland has a small fishing fleet consisting of vessels of between five and 12 meters and this economic activity underperforms when it comes to contribution to GDP. Fishing output has increased from 10,000 tons in 2014 to 120 000 tons in 2017, but this is reckoned to be below the industry’s potential by some distance. The reasons for this are many and complex. Somalilanders are traditionally nomadic livestock owners and the possession of animals is associated with status. Fishing obviously does not accomplish this and is looked down on as an activity for the desperate and poor. Minister for Finance Development, Saad Shire put it this way: ‘Fishing is looked down on as far as our tradition is concerned – you must have a flock.’13 This is, in fact, the case at present, as fishing is conducted on a small scale and the sale of fish is limited to the coastal area due to the lack of a reliable cold-chain for the transport of the fish to the interior. It is notable that the capital city of Hargeisa with its large population has no fish market despite its relatively close proximity to the coastline. Fish ought to be a readily available cheaper protein option throughout Somaliland and it ought to have an export market given the short distance to big fish-consuming markets in the Mediterranean which are readily accessible via the Red Sea and the Suez Canal. In order to increase local consumption and exports, investment is needed in refrigeration facilities at the coast, on transport vehicles and in the cities to extend the shelf life of the fish. The development of the transport corridor between Ethiopia and the port of Berbera opens up the possibility of exports to that country, a large market that may be game changing for the industry. In addition to this, there are high barriers to entry with small locally made boats costing US$20 000 each.14 Less expensive boats might be imported or the price might be brought down by increased competition. An immediate problem is that the research which suggests that fish stocks are vast and untapped is dated and may even be decades old. A fresh survey has been commissioned and ought to give greater insight into the variety of harvestable fish and how they might best be caught.
Agriculture: From rain-fed to irrigated
Agriculture is the second-largest productive sector of the economy after livestock rearing. Sorghum has been the traditional cereal crop, but wheat is being investigated as the future mainstay because it requires three months to grow to maturity compared with sorghum’s six months. The biggest obstacle to cultivation is the shortage of water. Around one-tenth of the land is suitable for cultivation and only half of this is used to grow crops. Government has allocated land for research into dry land crops where 720 hectares are used to grow sorghum and 76 hectares to grow wheat, proving that the latter is more suitable. The UN FAO has supported projects to build canals for the irrigation of crops. In order for irrigation to work, dams need to be built to preserve rain water runoff. Smaller earth dams require less capital investment and may be constructed by local farmers with the assistance of earth-moving equipment. The production of cash crops is increasing with the introduction of greenhouses and drip irrigation technology. The agriculture department has begun research into drip irrigation techniques for the growing of tomatoes on a small scale at the department’s headquarters in Hargeisa. This type of cultivation is more suitable for an arid country such as Somaliland. Cash crops include tomatoes, watermelons, cucumbers, eggplant and onion and there is an export market in Djibouti for some of these crops. The traditional divide between animal farming and crop farming needs to be altered so that crops are grown as supplementary feed for animals. Farmers with ‘one hand in livestock and the other hand in cultivation’11 are needed.
Livestock: From nomadic pastoralism to modern farming
The Somaliland Chamber of Commerce, Industry and Agriculture estimated that livestock made up 60–65 per cent of the national economy, with a population of 10 million goats, five million sheep, five million camels and 2.5 million cattle. These numbers may be out of date, however, and it is difficult to obtain more contemporary figures. The major markets for livestock are Saudi Arabia, the UAE, Yemen and Oman. The lack of reliable data notwithstanding, all those we interviewed agreed that livestock was the largest economic sector at 29.5 per cent of GDP. Export income from livestock derives almost entirely from the sale of live animals to countries on the Arabian Peninsula, and to Saudi Arabia in particular, during the annual Muslim pilgrimage to Mecca. The export of live animals for the Hajj involves a network of buying agents in Somaliland, but also in Ethiopia and elsewhere, who procure the animals and transport them to the port of Berbera – where between one and two million of the live animals are boarded on vessels and shipped to Saudi Arabia during the 20 days of the Hajj. This effectively means that the biggest slice of Somaliland’s foreign exchange earnings occurs during an annual 20-day window. At the Centre of Somaliland’s economy stands the Blackhead Persian, a breed of sheep that is well adapted to the climate and which is the country’s single largest export. Although Somaliland struggles to export its livestock because of its unrecognized status, this unique sheep is an exception. During the annual Muslim pilgrimage to Saudi Arabia, more than a million sheep and goats are exported for slaughter in keeping with religious tradition But this annual export boon is precarious. The sheep are exported during the Hajj because of sheer necessity. There is simply no other country that can supply millions of sheep for slaughter over 20 days. Somaliland’s sheep are smaller than breeds from other countries and are therefore cheaper. They can also be transported live over the relatively short distance to Saudi Arabia. For the rest of the year, Saudi Arabia does not import Somaliland’s livestock because it says the animals do not conform to its health standards
The economic challenge – bringing the nomadic livestock-based economy into the 21st century – is enormous. In addition, while the economy stutters along, identity politics increasingly raises an angry head in the east as religious divides between liberals and conservatives harden. It is not surprising that the government looks for scapegoats and single-bullet solutions. The solution is more complex, difficult and unfortunately long-term. A process of negotiation best serves recognition, yes, but that will take time and a reasonable facilitator, not one with a regional axe to grind or wider geo-politics to play. For this reason, Turkey, Italy, the UAE, Qatar, and the Saudis are, among others, out. In addition, the best advocate for recognition is inevitably continued and improving economic success. This will require improving domestic governance, and that tax collection, revenue allocation, accountability, transparency and clear method. As in, many African countries National Development Process represent a wish list rather than a set of priorities. It will have to address endemically poor productivity, requiring action on a range of matters, from ending monopolies and managing vested interests, promoting girls’ education, instigating greater public awareness on the consequences of khat, and taking action on corruption. Success will require a clear articulation of a national vision, a big idea that citizens can buy into that goes beyond recognition, no matter the extent to which this remains unfinished business for Hargeisa