Somaliland aims to show coming of age


Camels are lifted on to a ship at the port of Berbera for export across the Gulf of AdenGoing Down Memory Lane -Editor

By Katrina Manson in Berbera

In a macabre twist on Noah’s ark, a crane in the Somaliland port of Berbera is hoisting camels two by two on to a ship taking them to their death across the Gulf of Aden. Just like the awkwardly suspended cargo, Somaliland itself has been left dangling for 20 years.

In 1991 the former British protectorate declared independence from anarchic Somalia, but no country has recognised it, as it is considered part of Somalia. Yet Somaliland, which marks its 20th anniversary on Wednesday, is largely peaceful and has built itself up from ruin with very little outside donor help.

Over the past 20 years, as its neighbour has descended into war, terrorism and piracy, Somaliland has sought to establish the trappings of a functioning state with its own currency, something approaching a central bank, democratic elections and a fiscal team of econometricians in pursuit of a wider tax base.

Local businessmen say that while livestock is worth 60 per cent of the economy, commerce in the largely unregulated private sector is flourishing against the odds and characterised by ferocious appetite for a tidy profit.

“The lifeblood of every Somali is trade,” says Paul Crook, chief technical adviser to the UN International Labour Organisation’s Somalia programme, who has lived in Hargeisa, the Somaliland capital.

Somalilanders have also become technologically savvy, transferring money across the world, making calls on solar-charged smartphones and shopping with debit cards. Their thriving business acumen may be the best way to effect de facto recognition.

“When you are a nomad you have to learn your own way to survive and I think we brought the nomadic experience to the city and tried to survive with an entrepreneurial community,” says Abdikarim Mohamed, head of Telesom, a local mobile phone operator with 400,000 subscribers that was formed when 650 shareholders clubbed together and raised $2.5m to get it going.

“The facts speak for themselves. For the past 20 years we have been much better than other countries that have recognition,” President Ahmed Mohamed Silanyo told the Financial Times at his presidential palace, newly redecorated following a 2008 bomb attack attributed to al-Shabaab the extremist Islamist group.

“Without recognition it means we have not been accepted by the international community as a full member – there is no doubt about it, we need a lot of development and support.”

Much of this comes from the country’s diaspora. Somaliland inspires fearsome loyalty among its native sons and daughters and an estimated 1m Somalilanders abroad send home more than $1bn each year.

Educated expatriates, including public finance experts, have given up jobs in Europe and North America to return home and now want to more than double state revenues within a year to $88m and reach $160m by 2013. Already they have doubled civil servant salaries and rooted out more than 5,000 ghost workers after 2010 elections brought a new administration vowing transparency in government.

“What we get, we spend. We have a cash budget from hand to mouth and no development budget,” said Mohamed Awaed Mohamoud from the public finance management team. “But we try: we don’t take loans and we have no debt and no deficit up to now.”

The government aims to boost tax revenue from 5 per cent of gross domestic product, one of the world’s lowest, to 13 per cent next year – still far below the sub-Saharan Africa average of 18-20 per cent. Officials calculate that one company alone evaded $9.13m in taxes.

Investors remain wary but some, including Chinese telephone infrastructure companies and UK frontier private equity, are backing it. So confident is one British Somalilander, who runs a UK investment firm, he wants to set up a £30m diaspora fund.

“Somaliland is the classic anomaly: the perception and the reality are far apart and in the middle is a huge amount of money,” says Mohammed Yusef, CEO of London’s Invicta Capital.

He has already secured an oil block unencumbered by potential rival claims from foreign oil companies, who pulled out long ago.

He also sees fishing, livestock exports and power generation among possible growth sectors, saying: “I see Somaliland as an undervalued share – buy low and ride the tiger up.”

The UN Food and Agriculture Organisation estimates Somaliland’s 850km shoreline could yield 40,000 tonnes a year of fish compared with between 1,000 and 5,000 a year now. Telesom also says it could bring down energy costs by 50 per cent if there were a reliable power source.

In private, British diplomats are sympathetic to Somaliland’s cause, and although the UK is unlikely to recognise the country, in March it hosted the first UK-Somaliland investment conference, which could pave the way for a bilateral trade recognition.

As for the mid-air camels at Berbera port, among the first projects topping Mr Yusef’s list is a $9m cold packing export business to save the camels from live export and add value. The dangling may be about to end.

Going Down Memory Lane with this article originally published by the financial times in March 2012-Editor