Agriculture and natural resources
See also: Mineral industry of Somalia
Cans of Las Qoray brand tuna fish made in Las Khorey.
Graphical depiction of Somalia's product exports in 28 color-coded categories.
Agriculture is the most important economic sector. It accounts for about 65% of the GDP and employs 65% of the workforce.[7] Livestock contributes about 40% to GDP and more than 50% of export earnings.[3] Other principal exports include fish, charcoal and bananas; sugar, sorghum and corn are products for the domestic market.[10] According to the Central Bank of Somalia, imports of goods total about $460 million per year, and have recovered and even surpassed aggregate imports prior to the start of the civil war in 1991. Exports, which total about $270 million annually, have also surpassed pre-war aggregate export levels but still lead to a trade account deficit of about $190 million US dollars per year. However, this trade deficit is far exceeded by remittances sent by Somalis in the diaspora, which have helped sustain the import level.[4]
With the advantage of being located near the Arabian Peninsula, Somali traders have increasingly begun to challenge Australia's traditional dominance over the Persian Gulf Arab livestock and meat market, offering quality animals at very low prices. In response, Persian Gulf Arab states have started to make strategic investments in the country, with Saudi Arabia building livestock export infrastructure and the United Arab Emirates purchasing large farmlands.[11] Somalia is also a major world supplier of frankincense and myrrh.[12] Additionally, fishing fleets from Europe and Asia have reached commercial fishing agreements in the northern Puntland region.[8]
Manufacturing
Prior to the outbreak of the civil war in 1991, the roughly 53 state-owned small, medium and large manufacturing firms were foundering, with the ensuing conflict destroying many of the remaining industries. However, primarily as a result of substantial local investment by the Somali diaspora, many of these small-scale plants have re-opened and newer ones have been created. The latter include fish-canning and meat-processing plants in the north, as well as about 25 factories in the Mogadishu area, which manufacture pasta, mineral water, confections, plastic bags, fabric, hides and skins, detergent and soap, aluminum, foam mattresses and pillows, fishing boats, carry out packaging, and stone processing.[13]
According to the UNDP, investments in light manufacturing have expanded in Bosaso, Hargeisa and Mogadishu, in particular, indicating growing business confidence in the economy.[8] To this end, in 2004, an $8.3 million Coca-Cola bottling plant opened in Mogadishu, with investors hailing from various constituencies in Somalia.[14] The robust private sector has also attracted foreign investment from the likes of General Motors and Dole Fruit.[8]
Airline industry
According to the Somali Chamber of Commerce and Industry, the void created by the closure of Somali Airlines has since been filled by various Somali-owned private carriers. Over six of these private airline firms offer commercial flights to both domestic and international locations, including Daallo Airlines, Jubba Airways, African Express Airways, East Africa 540, Central Air and Hajara.[19]
Hospitality
Somalia's hospitality sector has seen an unprecedented level of growth in the past few years. Much construction is taking place in Mogadishu and other major urban centers, encouraging the formation of new restaurants and hotels.[8] Private-security militias are hired to ensure safety and the normal conduct of business.[3]Telecommunications and media
The Hormuud Telecom building in Mogadishu.
After forming partnerships with multinational corporations such as Sprint, ITT and Telenor, these firms now offer the cheapest and clearest phone calls in Africa.[8] Installation time for a landline is just three days, while in Kenya to the south, waiting lists are many years long.[21] These Somali telecommunication companies also provide services to every city, town and hamlet in Somalia. There are presently around 25 mainlines per 1,000 persons, and the local availability of telephone lines (tele-density) is higher than in neighboring countries; three times greater than in adjacent Ethiopia.[13] Prominent Somali telecommunications companies include Golis Telecom Group, Hormuud Telecom, Somafone, Nationlink, Netco, Telcom and Somali Telecom Group. Hormuud Telecom alone grosses about $40 million a year. To dampen competitive pressures, three of these companies signed an interconnectivity deal in 2005 that allows them to set prices and expand their networks.[20]
Investment in the telecom industry is one of the clearest signs that Somalia's economy has continued to grow despite the ongoing civil strife in parts of the southern half of the country.[20]
As of 2005, there were also 20 privately owned Somali newspapers, 12 radio and television stations, and numerous internet sites offering information to the public. Several local satellite-based television services transmit international news stations, such as CNN.[8] In addition, one of Somalia's upstart media firms recently established a partnership with the BBC.[8]
Finance
Main articles: Central Bank of Somalia and Somali shilling
An Amal Bank branch in Bosaso.
Owing to a lack of confidence in the local currency, the US dollar is widely accepted as a medium of exchange alongside the Somali shilling. Dollarization notwithstanding, the large issuance of the Somali shilling has increasingly fueled price hikes, especially for low value transactions. This inflationary environment, however, is expected to come to an end as soon as the Central Bank assumes full control of monetary policy and replaces the presently circulating currency introduced by the private sector.[22]
Although Somalia has had no central monetary authority for upwards of 15 years between the outbreak of the civil war in 1991 and the subsequent re-establishment of the Central Bank of Somalia in 2009, the nation's payment system is actually fairly advanced due primarily to the widespread existence of private money transfer operators (MTO) that have acted as informal banking networks.[23]
These remittance firms (hawalas) have become a large industry in Somalia, with an estimated $1.6 billion USD annually remitted to the region by Somalis in the diaspora via money transfer companies.[3] The latter include Dahabshiil, Qaran Express, Mustaqbal, Amal Express, Kaah Express, Hodan Global, Olympic, Amana Express, Iftin Express and Tawakal Express. Most are credentialed members of the Somali Money Transfer Association (SOMTA), an umbrella organization that regulates the community's money transfer sector, or its predecessor, the Somali Financial Services Association (SFSA). A unique feature of the Somali funds transfer companies is that they all charge the same low commission of 5% for sending amounts of up to approximately $1000, a fee range that encompasses the vast majority of household Somali remittances. For amounts greater than $1000, these companies charge commission fees of between 3%-4%, significantly lower than Western Union's 7.1% fee and MoneyGram's 7.2% fee for sending the same amount to Ethiopia. The bulk of remittances are sent by Somalis based abroad to relatives in Somalia, a practice which has had a stimulating effect on the country's economy.[24][25]
A 500 Somali shilling banknote.
As the reconstituted Central Bank of Somalia fully assumes its monetary policy responsibilities, some of the existing money transfer companies are expected in the near future to seek licenses so as to develop into full-fledged commercial banks. This will serve to expand the national payments system to include formal cheques, which in turn is expected to reinforce the efficacy of the use of monetary policy in domestic macroeconomic management.[23]
With a significant improvement in local security, Somali expatriates began returning to the country for investment opportunities. Coupled with modest foreign investment, the inflow of funds have helped the Somali shilling increase considerably in value. By March 2014, the currency had appreciated by almost 60% against the U.S. dollar over the previous 12 months. The Somali shilling was the strongest among the 175 global currencies traded by Bloomberg, rising close to 50 percentage points higher than the next most robust global currency over the same period.[27]
Stock exchange
The Somalia Stock Exchange (SSE) is the national bourse of Somalia. It was founded in 2012 by the Somali diplomat Idd Mohamed, Ambassador extraordinary and deputy permanent representative to the United Nations. The SSE was established to attract investment from both Somali-owned firms and global companies in order to accelerate the ongoing post-conflict reconstruction process in Somalia.[28]In August 2012, the SSE signed a Memorandum of Understanding with the Nairobi Securities Exchange (NSE) to assist it in technical development. The agreement includes identifying appropriate expertise and support.[28][29] Sharia compliant sukuk bonds and halal equities are also envisioned as part of the deal as Somalia's nascent stock market develops.[28]
As of November 2014, the Somalia Stock Exchange has established administrative offices in Mogadishu, Kismayo, and other urban centers in Somalia. The bourse is slated to officially open in 2015. Initially, seven Somali-owned firms from the financial services, telecommunications and transportation sectors are expected to list their shares therein for prospective global investment.[30]
Energy
The World Bank reports that electricity is now in large part supplied by local businesses, using generators purchased abroad. By dividing Somalia's cities into specific quarters, the private sector has found a manageable method of providing cities with electricity. A customer is given a menu of choices for electricity tailored to his or her needs, such as evenings only, daytime only, 24 hour-supply or charge per lightbulb.[7]
Oil blocks in Puntland.
In the late 1960s, UN geologists also discovered major uranium deposits and other rare mineral reserves in Somalia. The find was the largest of its kind, with industry experts estimating the deposits at over 25% of the world's then known uranium reserves of 800,000 tons.[33] In 1984, the IUREP Orientation Phase Mission to Somalia reported that the country had 5,000 tons of uranium reasonably assured resources (RAR), 11,000 tons of uranium estimated additional resources (EAR) in calcrete deposits, as well as possibly up to 150,000 tons of uranium speculative resources (SR) in sandstone and calcrete deposits.[34] Somalia concurrently evolved into a major world supplier of uranium, with American, UAE, Italian and Brazilian mineral companies vying for extraction rights. As of 2014, Kilimanjaro Capital has a stake in the 1,161,400 acres Amsas-Coriole-Afgoi (ACA) Block, which includes uranium exploration.[35] Besides uranium, an unspecified quantity of yttrium, a rare earth element and costly mineral, was also found in the country.[33]
In mid-2010, Somalia's business community pledged to invest $1 billion in the national gas and electricity industries over the following five years. Abdullahi Hussein, the director of the just-formed Trans-National Industrial Electricity and Gas Company, predicted that the investment strategy would create 100,000 jobs. The new firm was established through the merger of five Somali companies from the trade, finance, security and telecommunications sectors. The first phase of the project started within six months of the establishment of the company, and trained youth to supply electricity to economic areas and communities. The second phase began in mid-to-late 2011 and saw the construction of factories in specially designated economic zones for the fishing, agriculture, livestock and mining industries.[36][37]
In 2012, the Farole administration gave the green light to the first official oil exploration project in Puntland and Somalia at large.[38][39] Led by the Canadian oil company Africa Oil and its partner Range Resources, initial drilling in the Shabeel-1 well on Puntland's Dharoor Block in March of the year successfully yielded oil.[38]
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