With increased economic activity throughout the Horn and East Africa the regions’ ports are more important than ever. Mombassa and Dar es Salaam are at full capacity, Djibouti is undergoing further expansion, which leaves Berbera Port the only other viable entry/exit point until the Lamu development is completed. Berbera Port sits in a very strategic location on the Red Sea and looks set to become a major port in the region for Somaliland, Ethiopia, Somalia and South Sudan. Somaliland’s government has signaled its eagerness to attract Foreign Direct Investment (FDI) projects and views the upgrading and expansion of the port as integral to the development of the Berbera Corridor. In recent years a number of companies including France’s Bolloré Africa Logistics, the Hong Kong based, Hutchison Port Holdings (HPH), and Holland-based, APM Terminals have expressed an interest in playing a role in the Port of Berbera. With the green light having been given for privation already bids are being placed with Somaliland’s National Tender Board with regard to securing the rights to manage the Berbera petroleum storage facility. Companies such as Hass Petroleum, Jet Oil and Red Sea Petroleum have already thrown their hat into the ring. The likelihood is that further interest will follow and before too long Berbera will be in a position to offer effective competition to Djibouti.
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If has been fascinating to monitor the international media with regards to coverage of the Horn and East Africa over the last eighteen months. Assuming that editors are even prepared to give to run a story at all the stories have been depressingly predictable, ranging from stories of Somali pirates and militants, child soldiers and outbreaks of the Ebola virus in Uganda, and famine and inter-ethnic strive along the disputed border between South Sudan and its northern neighbour. The HABA region is no stranger to climatic and geo-political woes, but equally is beginning to attract serious interest as a gateway into Africa and as an emerging economic zone in its own right. Negativity and well-worn stereotypes apart, there has been a frisson of interest from those interested in hydrocarbons. Whilst thought of petro-dollars has excited some in the business press, the more discerning have noted serious investment in infrastructure along with signs of improved aviation links. IT, solar energy and livestock are all areas that look to have considerable potential. When it comes to the Horn rarely do journalists, analysts or policy makers see the whole picture, it is as if they appear to be looking at the region through colanders. For some risk, both perceived and actual risk frames every decision taken, while for others much of East Africa and all of the Horn is viewed as a forbidding terra incognito. What is required is a rational and informed approach to a part of Africa that is already proving a useful entry point into Central and Sub-Saharan Africa – HABA for its part is determined to help others to see more clearly.
By Ed Stoddard
CAPE TOWN (Reuters) – Wanted: investors for small African nation with good oil and mineral potential – no seat at the United Nations but history of independence in rough neighborhood.
The break-away nation of Somaliland is a tough sell but the announcement this week that serious hydrocarbon exploration is about to kick off there shows that oil talks, regardless of political status.
For Somaliland, an internationally unrecognised state of 3.5 million people that declared independence from Somalia in 1991, it promises to be a game changer.
“We need to find a way to earn hard currency besides selling goats, sheep and camels to Arabs. This is the only way we earn hard currency now,” Hussein Abdi Dualeh, the minister of energy and mining, told Reuters on the sidelines of an African oil conference in South Africa organised by Global Pacific & Partners.
Ophir Energy Plc, Australia-based Jacka Resources and Genel Energy, which is headed by former BP chief executive Tony Hayward, are all about to start exploration in Somaliland.
Dualeh said the investments would be worth tens of millions of dollars, small change in the global oil industry but a windfall to a government that only has a budget of $120 million.
Gas discoveries off Mozambique and Tanzania and oil finds in Uganda and Kenya have sparked a hydrocarbon scramble into previously unexplored parts of Africa.
Oil companies often go where other investors fear to tread, including other unrecognized statelets such as Kurdistan.
“Oil companies are concerned about geology, not politics,” Dualeh said.
He also said Somaliland offered investors something sorely lacking in anarchic Somalia: stability.
“We control our borders, we have a police force and military. We have had four governments come and go with democratic elections,” he said.
The territory has not exactly been an oasis of peace, however. Fighting erupted there in January after the leaders of the northern regions of Sool, Sanaag and Cayn decided to band together into a new state called Khaatumo.
Somaliland’s troops have since clashed with militia fighters loyal to Khaatumo, with reports of dozens of casualties.
And what about pirates?
“The pirate problem is not off our coast, it starts in the Indian Ocean with Somalia. We have a nimble coast guard that does its job with limited resources,” Dualeh said.
If oil is discovered, Somaliland would also welcome the steady stream of revenue that would follow.
Dualeh said livestock sales across the Red Sea to Saudi Arabia followed a seasonal pattern with sales peaking during the annual haj pilgrimage.
“We need to get stuff out of the ground. Selling livestock during the haj is not sustainable,” he said.
The self-declared independent state in the north-west corner of conflict-ridden Somalia has been an oasis of calm, and it is now seeking foreign investment.
Last week’s London conference on Somalia made a nod to Somaliland, formerly a British protectorate, and the semi-autonomous region of Puntland. Without naming them, the final communique “welcomed the success in some areas of Somalia in establishing local areas of stability, and agreed to increase support to build legitimate and peaceful authorities, and improve services to people living in these areas”.
Neither region was named because of Somalia’s political sensitivities. Somaliland has not been recognised internationally since it broke away in 1991 after the fall of Siad Barre, the Somali dictator, and Somalis strongly reject the idea of Somaliland’s independence. It was a diplomatic breakthrough in itself to have Ahmed Mahamound Silanyo, the Somaliland president, present at last week’s meeting.
As the London communique indicated, Britain plans to concentrate its aideffort on Somaliland. The Department for International Development (DfID) plans to spend an average of £63m annually on Somalia until 2015, devoting more than 40% of its aid on this north-west corner, home to 3.5 million people.
Somaliland will need the money. Its 2012-16 national development plan(pdf) published in December set out a capital investment proposal of $1.19bn. The government is expected to provide $74m, the private sector $132m, the diaspora $4m, but the overwhelming amount is expected to come from aid donors – $979m, 82% of the total investment plan.
“Given the meagre resources available to the government from its budget and the absence of credit facilities, the bulk of the investment required for the national development plan is expected to come from external sources,” says a summary of the plan. The areas for investment are the economy, infrastructure, governance, social and the environment. Most of the investment for infrastructure is set to repair and upgrade Somaliland’s dilapidated road network.
Somaliland’s minister of planning, Dr Saad Shire, provided an overview of Somaliland’s economic objectives before an enthusiastic crowd of supporters in the UK parliament on Wednesday at a session chaired by Alun Michael from the all-party parliamentary group for Somaliland. The message was that Somaliland was open for business.
Shire trumpeted Somaliland as ideally located for access to east African markets, particularly Ethiopia, markets in the Middle East and even Asia – and what must be one of the world’s most favourable regimes for foreign investors.
Foreign direct investors will pay no tax for three years. After that they will have to pay only 10% on profits, which can be freely repatriated. There will be full compensation for any expropriations, which would be done only in the “public interest”. There will also be no minimum wage. Shire listed a number of foreign investors already doing business in Somaliland, including Coca-Cola, Western Union and Nubian Gold.
In an idea that went down well with his audience, Shire said Somaliland suggested the Somali diaspora make a $1 voluntary contribution to the state when they send remittances, which would come to between $300m and $400m a year. Several people in the audience said they would be willing to contribute much more than $1, while Quman Jibril Akli, from Somaliland Focus UK, went so far as to say the $1 contribution should be made compulsory.
Others cautioned against relying too much on the diaspora, as future generations may not feel the same emotional tug. “Our grandchildren may not have the same commitment, we’re just a stopgap,” said one Somalilander.
As for aid, Somaliland’s lack of international recognition – despite being independent to all extents and purposes for the last two decades – means most aid goes through UN agencies rather than directly to the government. The clearly frustrated Shire complained that the aid usually ends up “in the wrong place [at] the wrong time”, despite consultations.
He also voiced a complaint that will sound familiar to relief agencies: aid does not arrive until starving people are shown on TV screens.
“Last year we appealed for development money to dig 10 to 12 huge reservoirs, each costing about $400,000, which would have taken care of the drought, or at least provided some water,” he said. “But the international community was not willing to spend the money. It was really a mistake, that’s what’s wrong with aid.”
To have more control over when and how to spend money, Somaliland is in the process of setting up a trust fund. The plan is to have it up and running by September, with the UK and Denmark providing an initial amount of $20m in the hope that others will follow.
“We only see 20p out of every £1 of aid,” Shire said. “Donations go through long channels; it’s like passing ice cream round, by the time it gets to the recipient it will have melted. What we get isn’t that much. We hope the $979m will go into the right sectors.”