The 2012 Business Confidence Survey, released this week, shows that investment in medium‐sized enterprises more than doubled between 2011 and 2012. The Somaliland Ministry of Commerce and the Chamber of Commerce, Industry, and Agriculture conducted the survey with USAID support.
“This year’s survey shows that businesses and investors are becoming more confident in the economy,” said Somaliland Minister of Commerce Honorable Abdirizak Ahmed Khalif. “We expect that their confidence will continue to grow and that investment will continue to increase.”
The survey found that investment in medium sized‐enterprises of $100,000 ‐$500,000 had more than doubled in Hargeisa between 2011 and 2012 (from 7.5 percent of respondents to 17 percent).
Nearly 300 local businesses from all regions of Somaliland responded to the annual survey‐including women entrepreneurs and youth‐owned businesses as well as investors from the Somali diaspora. The survey queried respondents about the ease of starting a business, perceived availability of skilled labor, the quality of infrastructure, security, and laws and regulations for businesses and investors.
Previous surveys had shown that businesspeople and potential investors were particularly concerned about weak legislation. In response, in 2012 USAID also provided assistance to the Ministry of Commerce to review and amend laws governing commerce and investment.
Support for these activities comes from USAID’s Partnership for Economic Growth program, a $13 million initiative that supports stabilization by investing in the local economy and strengthening the livestock, farming, and energy sectors.
‘Guul’ meaning ‘success’ in the Somali language has been incorporated with the English word ‘Group’ to portray and highlighting the amalgamation, collaboration and affiliation of successful Somali and foreign investors. Poetry is one of the key pillars of the Somali culture; we exercise this through alliteration and our favourite letter – G; drawing on the company’s creative direction. Our logo illustrates the wealth of opportunities in the region, the company’s drive for global success and long-term sustainability.
http://www.guulgroup.com Guul Group (GG) is operating or investing with a diverse number of companies from different industries as part of its varied and growing portfolio across Somaliland and potentially the Horn of Africa. The company is both dynamic and entrepreneurial; purposefully pursuing emerging markets with an emphasis on innovation, growth and ethos. A business that invests, continuously seeks investment opportunities, provides forward thinking services whilst striving to ensure that there is a great push for Corporate Social Responsibility. GG provides investment opportunities with the aim of bringing and working with foreign investment and strategic alliance partners on projects in Somaliland and potentially other Horn of Africa markets, which earn considerable/realistic profits for the investors through investments and projects that have a substantial potential return on investment (ROI). We are constantly looking for new ideas, opportunities and partnerships, please get in touch: firstname.lastname@example.org://www.guulgroup.com[/caption%5D
“As it currently stands, Somaliland represents a high-risk, high-reward opportunity for foreign investors, local businessmen say. As international cooperation increases and more foreign companies start to move in, the economic opportunities will continue to grow. Those who get in early may have the chance to be part of something both exciting and profitable”. Rob Denman; editor in chief and CEO of London-based Pathfinder Business.
- This November, Somalia struck its first major oil deal since seceding from Somalia in 1991.
- The driving force of this Horn of Africa nation’s economy has traditionally been livestock.
- Somaliland government is now starting to receive much-needed revenue from foreign private investors to support its development.
As Somalia starts to emerge from instability and chaos, 20 years of relative peace and stability are starting to pay dividends for its close neighbour Somaliland.
This November, it struck its first major oil deal since seceding from Somalia in 1991. Anglo-Turkish company Genel Energy received its licence from the Somaliland government in early November to explore and develop oil and gas reserves after pledging almost $40 million for exploration activities.
The independent oil and gas exploration and production company has become the first foreign investor to commit a significant amount of capital to the country’s energy sector, after initial investigations demonstrated “numerous oil seeps” confirming “a working hydrocarbon system,” a statement from Genel said.
Genel Energy, headed by erstwhile BP CEO Tony Hayward, is due to start exploration before the end of the year.
The driving force of this Horn of Africa nation’s economy has traditionally been livestock. With a livestock population that triples the 3.5 million civilian population, the livestock trade generates up to 65 per cent of the country’s GDP, Somaliland’s Minister of Planning Saad Shire said.
With a limited national budget of $120 million the Somaliland government is now starting to receive much-needed revenue from foreign private investors to support its development.
ALSO READ: Hope grows in a post-transition Somalia
Somaliland’s oil and gas reserves attracted the attention of other giant energy companies such as South African-based Ophir Energy, Jacka Resources Ltd of Australia, and Petrosoma Ltd, a subsidiary of British-based Prime Resources — all of whom announced their readiness to invest.
Somaliland has suffered from not being internationally recognised for the past 21 years. Its unconfirmed legal identity has hindered its economic prospects — few insurance companies have been prepared to insure foreign investors here. Subsequently, investors have tended to regard Somaliland as an economic leper.
For these reasons, the country has also been ineligible for financial support from the International Monetary Fund and the World Bank. However, in 2012 Somaliland’s private sector started to progress against the odds.
At the beginning of the year, the first UK-Somaliland investment conference was held to stimulate bilateral trade recognition. And a $17 million Coca Cola plant launched in May by a Djibouti conglomerate made it the largest private investment in Somaliland since 1991.
Investors are seeing Coca Cola’s decision to have an operation in the region as a positive statement about the country’s stable business climate.
Somaliland’s Berbera port is also expected to attract major investment in the coming years. Built originally by the Soviet Union during the Cold War, the port currently serves as a major gateway for the country’s livestock exports. There is huge potential for it to be a juncture for oil and gas exports coming out of landlocked countries like Ethiopia.
The port manager, Ali Omar Mohamed, is enthusiastic about the potential of expanding the port to make it a regional trading hub between Africa and the Middle East.
“We are strategically located — Berbera is located in a maritime lane — 30,000 ships pass by our port every year from Europe, the Middle East and Asia. We can develop Berbera into a major port like Singapore — with container terminals, free zones, oil refineries, and services related to maritime business,” Shire said.
By MATTHEW NEWSOME
“By 2050, 1 in 4 of the worlds population will be in Africa of working age. What does that mean for us? It means it could point to strong long term business growth” – Clive Carpenter
The night was full of smiles and laughter, hand shakes, business card swaps and an overwhelming feeling of optimism and drive. Being on the “inside” of modern Africa you feel one of the privileged. Privileged in the sense that I know the potential that Africa offers, the truth, the politics, the stability and the gains to be had all round, not just for foreign investment but most importantly for the Africans themselves. I am beginning to build an understanding of just how progressive the continent is, and also how BIG. There are more than 50 countries in the African continent, each one has its own feel, its own opportunities for business, its own music, art, passions, agriculture, technologies, minerals, retail, construction. No longer should Africa be tarred with a mud hut and machete stereotype. No, Africa is a CONTINENT, not just ONE country with just ONE problem, no like any…
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It’s not a country recognised by anyone other than its own government, but that doesn’t seem to phase three oil companies scaling up exploration in Somaliland.
UK-listed Genel Energy and Ophir Energy, and Australia-listed Jacka Resources, are starting to explore for oil in earnest in the breakaway state, which declared independence from Somalia in 1991.
“We are embarking on the largest and most significant exploration this country has seen since it became independent 21 years ago,” oil minister Hussein Abdi Dualeh told beyondbrics from an oil conference in South Africa, hopeful the first drilling will start in 2014 following seismic surveys this year. “They are starting in a major way – it’s going to be a massive year.”
The three explorers cover seven blocks between them and Dualeh insists they have nothing to fear from old claims on some of the blocks issued under the former Mogadishu administration before it collapsed.
“The old companies from way back when Somalia was together have long gone. These contracts don’t last forever, they are long expired. I’m not worried they’ll have problems – I have no idea who had what,” says Dualeh. “We have had full control of the territory for 21 years. We have stability and access to the port – we have what any investor would like to have.”
Under the former Somalia regime, oil blocks were previously concessioned to Chevron, BP and Conoco before they declared force majeure more than 20 years ago when the state collapsed. A new donor-backed government in Mogadishu faces pressing concerns such as fighting al-Shabaab Islamist militants, holding off piracy and establishing a nationwide administration in the failed state.
The new explorers are no strangers to disputed and semi-autonomous states. UK’s FTSE-listed Ophir Energy, which owns 75 per cent of two Somaliland blocks, also has assets in western Sahara, while Turkey-based, London-listed Genel, which has 75 per cent of another two blocks, is developing assets in the Kurdistan region of Iraq and will start exploration in Somaliland in December.
Dualeh says about a third of 24 blocks – which cover the entire country – have so far been given out but that the prospects look good. Yemen, just across an expanse of water, has 9.8bn barrels and Kenya to the south has recently discovered likely commercial quantities of oil.
The self-declared state of Somaliland, internationally recognised as a semi-autonomous region, is agreeing individual contracts as it has yet to release its own petroleum code. The only existing code dates back to the days of unity.
“The geology is just very very exciting; the whole of east Africa has woken up and Somaliland is right at the spearhead of that,” says Mohammed Yusef, chairman and CEO of Petrosoma, whose 50/50 joint venture with Australia’s Jacka Resources will start the first aeromagnetic survey of their southern Odewayne blocks on Thursday. He says exploration is likely to run to $45-50m in the next two years. Yusef acquired the blocks in 2005 and spent years searching for co-investors to develop the acreage before agreeing a 50 per cent deal with Jacka Resources in March this year.
“What’s changed is that the investor sentiment is more positive. It’s not an accident that it’s an Australian company,” says Yusef “They went into Uganda against conventional wisdom and found the biggest monster in Lake Albert and that kicked off the whole east Africa oil revolution,” says Yusef of Jacka’s management team, who spearheaded exploration into Uganda’s oil potential, which has so far yielded reserves running to 3.5bn barrels.
“In Australia and Canada and to some extent in South Africa where they’re used to investing in natural resource investing in anything that makes sense and is viable, they can find money and they are quick to understand risk in places like Somaliland.”
Unlike other blocks, there are no former claimants on the 22,000 sq km of the Odewayne area licensed to Petrosoma and Jacka, which covers parts of three blocks.
“It’s like discovering an undervalued share. We’re not a fragile state any more after 21 years; we’re undeveloped but we’re a very, very resilient state. When the oil is discovered Berbera [the port] will be shipping oil rather than camels,” he adds.
Somalis living in Somaliland are rightly proud of their track record on democracy over the last couple of decades. This last week has seen yet another significant milestone, with local elections passing off peacefully and with a high turnout. International observers, including representatives from Progressio (http://www.progressio.org.uk/content/somaliland ) and Somaliland Focus (http://www.somalilandfocus.org.uk/ ) have been favourably impressed by the degree of democratic engagement and minimal irregularities. Somaliland’s continuing spirit of calm, is just one of a number of reasons why economic activity has increased apace in recent years. The country’s strategic location coupled a general improvement in the international climate locally has helped foster a greater appreciation of Somaliland’s potential. Diaspora communities in the UK, USA, the Netherlands and Scandinavia, as well as Australia and New Zealand have maintained strong ties and there is increasing evidence of Somalis being eager to return to play a constructive role. Private enterprise is fast proving to be the dynamo of the economy. Mahamed Liban, the founder of Guul Group (http://www.guulgroup.com/) is typical of the bright, articulate members of the Somali Diaspora who are returning in droves, eager to share their knowledge and skills. Liban, one of an increasing number of British Somali entrepreneurs, is upbeat about the prospects for his Hargeisa-based company; “We have already been approached by a number of foreign investors, namely from Australia and the UK and Guul Group is well placed to facilitate commercial activity by drawing up on market insight, local knowledge and contacts. The company provides investment opportunities with the aim of attracting and working with foreign investors and strategic alliance partners on projects in Somaliland and potentially other Horn of Africa markets.” In common with other returning members of the Diaspora he recognizes that even as a Somali there is need for considerable readjustment; “Culture is enormously significant and so for someone who has been away for two decades, much will seem alien and so a measured approach is best.”. Liban is candid when talking about the challenges new businesses face; “…many returnees and foreigners have a distinct lack of local knowledge and market insight. It is important to remember that what might work or sell in Europe or the US will not necessarily work or sell here.” The fact that Somalis are happy to embrace new technology is an added draw and this will be further encouraged by the fact that the country is currently being connected to fibre optic cables. Economic development is well under way and there is increasing body of evidence to suggest that many foreign, Diaspora and local investors are going to achieve that thing they are all seeking, namely ‘Guul’ (meaning ‘success’ in Somali).
Horn of Africa Business Association – http://ha-ba.com/somaliland%E2%80%99s-returning-diaspora-proving-to-be-a-dynamo-for-development/