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 Aden.

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 Mohamed 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.

FT.com : http://www.ft.com/cms/s/0/f48e64be-80a1-11e0-85a4-00144feabdc0.html#axzz1MeZajzVG

Coca-Cola boosts Somaliland economy

By Katrina Manson in Berbera

While no government recognises Somaliland, the business stamp of approval is proving less elusive.

Coca-Cola has issued a second licence within Somalia, which will cover Somaliland and neighbouring, semi-autonomous Puntland, a tacit recognition of Somaliland’s functioning economy. The company’s other franchise, which is based in Mogadishu, is no longer able to function because of violence in the Somali capital.

Coca-Cola’s vote of confidence – long withheld – may do more to propel investor interest and confidence than any political move. Only two other Coca-Cola franchises remain to be given out in the world: Cuba and North Korea.

Ahmed Guelleh, a Somaliland businessman and owner of Somaliland Beverage Industries, had the franchise to Somaliland – then a region of Somalia – 26 years ago, before war broke out and he lost everything. He won the licence back in late 2010 and production is due to start this year.

Mr Guelleh’s band of five brothers is a typical, if highly successful, example of a strong trading family. Their $5m-a-year import-export operation brings in everything from porridge oats to tyres while sending out animal skins and frankincense, as well as serving as agents for a shipping company and DHL.

The Coca-Cola bottling factory, among the first manufacturing investments in Somaliland, with brand new machinery from Austria and Italy, has cost $10m and is expected to generate an annual $3.2m profit, bottling 11,000 an hour and employing 130.

Its establishment has required a tailored approach. SBI found and secured its water supply after drilling for six months in 200 sites. It will sell plastic, rather than glass, bottles because glass takes too much water to wash and can take months to return from the hard-to-reach and insecure east. Instead the company will pay locals to collect empty plastic bottles and ship them to a recycling company in India that will pay for the refuse in a break-even deal.

The company says it will undercut the current Yemen-imported Coke price by about 40 per cent, saying Somaliland is the most price-sensitive market in the world.

“Recognition is the problem, not the place,” says Gavin Dehning, managing director of SBI. A South African who left his job of 14 years to come and set up the factory, he has had to overcome the damaging impact of piracy and the issue of Somaliland’s lack of diplomatic recognition.

When SBI ran out of bitumen to paint a septic tank, it took three weeks to replace it, as pirate-nervous ships dock rarely. Twelve Indian steelworkers critical to putting up the factory were prevented from travelling because the Indian authorities equated Somaliland with its anarchic neighbour — for which it has an advisory forbidding travel.

But Mr Dehning also says Somaliland port authorities are the most speedy and accommodating of any African country in which he has worked, offering none of the red tape or bribery with which he is familiar, and that the company has done everything to make sure it exceeds the requirements of the franchise.

“Coke is not going to destroy its brand because of one small little country,” he said.

FT.com : http://www.ft.com/cms/s/0/35ab85bc-80ca-11e0-8351-00144feabdc0.html#axzz1MeZajzVG