iOL
Ex-QDMS
Hargeisa currency traders wait for
business at a stand set up in front of rubble left over from the Horn
of Africa�s years of civil war. Unheard of in Somalia to the south,
these traders are able to display cash out in the open with little fear
of robbery. Their self-proclaimed Republic of Somaliland has become one
of Africa�s fledgling success stories. But it is a success the outside
world is reluctant to recognise or help because of the fear of
encouraging other break-ups.
Matthew Newsome Hargeisa
As Somalia starts to emerge
from its quagmire of instability and chaos, 20 years of relative peace
and stability are starting to pay dividends for its close neighbour
Somaliland, as 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 (R352m) for exploration activities.
Genel told Inter Press Service
(IPS): “Somaliland provides an exciting geological opportunity, and we
look forward to starting work in the region.”
The independent oil and gas
exploration and production company had 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 chief executive 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 gargantuan livestock population that tripled the
3.5 million civilian population, the livestock trade generated up to 65
percent of the country’s gross domestic product, Somaliland’s Minister
of Planning Dr Saad Shire said.
With a limited national budget of
$120m, the Somaliland government is now starting to receive much-needed
revenue from foreign private investors to support its development.
Somaliland’s oil and gas reserves
attracted the attention of other giant energy companies such as
London-based Ophir Energy, Jacka Resources of Australia, and Petrosoma, 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 last 21 years. Its unconfirmed
legal identity has hindered its economic prospects – few insurance
companies have been prepared to insure foreign investors there.
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 $17m 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. It is
considered the jewel in the country’s economic crown.
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 Africa’s landlocked
countries like Ethiopia.
“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.
The port manager, Ali Omar
Mohamed, is irrepressibly enthusiastic about the potential of expanding
the port to make it a regional trading hub between Africa and the Middle
East. “This port can be as big and as successful as Djibouti. It is
only a matter of time before it attracts investment to modernise and
expand it, so that we can have the increased capacity we need to realise
its full economic potential,” he said.
Shire
is confident that if Somaliland produces a stronger commercial legal
framework, with proper safety measures to increase private investor
confidence, it will attract investment to transform the country into a
prosperous flourishing democracy like Singapore.
“We have stability and access to a
port, we have what investors are looking for. If Singapore can do it, I
think we can,” he said.
The lack of insurance available to
investors is the biggest barrier to the country’s development according
to J Peter Pham of the Michael S Ansari Africa Center, which was set up
to help transform US and European policy approaches to Africa.
“Without international recognition
and the consequent access to international financial institutions,
Somalilanders face serious obstacles to achieving the economic
development, which would ordinarily accrue to a state with their record
of political stability and democratic governance,” he said.
“It is not just a matter of
accessing development assistance and international credit, but also of
having a legal framework whereby potential private-sector partners could
obtain insurance and otherwise secure their investments,” he said.
According to Pham, Somaliland will
never be in a position to fully benefit from the natural resources it
is endowed with, as long as it is refused nationhood status. “The
potential natural resources of Somaliland – including hydrocarbons,
minerals, and fisheries – cannot be really tapped in the absence of a
resolution of the sovereignty question.”
The
urgent need for foreign investment was highlighted in a 2012 to 2016
national development plan produced by the government in December 2011.
It outlines the need for overdue investment in the country’s
infrastructure such as road building and waste disposal. The total
capital required to fund this plan is $1.19 billion.
According to Shire, the bulk of
the investment for this is expected to come from external sources like
aid donors and foreign investors.
However, there is a danger that
without prompt recognition from the international community, development
will be too slow and may cause sections of the population to become
disaffected and vulnerable to groups like Somalia’s al-Qaeda-linked
al-Shabaab.
According to Pham, the
international community’s inertia in responding to the issue of
Somaliland’s nationhood is placing the country in clear and present
danger and making it vulnerable to influence from the Islamist terrorist
group.
“What the international community
needs to understand is that unless something is done to spring
Somaliland from the limbo to which it has been consigned, things may not
remain all that smooth.
“A growing population of young
people whose prospects are limited by the constraints on economic
development may find themselves a receptive audience for voices very
different from the farsighted leaders who built Somaliland from the
ruins of the former Somalia,” he said. – IPS
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