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Somalia - The Next Investment Opportunity?: Jan-Carl Stjernswärd
Somalia - The Next Investment Opportunity?: Jan-Carl Stjernswärd
INVESTMENT OPPORTUNITY?
Published on Published onFebruary 28, 2018
Jan-Carl Stjernswärd
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Managing Partner at Lincoln Associates FZE
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What has led to this interest? In short, its location and Ethiopia’s growth.
This, and some of the opportunities available are discussed below.
Strategic location
Real estate agents always say location is the single most important factor
when choosing whether to buy a property or not. Geopolitics is no different.
One of the miracles of economic growth over the last decades has been
Ethiopia. This thriving consumer economy of 120 million has had its GDP
increase by six fold from around USD 12 billion in the year 2000 to around
USD 72 billion as of 2017. Yet this landlocked economy has not had a port of
its own since Eritrea seceded as an independent state in 1991. Relations
deteriorated, leaving the country dependent upon neighbouring Djibouti. This
in turn led to Djibouti’s remarkable development.
Each of Berbera and Bosaso could serve Ethiopian demand – as well as help
Somaliland and Somalia develop themselves – both via Djibouti (if transit is
permitted) and directly through various overland routes.
Foreign players
What all this means is that the security situation is rapidly improving. The
most problematic region remains the capital, Mogadishu, with Puntland
(Bosaso Port) and Somaliland (Berbera Port) both being stable and relatively
safe.
A flat society
Somalis have for centuries been nomads. As with other nomadic societies
that this correspondent has visited in Central Asia and Africa, there is an
ingrained sense of hospitality and trust between people. There is no real class
pyramid, and pauper and businessman alike often share the same table at
restaurants, political meetings and social gatherings. For a foreign investor,
this is refreshingly different from many other sub Saharan countries,
underpinned by a strict pecking order of rent seekers.
Also enriching Somalia’s economic and social life are its large diaspora
community (stemming mainly from people fleeing the civil war of the early
1990s). Somali communities exist in the UK, North America and
Scandinavia. Encountering an otherwise normal looking Somali with a heavy
Mid Western drawl peddling his wares in a lively provincial town is
becoming an increasingly more frequent experience as educated diaspora
members return to Somalia to capitalize on new opportunities. Large sums of
cash are remitted through this network, using the Islamic finance system of
hawala, in and out of the country. Indeed, in the absence of banks, Somalia
has developed some cutting edge solutions to cater for payment solutions,
including e-wallets on your phone through which most payments can be
made.
All in all, while inter clan rivalry remains an issue, foreign guests are
invariably shown respect and friendship by the ordinary Somali.
The future
Even though political and security challenges remain, it seems likely that
Somalia’s economic boom will iron out these problems over the next few
years. Meanwhile, for the investor seeking potentially triple digit returns and
with a healthy appetite for risk (and seafood), Somalia offers many
interesting opportunities in the energy, hospitality, finance and infrastructure
sectors.