Private Sector-Led Solutions Help Bring Somalia Back Into the Global Economy

Working in key business sectors to stabilize Somali society

Client
U.S. Agency for International Development (USAID)
Project(s)
USAID/Somalia Growth, Enterprise, Employment, and Livelihoods (GEEL) project

Somalia has been crippled by two decades of civil war, inhibiting the country from participating in the mainstream global economy. This has led to one of the lowest GDPs in the world and an unemployment rate of 75 percent. Throughout the international development community, the idea of implementing a long-term economic development program has long been seen as an impractical endeavor that risked low results. In recent years, a nascent federal government has been working to address the vacuum of power and lack of economic opportunity which terrorist groups, such as Al-Shabab, use to wreak havoc on parts of the country.

Despite this turmoil, the Somali private sector has been slowly but steadily finding opportunities to combat instability through economic growth, particularly through the agriculture, fisheries, livestock/dairy, and energy sectors. With support from the United States Agency for International Development (USAID) Growth, Enterprise, Employment, and Livelihoods (GEEL) project, Somalia is demonstrating that it is “open for business” and re-emerging as an actor in global markets. Backed by GEEL’s targeted technical assistance, local enterprises are taking the lead in helping Somalia’s economy recover and stabilize. 

Re-entering the Global Economy

Following the 20 years of conflict that stifled growth, Somali businesses are now seeking ways to not only grow but to become significant contributors in local and international markets. GEEL has helped more than 60 of these businesses take initial steps by connecting them to the international trade arena. For example, in 2016 GEEL supported a group of businesses to establish the first Somali exhibit to promote Somali products at the Gulfood Trade Show in Dubai, the world’s largest food exhibition. Three years later, the GEEL-supported exhibitors at Gulfood grew five-fold, showcasing the expansion of Somali businesses and their growing presence in the international market. During these events, GEEL facilitates individual meetings with buyers, resulting in Somali export sales shooting up by more than US$4 million over three years, with multiple ongoing transactions and partnerships.

This foothold in international trade was made possible through GEEL’s multidisciplinary approach that improves Somalia’s economic competitiveness at several levels--from high-level business connections that lead to increased sales, to access to finance, to improved certified production that expands market reach. For example, women-owned businesses participate in GEEL-supported forums to connect them to banks and investors, such as MicroDahab, Kaah International Microfinance Services, Dahabshil Bank, and International Bank of Somalia. One such event held in March 2019 hosted 80 businesswomen and resulted in financial institutions offering free business accounts, the acceptance of businesswomen guarantors for micro-loans, and immediate evaluations of investment proposals.

At the same time, GEEL has introduced what were previously considered inaccessible technologies into the hands of over 45 agribusiness firms. These businesses now boast improved levels of production through the latest knowledge in drip and pivot irrigation systems, cold chain storage solutions, climate-smart technologies, and renewable energy systems.

This approach has been successful across sectors. For example, to capitalize on Somalia’s bountiful coastline–the longest in mainland Africa–GEEL efforts are sustainably increasing fish sales. The project helps fisherfolk overcome policy and infrastructure challenges as well as introduces innovative methods to hygienically store freshly caught fish. Tackling the challenge posed by the high costs and low availability of energy that make cold chain storage inaccessible, GEEL worked with fishing companies to develop mobile fish shops. Using refurbished shipping containers powered by lower-cost solar energy, the mobile shops help improve the availability and quality of Somali fish in the local market while increasing access to international markets such as Oman and China.

Building Resilience to Drought

Despite significant progress, economic gains in Somalia are regularly threatened by recurrent shocks and stresses such as drought. For example, the 2015-2016 regional drought caused livestock losses as high as 40-60 percent in some areas of the country. As the drought killed off many herds, maintaining livestock became increasingly expensive for animal herders, and food prices spiked. The compounded effects of drought and higher food prices contributed to food insecurity and malnutrition throughout the country.

To increase farmers’ resilience to cyclical drought, GEEL works with agro-pastoralists to introduce several layers of private sector-led solutions that help animal herders reduce their losses. For example, GEEL has partnered with the private sector to transform 200 new hectares to commercial fodder production to replace higher cost feed imports during droughts, creating approximately 300 new jobs in fodder processing. GEEL also developed an innovative camel leasing model for private sector dairy companies to lease animals from pastoralists during a drought to protect commercial milk supplies and the profits of both the herders and dairy companies. These demonstrate how private sector-led solutions can effectively build resilience to drought and be a win-win for the businesses and producers.

Supporting a New Somalia

Today in Somalia, systems are improving, businesses are growing, jobs are increasing, and the people are ready for change. Somalia is once again becoming a player in the world economy.

In the past four years, GEEL has supported this transformation by investing or co-investing in 62 Somali companies, including those owned by women and the diaspora, which has leveraged over US$22.5 million in new private investment, 40 percent from diaspora-owned enterprises. These investments have, in turn, generated more than 2,000 new full-time jobs. 

By empowering the local private sector, working closely with the national government, and building resilience to recurrent shocks and stresses, GEEL is demonstrating that long-term economic growth programs in Somalia are not only possible—they are profitable.