FEDERAL REPUBLIC OF SOMALIA

MINISTRY OF COMMERCE AND INDUSTRY

Somali Investment opportunities and guideline of investors

Mogadishu-Somalia

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Somali Investment opportunities and guideline of investor
Somalia at a glance

Name Federal Republic of Somalia

Population 15 million
Total Area 637,657 sq.km
Neighboring countries Djabouti, Ethiopia, Kenya, Yemen
Major cities Mogadishu, Hargeisa, Kismayo, Beledweine
Languages Somali
Political System Parliamentary system
Currency Somali Shilling

Country Overview
Somali is located in a strategic area and the boundaries are to the north: Gulf of Aden, to the North
West: Djibouti, to the west: Ethiopia, to the south west: Kenya, to the east: the Indian Ocean waves
meet Somalia’s long coastline to the East and South.

Independence
Federal republic of Somalia took independent in 1960 southern and northern parts from Italy and
Britain.
The 2012 Somali provisional Constitution brought numerous changes to the country’s political
system, including devolution. As a result, two levels of government were created a Central
Government and 5 active federal member states and Somaliland, Somalia took the federal system.

The Federal Government of Somalia welcomes all forms of the investments, including public private
partnerships (PPP), and other alternative investment financing opportunities.

Trade and investment are the key drivers of development in Somalia that will ensure Somalia plays
the fullest role in a changing and interdependent world. In support of this goal, Somalia has adopted
one of the most flexible foreign investment laws in the world.

This Investment law, most importantly, treats both foreign and national investors as enjoying
similar economic and social advantages. Foreign investors have free access to all sectors of
economy unless investments infringe national security, environment, religion and heritage
concerns or are deemed morally unviable.

The National Investment policy priorities investment into agriculture and livestock, energy and the
fishers. A National Investment Promotion Strategy and Foreign Investor Protection Framework
have also been developed.

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Somali markets are relatively unregulated giving investors great flexibility. The Somali
government is keen to work with businesses to develop regulatory frameworks which support them
and improve their access to international markets and finance.

Somalia have untapped reserves of numerous natural resources such as iron ore, uranium, copper,
tin, bauxite, gypsum, salt, oil, and natural gas. These resources remain largely untapped and
unexploited because of the poor infrastructure and the decades of civil war. For a long time, now
the country has functioning government to welcome to investors all kinds of investment. However,
the country is slowly rebuilding and several foreign companies already showing interest in
investing in the different sectors. Somalia has a lot to do if has to rely on its minerals for revenue.
Most experts believe that the oil and gas sector is likely to see some progress in the future.

Other Minerals In recent years, several other minerals have been produced in Somalia including
gemstone, sandstone, niobium, granite, tantalum, and marble. It also has deposits of several other
non-metallic minerals such as kaolin, silica sand, feldspar, and limestone. These minerals are
mainly explored by artisan miners on a small scale. There are also small deposits of copper and
iron ore in the country.

Sectors and its opportunities / Economic potential Sectors

Livestock
Livestock is the backbone of Somalia's economy, accounting for 60% to 65% of the country's
production, and is available in a variety of livestock sectors such as camels, cattle and sheep.
According to FOA, there are an estimated 3.69 million camels in Somalia, 0.80 million in cattle,
and 11.75 million in Riyadh and 11.75 million in a sheep.
Somali livestock, one of the sweetest meats in the world, exports more than 1,612 million head of
livestock annually to Saudi Arabia, Oman, Kuwait, Bahrain, Jordan, and Qatar. but there are many
other international countries interested in exporting livestock to Somalia. In this sector, there are
a wide range of investment opportunities, and there is a need to further develop the livestock sector
as well as trade to increase livestock production both at home and abroad, and also other
opportunity to industrialized meat and milk productions.

Agriculture

Agriculture is the backbone of Somalia’s economy, contributing to approximately 70 percent of

the country’s Gross Domestic Product (GDP), 80 percent of the employment, and about 50 percent
of exports. Somalia is emerging from post-conflict, and despite the challenges faced, the sector
comprises of crop production, livestock, and forestry.

Somalia has huge investment opportunities and has 44,129,000 hectares of arable land that can be
grown with a variety of crops such as maize, sorghum, beans, Rice, Vegetables, Cotton, Sesame
and yet also Bananas.
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In this sector, it has not yet been utilized as it should be as only 1.6% of the total arable land in
Somalia is cultivated, and it needs to be developed and large-scale investments to transform it. the
Somali agricultural system and increase the productivity of the country and the economy as a
whole, Somalia’s agricultural exports are growing, dominated by sesame, lemon, and banana.

Somalia’s agricultural production mainly relies on 2,300 kilometers of productive land in riverine
regions. As such, the agricultural sector provides opportunities for investment with high returns,
including:

• Large scale specialist crop production

• Agri-inputs and machinery
• Grains and pulses production
• Fruits and vegetable production
• Food processing, distribution, and export
• Agri-inputs including equipment and technology
• Cold chains and warehousing
• Transport and logistics
• Quality assurance and testing
• Agricultural finance

Large Scale Crop Production

Lack of water and the high cost of irrigation, energy, and mechanization mean that most largescale
agriculture is not cost-effective and competitive as imports. Therefore, investors should focus on
specialist crops indigenous to Somalia or those suited to the constraints of its climate.

1. Fruit Production

Somalia’s tropical climate is well suited for the commercial production and export of fruits
and vegetables, including cultivation in climate-controlled environments for increased
productivity:

• High-value fruits like lemon, mango, grapefruit, Papaya and banana

• Banana is one of the major high-value export crops with lower production cost
compared

to major competitors in Latin America. Farmers in Somalia have produced bananas

for more than 100 years. With over 50,000 hectares available for cultivation, banana
production and exports provide lucrative opportunities for investment. Bananas
grown in Somalia are not affected by endemic pest and disease and therefore require
little or no chemical intervention to thrive, thus reducing production costs.

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 Additionally, the governments of Somalia and Turkey signed a preferential free
trade agreement, reducing import tariffs for the Turkish market and also Somali
government ready any agreements with interesting Countries.

2. Agro-processing Industries

Somalia’s rising urbanization has led to increased demand for processed food. The country
currently imports processed food valued at USD 1.5 billion annually, mainly from neighboring
countries and the Middle East. Numerous investment opportunities exist in agro-processing and
value addition as no major Agra-processing company is in operation in Somalia. The sector reports
between 55 and 60 percent post-harvest losses, which need attention.

3. Agri-inputs and Modern Irrigation Systems

The lack of multinational seed and agrochemical companies in the country provides
investors a unique opportunity to invest in Somalia’s agri-input sector. For instance:

• Seed production and processing: demand for quality and certified seed exceeds
10,000 metric tonnes annually, with only two local companies supplying below
1,000 metric tones. The deficit is an opportunity to invest.
• Pesticides: almost all the pesticides used locally are imported, providing an
opportunity for pesticide formulation and marketing.
• Fertilizers: The Somali market demands over 10,000 tonnes of fertilizer a year, but
none is manufactured in the country despite the availability of raw materials.
• Greenhouse technology: increased uptake of greenhouse farming by farmers in
Somalia has shot-up demand for the required technology, but almost all greenhouse
equipment is imported.
• Commercial irrigation and water harvesting: There are 8.9 million hectares in
Somalia with potential for irrigated agriculture. Therein lies opportunities for large
scale public- private partnerships.
4. Agricultural Machinery and Equipment

Almost all farm machinery, including tractors, are imported, with average imports of 1,000
tractors per year. There are opportunities to manufacture tractors locally, with more than
3,000 tractor units required by farmers as well as donor supporting farmers over the next
few years, and a minimum average of 1,000 tractors to be replaced annually by commercial
farmers. Tools used small scale farmers are also high in demand, and present opportunities
for local assembly investment.

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Fishers sector
Somalia, it has a coastline of 33310Km2, which is mostly used by coastal communities for fishing
by the coastal community and a small number for export. The use of wildlife off the coast of
Somalia has not been well utilized as the coast, Somalia has the longest coast in Africa and the
richest and most abundant fish in the continent. Therefore, the proper utilization and investment
of resources of the coast of Somalia, is a great opportunity.

Power and Renewable Energy

Somalia has one of the most expensive rates in the whole world customers are paying above $.36
dollars for per KW. The population of over 12 million people there is enormous demand for
cheaper and reliable electricity throughout the country generated by international standard power
plants.

There are private electricity companies that provide electricity services in the country. For these
companies, they only meet the needs of urban neighborhoods and parts of small companies and
industries.
The need for more powerful power companies has arisen in the wake of the country's inability to
build large-scale power plants that need to be powered by large-scale power plants, and there is a
need for investment. special investment in the country's electricity to increase production in
Somalia.

One of the most critical problems for economic growth and strength in Somalia is cheap access to
electricity. For Somalia to fully capitalize on its economic strengths, more affordable and reliable
access to electricity is needed.

The Government of the Federal Republic of Somalia truly believes that investment in its energy
sector, including electricity, will unleash the dynamic and sustainable economic growth and
profitability that will benefit both citizens, investors and ultimately, the whole country and region.

This opportunity opens with the investors to bring more affordable electricity would have a strong
economic effect, increasing Renewable energy sources are a viable and immediate way to achieve
afford- able access to energy for the public and businesses in Somalia.

The Somali Government is strong to capitalize on the great opportunity afforded to it by its
strategic location to pioneer renewable energy. Renewable energy will assist Somalia to achieve
affordable, reliable and efficient energy
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Port and Docks operations

There are four major ports in Somalia which used to fall under Somali Ports Authority: Mogadishu,
Berbera, Kismayo and Bossaso. The first three are Deepwater ports, the latter is the fastest growing
port in Somalia. All of these ports now fall under independent port authorities set up by federal
member states, as do the smaller ports such as El Ma'an, Merka, Gara’ad , Hobyo.

Mogadishu Port

Located along the Indian Ocean on the South coast of Somalia, Benadir Region. Mogadishu port
was the most active port that served Commercial, humanitarian and military purposes in Somalia.
Presently Federal Government of Somalia controls the port. Cargo destined for South and Central
Somalia is often routed through the Mogadishu ports.

Banks and financial institutions

The country has a central government bank, there are also private commercial banks with many
services but there are still commercial banks that are doing small loans with SMEs. That increase
economic and employment opportunities.
This sector, therefore, is great importance to the national economy, and the need for banks to lend
money to create large, medium and small investments. There is huge opportunity for financial
sector. Federal Government of Somalia welcoming all the investors who are interesting to invest
the financial sector of Somalia and Government of Somali urge all the modern banks around the
world to invest this sector.

Bilateral investment Treaties

Somlia had number of Bilateral Investment Treaties with different Countries such as Egypt,
Germany and Turkey, and FGS is ready to increase BITs with other Counties.

Somalia-Turkey Bilateral Investment Treaty (01/06/2016)

Somalia-Germany Bilateral Investment Treaty (27/11/1981)
Somalia-Egypt Bilateral Investment Treaty (29/05/1982)

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Multilateral Agreements
Multilateral Investment Guarantee Agency

Somalia Becomes 182nd Member of Multilateral Investment Guarantee Agency. The Multilateral
Investment Guarantee Agency (MIGA), a member of the World Bank Group, The Multilateral
Investment Guarantee Agency is an international financial institution which is offers guarantees
of political and financial risks, and also insurances. These guarantees help investors protect foreign
direct investments against political and non-commercial risks in developing countries.

Regional Integrations
Trade between African countries has the greatest potential for building sustainable economic
development and integration, The Regional Economic Communities (RECs) in Africa group
together individual countries in subregions for the purposes of achieving greater economic
integration. They are described as the "building blocks" of Africa.
Somalia is the member of some sub-regional integration such as AFCFTA, COMESA, Horn of Africa
Initiatives (HAO)

The African Continental Free Trade Area – AfCFTA

On 21st March, 2018, in Kigali, Rwanda, Africa made history by opening for signature, the
Agreement Establishing the African Continental Free Trade Area and also 54 countries have
signed and 36 have ratified the Agreement
AfCFTA is a legal framework that aims to ease the flow of goods and services across national
borders.
Somali is the Member state of The African Continental Free Trade Area (AfCFTA) the cabinet of
Somalia passed This agreement and submitted to the Federal Parliament of Somalia.
It is a market shared by 55 African Union Member States that committed to eliminate tariff and
non-tariff barriers on trade in goods as well as facilitating free movement of persons and services
across the continent. The AfCFTA is a market bringing together 1.27 billion Africans with
combined GDP of 3.4trillions dollars.

Legal Framework
Federal Government of Somalia Has approved number of laws related trade and investment to
regulate all kind of investment either domestic or foreign such as:
• Foreign Investment Law
• Company Law

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 • Licences Law
• Trademark Law
• Some other laws are still under draft

Policies
There are some policies and strategies are approved by the cabinet and implemented such as:
Trade Policy
MSMs Policy
Industrial Development Policy
National Investment Policy--first draft
And other policies are still under draft