Somaliland Central

Introduction

Small and Medium Enterprises (SMEs) play an important economic role in many countries. Over the past 15 years, economic planners have realized the importance of the small enterprise sector in achieving economic development. Many governments and development organizations have focused on the promotion of SMEs as a way of encouraging broader participation in the private sector. Small and medium-sized enterprises (SMEs) play a central role in the Somaliland economy. They are a major source of entrepreneurial skills, innovation and employment. In Somaliland, Small and Medium Enterprises Sector, is the biggest income and employment generator for many people and the largest business sector. Small and medium enterprises that trade in clothes, food, agricultural products, consumables, gold, beverages, fruits, etc. are visible in every city’s main street across the towns and cities of Somaliland. Those traders support families who may find it difficult to get alternative sources income, it is very clear that SMEs are the backbone of the Somaliland nation’s economy and deserve to attain appropriate technical, financial, legal, and political support from the top (Hiiliye, 2012). Somaliland imports most of its food and non-food- items from neighbouring countries, this creates number of small and medium enterprises to merchandise

Accounting Skills and Performance

Many SMEs in Somaliland suffer from lack of technical and business skills and most SMEs owners do not keep records of business transactions and this is a challenge to the performance and growth of the enterprises (ILO, 2010). Bookkeeping practices of SMEs in most countries are not adequate and this negatively affects their financial performance which leads to inevitable business failure (World Bank, 2013). The financial accounting problems faced by many SMEs is because they rarely use the services of qualified accountants but instead uses the conventional way of accounting which do not include business record keeping (Gahman, 2015). Challenges faced by SMEs due to poor accounting systems and procedures leads to lack of professional accounting records which make SMEs to be disadvantaged when it comes to borrowing bank loans, since banks depend on a business accounting records to ascertain credibility and qualification for issuing business loans (Kinyua, 2014).Proper book-keeping of accounting records should be kept for the well- being and growth of a SME.

Trade and Services

Transit Trade

Since pre-colonial times, Somaliland’s economy has been dominated by the transit trade between Ethiopia and foreign ports of call – mainly on the Arabian Peninsula. The ancient coastal towns of Seylac, Bullaxaar, Berbera and Maydh were the nodes of this trade. Following the secession of Eritrea from Ethiopia in 1993, the latter became a landlocked country for the first time in centuries, acquiring a new-found dependence on foreign ports – namely Assab, Massawa, Djibouti and Berbera. With the outbreak of war between Eritrea and Ethiopia in 1998, access to Assab was denied to Ethiopia, which shifted the bulk of its import trade to Djibouti. But congestion of Djibouti’s facilities has

stimulated Ethiopian interest in the port of Berbera, offering Somaliland an unprecedented opportunity to access the 60 million consumers in the Ethiopian market.

By 1997, 65% of the trade through Berbera port was reportedly destined for Ethiopia (Bradbury: 1997), and roughly 60% of exports originate there. Transit traffic along this corridor appears to be on the increase (GOS Plan of Action: 1999), with expected spinoff effects for the entire Somaliland economy.

Somaliland’s utility as a transhipment corridor to Ethiopia has also been noted by Ethiopia’s partners in the international community. In early 1999, the European Commission (EC) routed a trial shipment of 15,000 metric tonnes of wheat destined for refugee camps in eastern Ethiopia through Berbera. The operation, which required 900 truck journeys to move the total shipment between Berbera and Jigjiga/Shinniile involved trucks from all over Somaliland, and proved to be surprisingly successful. The European Commission repeated the operation later in the year, with two vessels delivering approximately 16,600 metric tonnes each through Berbera for Ethiopia. Many observers in Somaliland are hopeful that future operations of this kind could eventually develop into a mutually beneficial trade relationship with Ethiopia. For the time being, however, Berbera remains uncompetitive in comparison with Djibouti. Port charges are nearly 20% higher and warehousing costs are nearly double.

For domestic imports, these higher costs can be passed on by traders to Somaliland’s consumers, but they render Berbera prohibitively expensive for transit goods. Berbera will have to find ways to reduce these costs if it is to compete for access to Ethiopian markets in the long term.

Foreign donors have also shown an interest in assisting Somaliland to develop its transit corridor in other ways. Both Denmark and the EC are sponsoring the rehabilitation of the Berbera-Hargeysa road as well as the construction of an all-weather road along the main transit route between Kalabaydh (near Gabiley) and Tog Wajaale, on the Ethiopian border. The United Nations Conference on Trade and Development (UNCTAD) and United Nations Development Programme (UNDP) have together been studying the transit trade through the corridor, and its potential contribution to greater economic integration of the sub-region – one of the Inter-governmental Association for Development (IGAD)’s declared priorities.

One concern with the prospects for a more dynamic trade relationship with Ethiopia is that it may enlarge the gap between east and west Somaliland. Berbera port is the anchor for the main cross-border trade networks, which lead via Hargeysa to Harta Sheekh, Jigjiga, and Dire Dawa (all in Ethiopia) as well as Djibouti. Trade via Burco with Laas Caanood, Somalia and adjacent areas in Ethiopia’s Somali region is important, but of a much lower magnitude. Sanaag region is commercially linked with both Burco and Boosaaso. The consequences of increased cross-border trade are likely to be concentrated along the road networks in the west, with a much smaller advantages accruing to the east. Some Somalilanders therefore advocate the need to develop the roads in eastern Somaliland, in order to link the area more closely to the west and so share in the benefits of economic growth. Another possibility mooted by some members of the business community is the establishment of a second trade corridor linking Berbera, via Burco, with the eastern part of Ethiopia’s Somali region. Exponents of this view believe that the development of natural gas resources in the Shilaabo area, together with the agricultural potential of the Shabeelle River near Godey and Qallaafo will eventually provide the basis for a strong trade relationship.

A more immediate obstacle to the expansion of cross-border trade is the level of taxation at Berbera port and elsewhere along the main transit route. A growing number of Somaliland traders have been turning to Boosaaso as an alternative, claiming that Berbera is simply too expensive and full of red tape. They assert that it is quicker and cheaper to clear goods from Boosaaso despite the greater distance goods must be transported to reach the market. Some assert that Boosaaso even offers Somaliland traders special treatment in order to attract their business.

Port authorities in Berbera claim to be working hard to dispel the perception of Berbera as “unfriendly” to traders, and have taken a number of measures to improve its image. The Port Director claims that business is growing, citing improvements in port management: “We have reduced the porters’ charges and the tariffs on cargo, and we are going to reduce them further. We are going to reduce the number of offices one has to

The Service Sector

Even more so than international trade, Somaliland’s service sector has experienced rapid growth in the post-war period. Telecommunications, airline business and financial transfer companies have hastened to fill the vacuum left by the collapse of the Barre government.

At least six major communication companies now provide services to the population in the main urban centres, namely: Hargeysa, Burco, Berbera, Laas Caanood, Boorame and Ceerigaabo. Most of these towns are enjoying international communications services for the first time ever. These companies have introduced new technology into the local telecommunications sector, “leapfrogging” several generations over the older, obsolete telecommunication systems still operational elsewhere in the sub-region. The expansion of this industry has created a new labour market requiring skilled professionals – many of them returnees from the diaspora – as well as semi-skilled and unskilled workers.

Economic Environment

Infrastructure

Somaliland’s most vital economic asset, notwithstanding its strategic location between East Africa and the Gulf, is probably its economic infrastructure, which allows trade and commerce to thrive. But the little infrastructure Somaliland possesses is in a state of disrepair, and is deteriorating year after year. The road network in Somaliland has never been good and has suffered from neglect since the civil war. The only sealed (tarmac) route is the Tuka Raq – Dila road, which crosses Somaliland from east to west. All other roads are dirt tracks, and even these are lacking in the northern mountain range, the coastal slopes and the much of the rangeland in the south. Many areas face problems of access, leading to a growing sense of isolation and resentment, since economic development has clung to the road network.27

Road links to Ethiopia and Djibouti are no better than the internal network. At no point does the tarmac road traverse the border to a neighbouring country, except the link with Somalia between Laas Caanood and Garoowe. The road network across the border in Ethiopia is inadequate, limiting the possibilities for cross-border commerce. Somaliland’s port infrastructure is dilapidated and underdeveloped. Many natural harbours, like Maydh, Seylac, and Laas Qoray lack basic facilities and either function below capacity or stand idle.

Government Policies and Regulations

Domestic and foreign investment in Somaliland suffers from an ill-defined and somewhat chaotic regulatory environment. Government policies, regulatory instruments, laws and services are widely perceived by the business community to be insufficient, and where they do exist they are typically weak and selectively applied. For potential investors, such a business climate can be discouraging: “Trade and investment policy has not yet been formalised,” says an official of the Chamber of Commerce, “so we have nothing to show for those who are interested [in investing here].”

Dahabshiil

The demise of al-Barakaat cleared the way for the rise of Dahabshiil, today the leading Somali MTO and one of Africa’s most successful businesses.17 In many ways, the story of this company— established in 1970 by Mohamed Saeed Duale, a businessman from Burco—represents the story of the Somali remittance business as a whole. It is also part of the narrative of this north-western corner of the Somali peninsula that, after thirty years of unification with Somalia, returned to being Somaliland. Dahabshiil’s initial geographical focus was on the Arabian Gulf States. There it relied on middlemen who transferred money from Somali workers by converting the value of their remittances into goods, which were shipped back to their families or sold by Dahabshiil’s agents in Somalia for cash, which they then handed to the intended recipients in US Dollars or Somali shillings. Burco was Dahabshiil’s initial headquarters, but it moved to Ethiopia during the civil war in the late 1980s, where it served refugees from Somalia. After Somaliland’s secession in 1991 it repositioned itself to meet the growing demands of refugees fleeing from southern Somalia, opening an office in Hargeysa and Dubai with branches elsewhere is Africa and in the West where Somalis had resettled or had sought refuge. Mohamed Saeed Duale and, later, his son, Abdirashid, were part of the state-building process in Somaliland, donating money to local communities and forging loyal relationships with politicians and other leaders. By doing so, they consolidated the company’s dominant market position in Somaliland. On its website, Dahabshiil says it invests 5 per cent of its profits in community regeneration projects for schools, hospitals, agriculture and sanitation. With 5,000 agents in 144 countries, it works with NGOs and UN agencies transferring funds across the Somali region. Publicly, Dahabshiil is seen as having a privileged, influential relationship with the Somaliland state. Despite its position of strength, Dahabshiil rapidly came under pressure from Telesom’s Zaad. In response to this Dahabshiil launched E-Cash, a debit card, in 2009, and established an Islamic lariba—or interest-free—bank, in neighbouring Djibouti in 2010. A debit card with a magnetic band that worked in Dahabshiil branches and Dahabshiil-affiliated merchants, E-Cash could be used to withdraw cash and purchase goods by swiping it in a card reader. But it needed a reliable Internet connection to work. Every Dahabshiil account holder is entitled to an E-Cash card and at its peak in 2014, there were more than 4,500 E-Cash cashpoint machines and up to 2,500 transactions a day carried out on them in Hargeysa alone. The E-card system was also active in Burco, Borama, and Berbera. It was popular with NGOs and international organizations, whose staff had personal Dahabshiil accounts. However, by 2015, the number of merchants using E-Cash had significantly dropped, and many shop-owners expected the business to fold.

Characterization of Limestone from Cement Plant at Berbera (Republic of Somaliland)

The results of physico-chemical characterization of limestone samples come from the Mesosoic limestone deposit areas in the region of Berbera (Republic of Somaliland) were reported in this paper. The chemical analysis was carried out by X-ray fluorescence analysis, FT-IR spectroscopy and thermal analysis. The physical characterization of limestone samples were performed in laboratory conditions. This investigation provided necessary data for subsequent utilization and exploitation of limestone in this region. The tested material is a good quality and purity. From the chemical composition point of view the tested limestone has a high content of about 96% CaCO3, with small amount of clay minerals and with traces of quartz, which corresponds to the medium purity limestone. It was confirmed, that this limestone is suitable for cement production. The density and porosity measurement indicated that the medium to high density limestone is very compact with porosity lower than 4%. These data very good corresponds to relatively high Young’s modulus up to 48 200 MPa and maximum strength of 204 MPa.

Introduction

Republic of Somaliland (North-western Somalia) is situated on the northern side of the Horn of Africa. From the geological point of view the country is comprised mainly by Mesozoic and Tertiary continental-margin and marine sedimentary rocks deposited unconformably on Precambrian metamorphic and igneous rocks [1]. The Berbera plain is a wide down-faulted sector, parallel to Somaliland coast along the Gulf of Aden, limited towards the south by high fault of the Precambrian crystalline basement forming the high mountains [2]. The basement in Berbera plain is covered by a thick Meso-Cenosoic sedimentary succession, including marine limestone facies (Fig. 1).

In the early 1980s, a cement plant became operational at Berbera in Somaliland, however, the lack of proper maintenance, shortage of spare parts, lack of managerial staff and skilled workers during the civil war caused the closure of this plant and termination of cement production [4]. National cement consumption was estimated to be about 250 000 metric tons in 2012, in view of this fact some plan to restart the country’s only cement plant at Berbera in Somaliland appears in recent time.

Literacy and business skills

particularly street traders and women, generally have less formal education than other groups. A government representative highlighted the lack of business skills within the IE in Hargeisa and the effect this has on the ability of urban IE workers to sustain their livelihoods.

[There is] no skilled manpower, small enterprises do not have the skills in marketing, [they] have

entrepreneurship but no planning. They will open a shop, and get benefits for a short period of time. [They] don’t have the capacity to break the frontiers. We need a paradigm shift to strengthen the whole Private Sector (KI7, Senior government advisor).

Women seem particularly vulnerable and struggle to improve their businesses to provide effective livelihoods.

[Women] are very wise people, even if not literate, but their businesses don’t grow because they can’t

read and write (KI9, NGO worker).

Difficulties with infrastructure and operating space

As demonstrated in Section 3.3.1 most current IE workers interviewed run businesses from the street and the lack of infrastructure, amenities or property rights, as well as inappropriate operating spaces were all cited as challenges to IE workers in Hargeisa. There is ambivalence within local government, which recognises that certain

IE workers need to be in the street while acknowledging the congestion this brings.

The government is very relaxed about the informal economy. We are not applying the letter of the law,

despite the crowded city. The problem can be prevented. The Municipality is building markets, but this

[the street] is their territory and the only place they can find customers…We talk about good governance, but there is a lack of good workspace and the informal economy is crowded and abusing the city, it’s difficult to regulate (KI5, Senior government official).

Women become breadwinners

Conflict sometimes has the effect of changing women’s role within the household. As the literature suggests women often become heads of household over the course of war (Mallett and Slater, 2012). Even where women are usually excluded from paid work because of traditional gender roles, in conflict situations where household survival is precarious, female participation in labour markets is mandatory (Beall and Schutte, 2006).

Role in peace-building and political processes

According to the literature, women often play a central role in informal reconciliation, by reviving local economies and rebuilding social networks (Sørensen, 1998). In Hargeisa women played a central role in the peace process as one KI articulates:

After the war [women] came together and said, “we have to have peace”, so we went around the

country…The peace was created under the trees in different regions. If one did not agree, his wife made him, because the peace is ours (KI11, Senior government official).

Somaliland has shielded itself from the instability that has plagued much of the Horn of Africa

External shocks. Somaliland is highly vulnerable to external shocks. These will remain a risk over which Somaliland has little control for the foreseeable future. Changes in trade policies by countries like Saudi Arabia have in the past had magnified consequences on Somaliland and, in the future, if trade increases with Ethiopia, its trade policies will have that potential as well. Jobless growth. One of the biggest political dangers facing Somaliland is jobless growth. This tension will grow if progress is not made now before a potential extractive industry boom, which all too often will intensify expectations in what is generally a sector associated with high revenues but limited direct job potential.