Diaspora Investment Fuels Growth Up to two million Somalis living abroad currently inject an estimated US$1.3-2 billion into Somalia’s economy per year, serving as a critical underpinning for the country’s future success. Many Somali diaspora members also have the potential to make high-value investments that can take Somalia from aid recipient to trade partner. At the same time, the diaspora community has played a critical role in supplementing Somalia’s resource constraints by contributing to efforts that build the capacity of businesses and individuals who are still based in-country. The Somali diaspora represents a large pool of potential human resource and investment capital that could be leveraged for long-term and scaled development in the Somali region. Amir, Fahima, and Ahmed, members of the Somali diaspora who returned after years away, share their thoughts on the importance of investing in Somalia and Somaliland, and the potential for growth and return on investment.
Amir, founder of an organic produce company and innovation center.
Fahima, passionate restaurateur and one of the founders of a livestock quarantine and exporting company.
“After 25 years of extensive studies, research, and training around the world, I made the choice to dedicate my life to exploring alternative ways to address the impact of climate change on food production in Somaliland.
“I went back to Somalia for the first time in 2006. I remember people telling me that I was crazy, but it was always my dream to make a difference in my country. I am proud that I was one of the first women to come back home and invest in the land. The growth in Somalia between now and then has been incredible to see.
“I left Somaliland in 1982 for Egypt, and was there until 1984 when I moved to the US as a student. I stayed there for 20 years and in that time I became a commercial pilot and a travel consultant. I came back home in 2000 after almost 20 years away and found many opportunities to do business.
As much as we hope and pray for our country to be great, Somalia has a long way to go. For the Somali people trying to go back home to rebuild, you are on the right path. It is important to gain an education and experience, but equally as important to bring that experience back to Somalia.
Everything was starting from scratch after the war. Although some of the ideas I had were not viable at the time, I stuck to them as I could see the potential as the city grew.
East Africa has a vast untapped market, with unlimited potential for investment. We have had many highlights and successes, but nothing is more rewarding than seeing children eating fresh home grown pineapple, strawberries, and sweet potatoes, among others, for the first time. My aspiration is to see a thriving farming community in Somaliland. I believe that we will be able to tell the next generation that we did our part in making the world a better place than we found it. It is up to us and the next generation to lift Africa up, and let it stand on its own feet.” A major challenge faced by farmers in Somaliland is inadequate access to water. The Growth, Enterprise, Employment and Livelihoods (GEEL) project will support Amir to realize his dreams by partnering to provide efficient infrastructure to access adequate water for his farms. This includes drilling boreholes and setting up modern drip irrigation systems.
Business has no borders. Somali people are very hard working and the country is full of opportunity. Anyone who wishes to invest will be getting a head-start to a land that will soon rise from the ashes. If we don’t work hard for our country, who will? We have to be the first to give back.” At the height of the drought in 2017, GEEL worked with Fahima’s company to buy drought-affected livestock, at fair prices, for export. This saved severely weakened, but otherwise healthy cattle, instead of letting them die, ensuring that a market was created at a time where many had collapsed.
Ahmed Ibrahim, self starter and pioneer in food production and processing.
Somaliland is growing, and there are many opportunities to join in rebuilding the country. If you have ideas, patience, capital, and passion, there is a lot you can do. All the education and experience gained from outside can be put to good use and will benefit you and future generations.” Ahmed plans to be the first fruit and vegetable wholesaler in Somaliland, with aspirations to build a high-quality cold distribution chain to serve domestic and regional markets. GEEL supported this vision by sponsoring learning visits to Kenya, Uganda and India, and will facilitate capital investments into the company to fund expansion.
Revival of Somalia’s Productive Sectors
The Somali fisheries sector, widely acknowledged to have significant potential for profitable expansion, is evolving to meet increasing world demand for fish. With one of the last untapped fisheries resources, Somali waters are considered to be some of the most diverse and profitable fishing grounds in Africa, teeming with schools of yellow fin tuna, blue marlin, dolphin fish, and sardines, in addition to having the longest coastline in continental Africa at 3,300 kilometers. Somalia has over 10,000 km2 of inland water area with two rivers, the Juba and the Shabelle, which render great aquaculture potential. Estimates suggest that the country has the potential to harvest 400,000 tons of fish per year, and players in the industry are gearing up to take their share of the $136 billion global seafood market.
Somalia is undergoing a unique and progressive transformation, with immense trade opportunities to explore. Economic activity is estimated to have expanded by 3.7 percent in 2014, driven by growth in agriculture, livestock, and fisheries, and a resurgent private sector, notably in the services industry, which includes telecommunications, construction, and remittances. This combined with Somalia’s naturally rich fishing grounds, fertile agricultural land, and strong tradition of entrepreneurship, elevated the country in global trade. Sesame production in Somalia has increased seven-fold since 1991, putting the country at the forefront of global sesame trade. According to the Food and Agriculture Organization (FAO), Somalia is the eighth largest exporter of sesame in the world, despite civil strife, minimal investment, and an absence of policy and regulations. Somalia is one of the few countries in the world where sesame is grown as a traditional crop. Production increased by an estimated 40 percent in the past six years, earning the country approximately $300 million in income annually, a relatively small amount compared to its potential largely due to lack of processing capacity to improve quality.
Improvements to the agricultural sector will require smart investments and coordination amongst all stakeholders. The Growth, Enterprise, Employment and Livelihoods (GEEL) project is continuously working with Somalis in the private sector and government to attract capital investment to create new businesses and expand existing ones, while introducing advanced skills and technologies to improve efficiency and increase compliance with internationally accepted food, health, and hygiene regulations. GEEL is working closely with Société Générale de Surveillance (SGS), the world's leading inspection, verification, testing, and certification company, to determine the standards required for Somali exports to trade globally, and support companies to become compliant.
Appetite for Somali livestock is growing, especially for beef and goat meat - said to be sweeter and less fatty than goats from other parts of the East Africa region. In 2015, Somalia exported a record 5.3 million animals to markets in the Middle East, 40 percent of which came from Kenya and Ethiopia, highlighting the central role Somalia plays in regional cross-border livestock trade. This was the highest number of live animals exported from the country in the last 20 years, earning an estimated $360 million in income and leading to a six percent growth in the industry that year.
Somalia is uniquely situated to meet rapidly rising demand for quality produce, and as the country continues to engage more with international markets, greater financial and technical support is needed to match private sector efforts, and take advantage of trade opportunities. Therein lies the opportunity to invest and realize Somalia’s potential.
For some commodities however, the road to recovery is longer. In 1990, before the war began, Somalia was the largest banana exporter in East Africa, employing over 120,000 workers and exporting produce worth $96 million annually to markets in Europe, especially Italy and the Arabian Gulf. Now, bananas are grown on approximately 4,000 acres, less than 14 percent of the 30,000 acres that were cultivated when the industry was at its peak. However, this number is growing as more and more farmers reclaim and cultivate banana plantations, aiming to supply the growing local demand, and export to regional and international markets. There has been significant progress, with exports slowly resuming in 2014 to Middle East markets, reconnecting historical trade ties, and paving the way for a new era of trade.
GEEL’s Investment Support
Are you growing or establishing a business in Somalia, working in the dairy, fisheries, sesame, fruit, or any related value chain? Are you an investor interested in high-growth, high-impact opportunities in Somalia? Contact the GEEL investment team at investment@sogeel.org to find out how GEEL can support your business growth goals.
Management Performance Improvements Assessment and improvements in governance, financial management and analysis, budgeting and accounting, preliminary due diligence on behalf of the enterprise, and more.
Operational Performance Improvements
STEP 01
STE P0 2
Assessment and improvements in any aspect of technical operations such as infrastructure utilization and maintenance, product sourcing, quality standards and certifications, and more.
Capacity Building
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STEP 0 5 Transaction Advisory Due diligence and other advisory services for enterprises that have been successfully matched with an investor.
ST E
Technical assistance and mentoring to businesses that have secured financing.
4 P0
Investment Implementation Support
STEP 03
STEP 06
Training and mentoring of Somali Business Development Service (BDS) providers in the service areas included in solicitation.
Business Growth & Investment Planning Assistance to formulate viable and bankable business growth plans founded on rigorous analysis of the near- and medium-term market opportunities, company operations, and financials.
Diaspora Investment Reaps Rewards!
When Fadoumo founded a marketing and catering services company in 2010, her vision was to offer farmers more opportunities to sell their products and provide access to large farm equipment, cold storage, and irrigation. The fruit and vegetable wholesaler and agricultural equipment leasing service provider has grown into an integral part of Somaliland’s economy. With the help of a Somali diaspora member living in Djibouti, and other investments facilitated by the Somali AgriFood Fund, Fadoumo was able to fulfill her vision. She has purchased high quality farm equipment - a tractor, solar pumps to efficiently access water, and pressure sprayers to irrigate crops - which she then leases to local farmers. This equipment is instrumental in increasing crop yields which help feed the local community, grow farmer cooperative operations, employ more workers, supply clean drinking water to livestock, and in general, fuel the local economy.
Fadoumo’s shop in Somaliland.
Fadoumo’s success story is one of many which illustrate how investment in Somali businesses, especially when partnered with investors from the Somali diaspora, can reap huge rewards for the entire region. Up to two million Somalis living abroad currently inject an estimated US$1.3-2 billion into Somalia’s economy per year, according to Shuraako, a program of One Earth Future, which connects Somali entrepreneurs with access to finance. These family remittances amount to twice the official amount of development aid, five times the size of annual humanitarian aid, and 24 percent of the region’s gross domestic product, making the Somali economy one of the most remittance dependent in the world. These important flows of diaspora funds to the Somali economy continue despite the country’s many challenges. While remittances offer a lifeline, investment in the Somali region has a variety of lasting positive impacts on development that remittances do not provide. Like Fadoumo, entrepreneurs in the region have leveraged financing from diaspora to invest in businesses that support job creation, increase food availability and support drought-resiliency through solar powered irrigation systems and greenhouse technology.
Fig. 1: Most Attractive Investment Options for Somali Investors - You have decided to invest $25,000 in a Somali opportunity. What do you consider the most attractive option?
Shuraako’s 2016 Somali Diaspora Investment Report shows there is huge potential for increased investment from the global diaspora. Diaspora communities have both the means and motivation to invest in their home countries and support business growth, important to all economies in general, but critical in many developing economies. The need for employment is particularly stark in a country like Somalia, where an estimated 67 percent of 14 - 29 year olds remain unemployed. Overall, diaspora investment plays a key role as an informal social safety net, particularly in Somalia. When a country engages its diaspora community in investing back home, businesses grow, jobs are created, development expands, and self-sustaining growth can be achieved for generations to come.
Story and pictures courtesy of Shuraako, a program of One Earth Future.
Fig. 2: Investments Intended to Create Local Jobs - Do you invest in Somali opportunities to create jobs for the local community?
Stronger Together: U.S. - Somali Diaspora Engagement A message from the U.S. Ambassador to Somalia, Stephen Schwartz, to the Somali diaspora in the U.S. "We view the Somali Diaspora as stakeholders in a stable, prosperous, and peaceful Somalia. Thousands have returned and many more desire to return to invest in their homeland, bringing with them the resources, energy, and expertise acquired while abroad. Building the private sector's ability to create jobs, provide employment opportunities to youth and women, and expand trade relationship will be the building blocks for economic growth. Be active and involved in your communities as American citizens; write to your representatives about your views on U.S. policy and assistance to Somalia and contribute to credible, diaspora led NGOs that are doing impactful work in Somalia."
U.S. Ambassador interacting with Somali diaspora members in different parts of the country. Photo: U.S. Mission to Somalia.
Upcoming Events Somaliland Investment Forum - September 19-21, 2017
Shuraako is organizing a two-day event on investment and renewable energy forum in Hargeisa, Somaliland. The forum aims to engage in a series of practical discussions to organize, collaborate, and advance the private sector in Somaliland and strengthen private sector investment. GEEL is part of the steering committee and one of the co-sponsors of the event. GEEL will be facilitating selected sessions on agriculture, fisheries and energy.
Minbar Somali - September 21, 2017
Pitch your startup and compete for $25,000+ in seed funding. Five startups will be selected to pitch to a "Shark Tank"-style panel of investors who, if they are interested, will negotiate investment terms on the spot. The investors may even compete with one another to get in on your deal. There is a guaranteed minimum of $25,000,000 in seed funding and coaching available.
Somali Diaspora Conference - September 22, 2017
The Somali Action Alliance, in collaboration with the University of Minnesota and the Government of Somalia, will host a high-level U.S. diaspora conference on September 22 in Minneapolis. The conference aims to increase the engagement of the diaspora community and generate more productive investments into Somalia. This conference will provide the diaspora with options for engagement, foster networks among and between organizations working in Somalia, and develop recommendations and an action plan for the diaspora to invest in Somalia’s development.
This document was produced for review by the United States Agency for International Development (USAID). It was prepared by International Resources Group (IRG) Ltd. info@sogeel.org | www.facebook.com/GEELSomali | www.flickr.com/GEELSomali | www.twitter.com/GEEL_Somali