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The blue economy is one of the least exploited sectors in Somaliland contributing 0.3% to GDP despite the fact that the Horn of Africa has the largest coast in mainland Africa. Somaliland has an 850 km long coastline that borders the Gulf of Aden and the Indian Ocean. Currently there are more than 600 species present in Somaliland’s marine fisheries of which 400 could be leveraged commercially. However, less than 10% of these fish stocks are exploited leaving the blue economy completely untapped. 

There have been both local and international efforts to invest in the fishing industry, but most of these projects did not take off due to lower demand for fish, culturally Somalis prefer livestock. Nonetheless, fish diet is becoming more acceptable in urban areas, as climate change is pushing this desert state into finishing. Somaliland has a comparative advantage to export fish stocks to neighboring, landlocked East African countries. 

The Somaliland National Development Plan projected that by 2021 the tuna fish harvest will increase by 20% due to an increase in demand for fish stocks from urban areas. Despite the projected increase in demand, the industry has few challenges to address before any growth. 

The cold chain infrastructure is barely non-existent at the moment. This makes it challenging for the fish stocks to be marketed and sold across Somaliland. Cold chain development is essential in reducing food losses and improving food quality in the fishing industry. Low access to ice and cold storage often result in fish being spoiled before reaching the market. Improving the cold chain infrastructure would immediately benefit fishers, processors, and others involved in the sector. 

Source: Cold Catch – Developing a Cold Chain Infrastructure for the Somali Fishing Industry 

Regarding infrastructural challenges, there are many limitations to consider throughout the fishing supply chain. For instance, the quantity of appropriate boats is very limited, which affects the number of fish that are caught. Other challenges include the lack of appropriate storage facilities and nests. The lack of infrastructure for hygienically storing, processing, and transporting fish products is one of the major impediments to the development of the Somali domestic fishing industry. 

There is no doubt that Somaliland has rich marine assets, but it lacks the appropriate infrastructure to fully leverage the industry. Currently, the unexploited fish stocks become vulnerable to piracy from neighboring countries and foreign fishing. 

Source: Industry Analysis, Fishing in Somaliland, 2013 

Somaliland’s marine life is abundant enough to be exported to neighboring, landlocked countries. For instance, Ethiopia imports fish stocks from China, Belgium, or Indonesia. This is a perfect example of Africa's assets not being fully leveraged. Somaliland has a relative advantage to exporting fish stocks to mainland Africa. However, there are no processing facilities to produce and package the fish stocks. 

The fishing industry is a highly profitable sector where the tuna industry alone is worth $6 billion globally. This is a market that Somaliland could easily tap into if the proper processing facilities are built. Investment in the marine sector would not only generate revenues, but would create jobs for many unemployed youths in the coastal regions.  

Source: Export Genius, Ethiopia’s fish stocks export data, 2020 

Furthermore, foreign investment is vital in expanding Somaliland’s fishing industry. UAE is a potential investor, as they are currently building the port of Berbera. UAE company, Dubai Port, already invested US$ 442 million to expand the port of Berbera, which is considered to be a strategic location for the UAE. However, foreign investment requires accurate data collection to evaluate and project the industry’s profits. Accurate data statistics plays a crucial role in market analysis that is needed to attract potential investors. Another method of attracting foreign investors is significant tax incentives. The Somaliland government could offer 0% tax rate for foreign investors during the first three years of operation or provide 50% reduction on taxable profits. Both approaches have proven to attract foreign investors, which is a must if Somaliland wants to capitalize on its marine life. 

Despite the structural challenges that have limited the potential of Somaliland’s blue economy, this is not a lost case. In this article, we will also address a few recommendations that could dramatically change the outlook of the industry. 

1.) Investment in Data and Knowledge

The most pressing challenge that Somaliland’s economy faces is the lack of scientific research and knowledge on its sectors. At the moment,  there is a lack of concrete data in the diversity of the fish stocks, the conditions of commercially viable fish stocks, species under threat, and the overall ecosystem. In order to fully understand the potential of the fishing industry, it is imperative to have a thorough assessment of the sector. The government in collaborations with international organizations must commission institutions with adequate expertise to assess the status of the marine habitat around the country. International agencies such as the World Food Programme (WFP) could be particularly interested in providing expertise analysis. The only way to improve the market value of the fish stocks is through improved market access and partnership with relevant investors and donors. Without data and comprehensive knowledge of the sector, potential donors will be less likely to invest. 

2.) Strengthen the Capacity of Local Institutions 

It is no secret that Somaliland’s marine life is vulnerable to piracy and illegal exploitation from neighboring countries. Sometimes Yemeni fishers catch their fish stocks within the Somaliland borders. Recently, the Somaliland Coastal Guard arrested 81 Yemenis in six fishing boats near Berbera (northern coast) for unlicensed fishing. 

These Coast guards need proper training, equipment, and better facilities to guard the marine borders. The Coast Guards are one of the weakest institutions that would greatly benefit from some sort of a capacity building. Illegal fishing in the Somali waters could threaten marine life and lead to overexploitation. In addition, the Somali coast has a bad reputation for piracy that has reached its peak in 2011. These piracy incidents have severe economic consequences as well as poor public image that would push away investors and donors. In order for Somaliland to compete with international markets and export fish stocks to neighboring countries, it should put together a comprehensive strategy that would strengthen the capacity of the coastal guards and other relevant local institutions. 

3.) Development of Regulatory Policies across the Value Chain 

Most of the fishing enterprises in Somaliland are informal – businesses that lack formal license registration and do not pay any taxes. Informality often leads to poor governance and low productivity. According to a World Bank research, the average informal business in developing economies is only one-quarter as productive as the average firm operating in the formal sector. Therefore, Somaliland’s Ministry of Trade, Industry, and Tourism should put together a plan that would formalize the businesses in the fishing industry. In order for Somaliland’s blue economy to significantly contribute to the GDP, fishing businesses should all be formalized by including them in the formal tax and financial systems. 

Source: World Bank, 2018. 

The Earth’s oceans have been a source of sustenance to the coastal population and generated income opportunities to millions. Seafood currently provides 17% of daily animal protein consumed globally, yet the blue economy is underexploited in Somaliland. In addition, over 1 billion people globally rely on seafood as their primary source of protein, which demonstrates the large, global demand for fish stocks. According to food security economists, seafood supplies for human consumption will need to increase by 70% due to population growth and economic development. 

On the supply side, based on recent research, investors have approximately $5.6 billion in capital to invest over the next five years and dramatically shape the world’s blue economy. Lack of funding or finance is not a challenge, but connecting the donors to Somaliland’s abundance marine life is the biggest obstacle. Hence, investment in data, knowledge, and sector analysis could provide valuable insights that could attract such investors. However, Somaliland cannot rely heavily on donor funding alone. The local institutions play an important role as well, in particular the coastal guards and regulatory institutions in charge of the formalization of businesses. 

This Op-Ed has been published on three Somaliland Journals:

1.) https://sii1991.org/leveraging-somalilands-blue-economy/

2.) https://www.somalilandsun.com/somaliland-leveraging-the-countrys-least-exploited-blue-economy/

3.) https://somalilandchronicle.com/2021/04/06/leveraging-somalilands-blue-economy/

About the Author:

Deqa Aden LinkedIn: https://www.linkedin.com/in/deqa-aden-109831b7 

Email: myslpa.info@gmail.com

A Pearson Fellow and Masters in Public Policy (MPP) Candidate at The University of Chicago and a member of the Somaliland Professionals Association of America (SLPA). She is an alumni of the Abaarso School, Grinnell College, The World Bank HQ in Washington DC where she was an Analyst and most recently Manager of Hargeisa Innovation Hub. 

SLPA Website: myslpa.org Somaliland Professionals Association of America (SLPA) 

The Op-ed is based on professional opinion and the author is not responsible for the implementation of these ideas.

Developing countries have one large need limiting their ability to progress and advance – access to affordable, reliable, and clean energy. After all, companies and societies cannot thrive sustainably without access to reasonable electricity and petroleum products. While this pressing issue happens in developing countries around the world, one prime example is Somaliland, where electricity and petroleum products are priced higher than those in their peer countries.

Somaliland has been a government for almost 30 years, after dissolving its union unilaterally with Somalia in 1991. Even with almost 30 years to work out some of the problems associated with being their own independent country, they still struggle in several ways. Both Somaliland and Somalia currently have one thing in common compared to their peers in the region – a lack of affordable energy.

Electricity prices are some of the highest across the world, peaking at a dollar per kilowatt-hour. By comparison, in Ethiopia, Kenya and the US the average cost is 1, 22, and 14 cents per kilowatt-hour respectively. For low-income families and small businesses, where the average household salary is less than $4 per day, the impact can prove crippling. For most, it is practically impossible to even consider paying for electricity.

In fact, despite Somaliland having substantial energy resources – primarily wind, solar, oil, and natural gas – consumption per capita is among the lowest in Sub-Saharan Africa. This is due to the prohibitively high cost compared to the average income and an overall lack of local/diaspora investment. While primary energy demand in Africa in 2018 was just over 800 Million Tonnes of Oil Equivalent (Mtoe), demand in other parts of the world was much higher. Demand for oil alone was approximately 3.1 million barrels per day (mb/d) in all of Africa, coming in higher than the 2.8 mb/d of the Middle East and 3.0 mb/d in China but lower than the 4.3 mb/d in India. The entire continent is actually expanding low levels of oil, but primarily that demand comes from countries that are much larger and more developed than Somaliland.

Like many other post-conflict zones, the energy mix in Somaliland is dictated by a short-term, localized outlook. Private operators set up diesel-based mini-grids with a small combination of solar power systems without batteries that require limited infrastructure investment. The operational overhead is much higher than renewables or gas-fired power plants, but the returns are immediate and more attractive. In comparison, the return on investment for a solar or wind plant is typically 10-12 years where a gas-fired power plant is 15-17 years.

Although these local energy sector operators are well established on their ‘turf,’ they tend to lack the capacity to implement large renewables and power plant installations that would significantly lower electricity prices for the citizens of Somaliland. Engaging with these local, well-connected operators and finding a way around their limitations is a central, practical consideration for any investor’s success, but it is not as simple as it might seem. In fact, it is exceedingly complex to overrun the two big players in the current market. The most significantly prohibitive issues that will deter any investor from entering this area are: limited regulation & oversight of the sector, monopoly distribution control, acute shortage of qualified staff, generation & distribution losses (up to 40%) due to poor infrastructure and collection, and finally high electricity tariffs due in part to energy company inefficiencies.

Related pieces: UK invests in renewable energy in Somaliland to address high costs of electricity

Though a complete switch to renewables would be the ideal answer to cover Somaliland’s energy needs, the real-world answer will be much more complicated when the country achieves its dream of becoming an industrialized tech hub for the region. A balance between natural gas-powered plants and renewables will mitigate the risk of peak power demands and national security co-storage issues, as well as increasing diversity and relieving concerns of energy security.

Often lost in energy transition messaging, and admittedly difficult to appreciate in the present industry downturn caused by oversupply and lost demand due to COVID-19, is the critical role of oil and gas both in fulfilling current energy needs and in facilitating future change. Proposals for a sustainable future rely on electricity, but there seems to be a disconnect between that ideal and the realities of power generation where fossil fuels still play the predominant role.

Africa still sources more than two-thirds of its electricity from fossil fuels, with natural gas adding nearly 5% of that total and growing with every new gas-fired power plant. Solar and wind account for less than 7% of overall domestic needs, and new solutions like hydrogen are nonexistent in the world’s second largest continent. Simply put, a solution like electric vehicles won’t change the demand for oil and gas, it just shifts the burner tip from the car’s engine to the power plant two counties over.

As populations and economies grow, energy appetites persist with fossil fuels playing a lead role. This may not be ideal, and this may not be true forever. However, in the current situation, unless the quality of life is sacrificed or energy storage technologies significantly develop capacities that will store energy to power large scale industries and communities, it is a present necessity. The transition process is gradual, and we can’t focus only on the horizon lest we lose sight of what’s right in front of us and what is necessary today to move towards that goal.

For Somaliland to realize accelerated economic and industrial development, local and diaspora investment will be needed to build self-sustaining projects unlocking the full potential of domestic energy resources. Increased access and affordability of energy will then attract credible international investment looking to help Somaliland expand and develop. It will be hard to sell  the idea to international investors to invest in Somaliland’s energy sector due to Somaliland still not being recognized on the global stage and the infrastructure needing to be built from scratch– which is not currently an option due to demand issues that can only be solved by tripling access in the next five to ten years.

This Op-Ed has been published on three Somaliland Journals:

1.) https://somalilandchronicle.com/2020/09/06/somalilands-state-of-energy/

2.) https://sii1991.org/the-state-of-energy-in-somaliland/

3.) https://www.somalilandsun.com/somaliland-the-state-of-energy-in-the-country/

About the Author:

Abdisamed Artan  LinkedIn Email: aga5@rice.edu

A Petroleum Engineer based in Houston, Texas and a member of the Somaliland Professionals Association of America (SLPA).

SLPA Website:  Somaliland Professionals Association of America (SLPA) 

The Op-ed is based on professional opinion and the author is not responsible for the implementation of these ideas.

Image credit: Edna Adan Maternity Hospital