What comes into your mind when you hear Somalia mentioned? Al Shabaab? African Union? Famine? Pirates? KDF? However negative it is, you are not to blame. Somalia hasn’t attracted good coverage in a while.
And you are probably not alone. A Mogadishu-based bank CEO once confided in me the headwinds he ran into while trying to establish correspondent (nostro) banking relationships with external bank(s)—for the obvious reason all the latter could pick out was risk, risk and risk everywhere.
Of course they didn’t proceed. But don’t be fooled, a lot is going on in the country’s economic front. Indeed, Somalia is currently undergoing serious structural reforms—especially in its fiscal as well as financial sector policies. They are now working on consolidating the federal fiscus.
Because Somalia is a federation (essentially, composed of semi-autonomous regions), at the moment, Federal Member States (FMS) collect and appropriate revenues within their collection jurisdictions leaving the Federal Government of Somalia (FGS) to finance federal expenditures from revenues collected in Banadir region only.
Indeed the country is resource-endowed. The country is now seriously looking at retooling its resource exploration rights issuance capacity to the extent that all financial proceeds out of any rights issuance will be domiciled in a single federal fiscus.
Essentially, the country is working hard towards capacitising its internal collections—in a bid to move away from direct bilateral budgetary support.
Somalia is also about to re-introduce its local currency, the Somali shilling. The country has not had an official Somali currency since the collapse of Government in 1991 and is excruciatingly dollarised.
The IMF is at the heart of this currency re-introduction. When you hear IMF, that’s over 70 years of experience.
Mobile money penetration
The IMF is also helping retool supervisory capacity of the Central Bank of Somalia (CBS).
They’ve just finished helping CBS establish a bank licensing framework, out of which five banks have been formally licensed. Indeed, formalisation of licensing procedures as well as enactment of other prudential regulations continues to add a coat of credibility and integrity to the sector.
The last I checked, 12 commercial banks had reportedly applied for a banking licence. But it is Somalia’s ubiquitous and staggering mobile money services that should probably raise your eye brows.
In 2016, mobile money penetration stood at 73 per cent, massively towering over the 15 per cent formal banking penetration. According to official estimates, some $900 million was moved through mobile money services, that’s some 16 per cent of Somali GDP.
The figures could be much higher if unofficial flows are factored in. Platforms such as Hormuud’s EVC+ or Telesom’s Zaad, have been driving mobile financial services. Even beggars have become savvy. Outside mosques they plaster telephone numbers across their busts inviting donors.
This ubiquity of mobile money services has continued to drive cashlessness in retail payment front—putting Somalia up in the payment innovation maps—much to the ignorance of the mainstream world, who are only fixated with the country’s insecurity situation.
In my view, for any flows-focused bank (i.e collections and payments), Somalia is a market to seriously consider.
DP World says Djibouti incident could hurt Africa investment
DUBAI (Reuters) – Port operator DP World said on Thursday that Djibouti’s decision to seize control of a terminal project could hurt African efforts to attract investment.
The Dubai state-owned port operator is facing twin political challenges in Africa.
Djibouti abruptly ended its contract to run the Doraleh Container Terminal last month and Somalia’s parliament voted this week to ban the company.
DP World has called the Djibouti move illegal and said it had begun proceedings before the London Court of International Arbitration, which last year cleared the company of all charges of misconduct over the concession.
“Africa needs infrastructure investments and if countries can change their law [to take assets then this] is going to basically make it more difficult to attract investment,” Chairman Sultan Ahmed bin Sulayem told a news conference in Dubai.
DP World reported 14.9 percent rise in 2017 profit to $1.18 billion profit and said that it would invest $1.4 billion across its global portfolio including in Berbera in Somaliland. [L8N1QX0F2]
It is developing a port in Berbera in partnership with the governments of Somaliland and Ethiopia. It is also developing a greenfield free trade zone in the breakaway region.
Bin Sulayem said he was not concerned by the vote in Somalia’s parliament to ban DP World from the country, which the parliament said nullified their Somaliland contract.
It is unclear how Somalia’s federal government could enforce the ban given Somaliland’s semi-autonomous status.
Europe, the Middle East and Africa accounted for about 42 percent of the cargo DP World handled in 2017.
Reporting by Alexander Cornwell; editing by Jason Neely
INTERVIEW: Somalia gears towards improving its monetary policies
CGTN — Somalia’s central government imposed a five percent sales tax this month as part of efforts to win billions of dollars in international debt relief. This was followed by protests in Mogadishu’s main market by traders opposed to the tax. CGTN’s Abdulaziz Billow sat down with the country’s minister of finance who shed more light on the country’s monetary policies
Somalia Tax Argument From Both Sides: Bakara Traders vs The Government
Somalia’s busiest and largest open-air market in Mogadishu has been closed for the past two days.
Business owners in Bakara market are protesting over a five percent tax imposed by the government, in an effort to pay back some of its international debt.
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