Somalia

Berbera port

Foreign Investment Overview

  • FDI inflow, 2017: USD 384M
  • FDI inflow into Somalia has been increasing since 2012 owing primarily to the end of the civil war.
  • Historically, the majority of foreign investment has been through intra-company loans.
  • In recent years, FDI is increasingly focused on Greenfield investments, joint ventures, and on subsidiaries of transnational corporations.
  • Germany and the US are the main investors in Somalia. Although the US has invested more in the country, Germany has the largest subsidiary of a transnational corporation in country – German Agro Action Office – owing to a bilateral trade agreement between Somalia and Germany for the protection and promotion of investments.

Composition of Somalia’s total GDP

Investment Attractiveness

  • Somalia’s 2012 end of the civil war opens new investment opportunities, even though it is still a challenging market to operate in.
  • The proximity of Somalia to Kenya creates interesting opportunities for investment. Many businesses located in Somalia are run out of Kenya. There may be opportunities to benefit Somalia if invested through Kenya.
  • Somaliland has particularly high potential for the region, based on its level of stability and Ease of Doing Business scores, particularly in dealing with construction permits, getting electricity, registering property, and trading across borders.

Sectoral View 

  • Somalia’s economy relies heavily on agriculture, donor grants and diaspora remittances.
  • Livestock is the largest single sub-sector contributor to GDP at 30% in 2016. Agriculture provides livelihoods for more than half of the population and generates between USD 250 – 350M annually, mostly through trade with the Middle East.
  • Services contribute slightly more than agriculture, and are driven by wholesale and retail trading, real estate, government services, and ICT.
  • Financial services contribute extremely little to the GDP; this sector is highly informal because the majority of the population saves outside the banking system.
  • Boosting infrastructure (including energy) and agriculture is a top economic priority in the country’s National Development Plan.
  • While Somalia’s export data shows a high value of electronic circuits export, the majority is passing through from the UAE to Hong Kong, so there is still domestic opportunity.

Recent Developments 

  • Somaliland recently secured its largest foreign investment deal to date – a USD 442M injection from Dubai-based firm DP World aimed at transforming the country’s Berbera Port on the Gulf of Aden and creating a regional trade hub.

South Korean Alignment

  • Construction could be a sector of interest for South Korea, given the need for rebuilding and infrastructure development, although construction currently amounts to only 4% of Somalia’s GDP.
  • Telecoms, mobile money, and beverages could also be of interest for South Korean investors. Qualitative evidence, based on interviews with Korean investor support organizations, suggests these sectors are of high potential for foreign investors.

Contact us to learn more about investing in the Horn of Africa.

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