Riding the Storm: Somalia’s Free market.

‘Necessity is the mother of invention’

-Plato

In the year 1331, It was  the great Islamic scholar/explorer Ibn Battuta  who described  Mogadishu, the capital city of Somalia  as one of the best cities of the world in which to do business. As it is evident from the date, that was a long time ago and Mogadishu has lost that recognition because of the 1991 civil war that caused many deaths, displacements, destruction and  lawlessness .

Despite all the unrest, Somalia has maintained a fairly informal economy without government intervention with a near 0% taxation. This form of free market is mostly driven by investments and finances of the local people and the Somali Diaspora. In 2009, Somalia’s GDP was estimated by the CIA to be $5.731 billion, with a projected real growth rate of 2.6%. Although the agriculture sector is the main engine of the economy and accounts for nearly 65% of the GDP, the other two sectors that can’t be ignored and have surprised many skeptics are the telecommunications and finance sector. The former, in private control has been totally revolutionized and transformed.

For instance,Golis Telecom Group now offers one of the most technologically advanced and fairly priced telecommunications and internet services to many businesses and households across many regions in Somalia. Hormuud telecom accounts for nearly $40 million a year. People are now using mobiles to transfer money and make purchases. It takes just three days to get a landline connection up and running while it takes many months just across the border in Kenya. The tele-density in Somalia is much higher than many countries in Africa and three times greater than our neighboring country, Ethiopia.

Despite the non-existence of a Central Bank for nearly 15 years, the payment system of the country is fairly advanced. This is due to the emergence of private money transfer operators(MTOs). These remittance firms known in the country as Hawalas make sure that trade, transfer of money and transactions are done cheaply and quickly. This sector only accounts for more than one billion US dollar a year.

 On the other hand, the livestock sector which accounts for 40% of the GDP and nearly half of the export earning is now giving a fierce competition to countries like Australia who have a long history of exporting livestock to the middle east. The combination of high quality and competitively priced live stocks and the near proximity to the middle east is helping  grow the Somali live stock industry. Now countries like UAE and the Kingdom of Saudi Arabia are building facilities inside the country making this sector more competitive and lucrative.

All of this is the upside of the nearly free market conditions that exist in Somalia but at the same it is worth to mention and bring attention to negative aspects this form of free market economics created in the country. Due to the lack and absence of government and regulatory agencies, many businesses and self-serving individuals have taken advantage of the anarchy in Somalia.

In the market you can easily buy and sell illegal weapons. Counterfeit products and fake currencies are in abundant circulation in the big markets of Somalia. Many Pharmacies do not have legal licenses to import and sell life-saving drugs and because of that sell expired drugs to people. This has caused many illnesses and deaths. Deforestation  is at its highest peak because of people illegally chopping  and burning down trees and exporting them as charcoals . This has had a huge impact on the environment. Many businesses and firms are also colluding and forming monopolies which makes the free entry/ exit of the market by start-ups and smaller firms nearly impossible.

This is the dark side of the free market economy we have in our country and I hope our next government will fill the vacuum it has left behind and become a government by the people, of the people and for the people.

Due to the lack of effective government for along time and the exception of these unfortunate negatives,the spirit, entrepreneurship, and business ingenuity of the Somali people have never been lost. In fact it made the Somali people more resilient, hardworking and made them realize the need to be self-sufficient and determine their own future instead of depending on the government.