Somaliland Update: The Space Between

In today’s Somaliland update I would like to examine the space between the business climate within Somaliland (and its neighbors) and the perspective of the world on those areas. We have a helpful guide into this problem through the eyes of one Mr. Mohammed Yusef, a London venture capitalist who is profiting off of the space between Somaliland’s low international profile and its friendly and well-regulated business culture. We then see how Somaliland’s neighbors are using agribusiness to conduct imperialistic aims, and then take another look at Somaliland’s banking law as evidence of Somaliland’s pro-business climate.

Profile Of A Venture Capitalist

Somaliland247, courtesy of the BBC, has a profile on Mr. Mohammed Yusef, a venture capitalist whose firm, Invicta Capital Limited, based out of London, has heavily moved into business in Yusef’s homeland of Somaliland (where he was born 60 years ago, when it was still a British protectorate). Mr. Yusef’s profile is fairly straightforward and to the point–here is a man willing (and able) to take risks and looking for bigger payoffs than can be found in London.

And so he has been attracted to Somaliland because the lack of international recognition and the negative association with Somalia has led to a large gap between the perception of Westerners toward business in Somaliland and the actual reality (which has been posted fairly regularly on this blog and on Somaliland247). Where there is a gap between expectations and reality and where people are afraid to take advantage of a good opportunity, there is plenty of space for profit, and Mr. Yusuf has taken advantage, showing a canny and clever approach to seeking profits by seeking niches that are not being met by competitors. An attention to details and niches like that appears to have served him well, recognizing that not all (or even most) risks will pay off, but that the ones which do will pay off handsomely. Well done, Mr. Yusuf.

Meanwhile, Back At The Ranch

The next piece of information does not directly concern Somaliland, but it does indicate a study done in the Horn of Africa that reflects on Somaliland and its neighbors and the pressures of agribusiness as well as the purposes of agribusiness in serving imperial aims among Somaliland’s neighbors. Somaliland (and Somalia) are of course too dry for successful agribusiness of the type found in South Sudan and Ethiopia, though the same principle would apply for livestock agribusines.

Chatham House has conducted an informative study of agribusiness in Ethiopia, Sudan, and South Sudan, and has discovered a slightly different dynamic in agricultural investment in each country [2]. It appears that Ethiopia has been using large agricultural deals (some of them potentially illegal) to provide ways of profiting off of marginal peripheral territories. This use of agricultural deals in an attempt to gain control over restive minority territories through the attendant infrastructure improvements that result from agribusiness may prompt conflict with minorities in those regions in the fight over scarce resources (especially water), as such peoples face threats to their traditional ways of life because of the demands of foreign-owned agribusiness companies.

In start contrast, the space between Sudan and South Sudan appears wide, in that Sudan’s agribusiness is established and generally appears to be unproblematical, having a long-term and fairly safe base around the core of Sudan’s state in the Khartoum area, as well as established trading partners in Muslim states. The situation for South Sudan is not so certain, with questionable trading links (through Sudan or Ethiopia/Djibouti/Somaliland?) in a nation nearly entirely without infrastructure. Most of the agricultural projects in South Sudan appear extremely speculative and there is doubt as to how many (if any) of the projects will actually come to fruition.

Chatham House’s study was a study of secondary sources, but still, it serves as a useful way of avoiding narratives of land-grabbing and showing a more nuanced picture of business that fits in with a country’s longstanding imperial aims (in Ethiopia), is a moderate and long-term practice fitting in with longstanding trade relationships (in Sudan) or is speculative and uncertain based on the rather undeveloped infrastructure of an extremely ambitious new nation (South Sudan). The difference in situations of the nations reflects their different approaches and uses for agribusiness projects. It is useful to see the nuance, and an excellent study for those interested in agribusiness in the Horn of Africa.

Banking Law Update

We reported earlier on the proposal of the Central Bank Act in Somaliland, which would open Somaliland to having foreign banks operate full branches within that nation [3]. We now have an update from Somaliland247 [4] that states that the finalized Somaliland Banking Act can be expected within three weeks. Furthermore, within six months there is an expectation of a Commercial Banking Act that would provide terms for commercial lending.

The hope is that expanded credit will allow the existing business culture within Somaliland (which, as can be expected, is rather undercapitalized) to pick up. Whether those expectations will be met is impossible to say at this point, but there are plenty of banks (including the Djibouti branch of a Swiss bank) that want to open up branch offices and set up ATM’s in Somaliland (which is currently illegal). So far the following banks have requested the Somaliland Government to open up business there: Yemeni state-owned bank CAC, Djibouti-based Salaam African Bank, and Banque de Depot de Credit Djibouti, a subsidiary of Switzerland-headquartered Swiss Financial Investments. No doubt others will follow. People go where opportunities are, after all, and these banks seek to establish a niche that has been largely ignored. Who can blame them for seeking to profit on the folly of the world in ignoring Somaliland, and who can blame Somalilanders for seeking such opportunities as they have to increase their own economic position? Certainly not I.

[1] http://somaliland247.wordpress.com/2012/01/25/the-joys-of-investing-in-somaliland/

[2] http://www.chathamhouse.org/sites/default/files/public/Research/Africa/bp0112_mosley.pdf

[3] https://edgeinducedcohesion.wordpress.com/2011/11/27/somaliland-update-little-by-little/

[4] http://somaliland247.wordpress.com/2012/02/02/somaliland-to-pass-central-bank-law-within-3-weeks-cbank/

About nathanalbright

I'm a person with diverse interests who loves to read. If you want to know something about me, just ask.
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2 Responses to Somaliland Update: The Space Between

  1. Pingback: A Modest Proposal For A Plebiscite To Resolve The Status Of The Republic Of Somaliland | Edge Induced Cohesion

  2. Pingback: On The Applicability Of Divorce Law To The Recognition Of New Sovereign States | Edge Induced Cohesion

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