Somalia’s coastline consists of the Gulf of Aden to the north, the Guardafui Channel to the northeast, and the Indian Ocean to the east. The total length of the coastline is approximately 3,333 km. This vast coastline size makes the country the largest in mainland Africa and gives the country considerable marine resources. Its maritime zone possesses one of the most important large marine ecosystems.
After decades of civil war and state collapse, Somalia has been making rapid progress towards peace, stability, and economic development. The country still faces a complex political, security and development environment, and much of its recent past has been marked by recurring violence, poverty, famine, and dependence on international aid. Despite progress made on the political and economic front in the past few years, most Somali citizens still live in a difficult situation with high levels of poverty, high levels of insecurity and high levels of vulnerability to disasters and marginalization. For Somalia to move away from the fragility, there is a need to make all the necessary efforts on maximizing rates of investment return to growth, revenue and jobs creation.
The investment opportunities found in today’s Somalia in general vary in type, size, scope, sector, purpose, and structure. Rebuilding stronger Private Sector institutions that provide services is of key importance for the Somali people. This includes, building more resilient economic activities that are not susceptible to economic shocks. Therefore, it is imperative that Somalia’s Blue Economy Framework (BEF) is structured in such a way to reflect on implementable and achievable development objectives that focus on poverty eradication and economic growth in line with Sustainable Development Goals (SDGs). Somalia’s policy leaders must focus on the development of BE that puts more emphasis and importance in helping Somalia rebuild stronger economy, generate much needed revenue for development, job creation and promoting value chains. To make these happen.
This study focused on establishing a Blue Economy Framework for Somalia on 5 key selected sectors:
The study is guided by the country’s urgent need for development and reduction in poverty, as well as by the need for a multi-dimensional approach to transitioning the country from aid dependence to sustainable social and economic development in order to attain improvements in security and the rule of law. With this in mind, one of the key areas is to revitalize, invest and finance as a matter of urgency to the country’s “blue economy” This will undoubtedly contribute in moving the country ahead for a sustainable development, especially for revenue generation, and economic transformation that will transform the country from the traditional economy into the knowledge and productive economy. With its large coastline, a robust BE is anticipated to create employment for youth and make available entrepreneurial opportunities for new enterprises, attract international investment, and inject new technologies into the sector.
According to the effort of diversifying the Somali economy is of the key major promising sectors and highlights fishing, off-shore oil, and gas as well as port construction. Enhancing investment in these key promising sectors has long been on the national development agenda for the successive Somali governments. There were a number of industry specific legislation and investment initiatives in existing sectors such as fishing and port rebuilding. Furthermore, both the Somali Federal Government (FGS) and the Federal Members (FMS) have long considered Somalia’s blue sectors as major source of revenue generating sources for the contribution of economic development. The FGS and FMSs have agreed on sharing revenues generated from natural resources and fisheries. Among other development goals, the Somali government lists sustainable development of marine and offshore natural resources as major economic development pillar with strategies and interventions across economic sectors.
The achievement of the national development goals will therefore definitely require to effectively fulfil the vision and mission of SFMR. Therefore, the federal government of Somalia has (among other things) to harness and leverage of its promising blue economy sectors. The opportunities around Somalia’s blue economies are enormous with significant potential to create jobs and improve livelihoods. To ensure the successful establishment of a Blue Economy Framework for Somalia and help realize key national development pillars, there must be long-term and visible commitment to support sustainable and equitable economic growth on the key priority sectors highlighted above.
Somalia’s fisheries are one of its most important blue economy resources. Nevertheless, their potential is far from untapped. According to the World Bank’s collection of development indicators, compiled from recognized sources, the total production of fisheries in Somalia was 30,000 metric tons in 2018, is expected to remain constant throughout 2063 due to and because of overfishing, overcapacity, and poor governance.
As result of or the direct consequence of not having proper petroleum oil governance regime in Somalia, the sector has attracted many outside investors both small and medium enterprises. Because of Somalia’s post-conflict/ fragile state statuses and its lack of government’s capacity of risk management, the country’s extractive sector has been making the news and become the first sector to generate interest from investors. Because of the lack of risk management capacity, the sector delivers high returns on investment, hence encouraging companies to take more risks. Despite the risks, the sector has potential and there have been numerous studies lately that show the sector as possible revenue
generation if managed properly.
Based on both published and unpublished reports as well as presentations from various sources, there were 206 oil blocks available for exploration in offshore
Somalia. According to the Somali Ministry of Petroleum and Mineral Resources, 50 of the 206 confirmed blocks total an area of 173,000 square kilometers. According to estimates, offshore Somalia may contain 110 billion barrels of oil, placing it in sixth place among the world’s oil reserves.
As with other marine minerals such as offshore oil and gas, Somalia’s Salt and Mineral Extraction sector has the potential to expand the extractive industry and help reduce over dependence on other sectors such as fisheries, offshore oil and gas, provide employment and generate revenue for the government. This is a sector that is currently not well studied in a large scale or for a valuation but continues to generate interest.
An indicative valuation for this sector cannot be provided by this analysis. While the potential value of salt and mineral mining is unknown, analysts estimate it to be significant. Despite the lack of data on mineral production, it is believed that the mineral sector of Somalia produces a small quantity of salt and gemstones. Information about Somalia’s Salt and Mineral Extraction sectors of the blue economy could have been found in two distinct sources—both domestic and outside more advanced international data sources, none exist now.
in the Somali ocean economy will likely be driven primarily by key sectors such as fisheries, ocean mining, and offshore oil and gas. A similar growth potential exists in marine renewable energy. There are no specific projections for production and revenues yet, but perhaps by the end of the decade, marine renewable energy (a high value BE sector) will be expanding, and investment in the renewable energy sector (which includes solar and wind) will increase. Various solar projects have been undertaken and the private sector is highly interested in the business. As per experts interviewed and literature reviews, the geographical location of Somalia facilitates the exploitation of three different forms of renewable energy: solar, wind, and ocean current.28 It is important to note, this is a nascent and high-value sector which currently has no cost or revenue but remains a highly potential sector.
Given that Somalia is one of the highest combined wind power and solar energy potentials on the planet31, the country is posed to generate significant revenue from the sector and its share of the global offshore wind energy value is huge.
Like fisheries, Somali’s shipping and port facilities have long been considered an area of opportunity for economic growth and crucial component of government revenue sources. It is estimated that about 55% of the Somali population live around coastal areas and regions. Many of these local communities depend on among many other sectors shipping and port facilities for their livelihoods. The increase of the local population numbers living in the coastal areas would mean any investment in sector will impact larger number of recipients and will offer expanding blue employment opportunities in these coastal communities such as Bossaso, Barawe, Kismayo, Merca, Mogadishu, Gara’ad, Hobyo and many other similar locations. In addition, not only the Somalia’s shipping and ports offer significant investment potential, but the sector can also provide favourable ease of access and travel operations in other blue sectors including fishing.
Somalia is at the entry / departure point of one of the most important international commercial shipping lanes (the Suez Canal and via the Cape) in the world. Globally, 80% of global trade by volume is carried out by sea and handled by ports worldwide and trade by sea is expected to grow significantly. Somalia currently has 4 major ports and few are getting built. Most of the shipping and port facilities handle much of the country’s cargo and banana/livestock exports as well as seafood. Despite having the longest coastline, shipping and marine transport within Somalia is limited while most of Somalia’s sea trade is handled by foreign vessels. Hence, despite its current limitations, the sector in general remains to be of key economic potential and backbone for international trade and more importantly so as Somalia engages oil exploration and experiences an increase in oil exploration equipment.
While Somali institutions have been making modest progress in setting up basic institutional capacity development, reforming the economy for growth, attracting finance and investment from small risk taking firms for some limited blue economy sectors such as fisheries, offshore oil & gas extraction. Capitalizing on the transformative potential of the blue economy for Somalia will need financing and investment at scale, across a much wider range of sectors and blended funds and in many of the emerging and new blue economy industries that offer the potential to transform Somalia’s longterm growth prospects. The development of this approach will require a number of key policy recommendations.
Firstly, creating an enabling environment for investment across sectors is number one. One of the crucial roles any of the countries reviewed in this study in promoting the Blue Economy was creating an enabling investment environment for both the public and private sectors. It is almost worthless if there is a general lack of conducive business and investment enabling policies. Long-term financing can only increase and become more reliable if there is an enabling environment for investment in the blue economy. Some sectors such as energy or telecommunication have already done some reforms where better and robust enabling environments for investment are created. There is still room for improvement.
It is critical that the Somali government continues to strengthen its reform agenda in order to remove investment barriers, whether these are regulatory or legal constraints, or other commercial risks. Many recent surveys on the business and investment climate in Somalia indicate policy and data limitations. The government should also strive to harmonize its investment and regulatory policies with those already existing national development plan and national investment strategies. Together with a policy framework that encourages significant investment in Somalia’s emerging blue economy, an enabling investment climate can reduce the risks for public and private investors. A good first step would be transparent planning and coordination among key stakeholders and enablers facilitated by government ministries.
Secondly, mobilizing domestic resources and attracting the well-educated diasporic entrepreneurs with blue ideas and capital. As highlighted above, Somalia’s oceans present countless new opportunities, and harnessing them would require initial financial investment, capital and creative ideas. Diversity of Somalia’s blue economy investment and success of its strategy depends on a range of work force, skills and talent which is a huge existing gap in Somalia.
Currently, Somalia’s traditional blue sectors like fishing rely more on manual skills or physical abilities, while other knowledge-intensive sectors such as mineral or off-shore extractive sectors require more advanced knowledge and technological skills that Somalia’s diasporic communities can provide. Efforts have already started and have been ongoing in mobilizing domestic (national & local) resources and delivery of development assistance towards stability, and sustainable economic and social development. The generation of new immediate revenue streams and their reinvestment into selected BE sectors are needed. Such opportunities for generating revenue streams exist in increasing the sale of fishing vessel license fees and large fines that can be generated on imposing illegal fishing. Most recent reports indicate that Somalia loses estimated revenues of $300 million USD to illegal fishing34, which is more than two times the annual potential earnings from the fishing sector. Imposing large fines on illegal fishing activities can increase licensing fees while could potentially generate new revenue stream from the fines or penalties. Improving and strengthening local resource mobilizations can increase the probabilities of more revenues that could be used for reinvestment for BE sectors for greater sustainable growth.
Thirdly, balancing investment options among competing development needs. Investing in blue economy sectors is an institutional challenge that requires balancing immediate priorities like security and post-conflict reconstruction needs with longer-term policy and institutional development considerations. When high priority expenditures in security and social services are compared with donor aid and the limited domestic revenue, the funding of blue economy sectors fails collectively. To significantly impact investment in high yield BE sectors, the country needs to develop alternative funding mechanisms and prioritize investment goals.
Setting investment priorities for development and for domestic resource mobilization is central to the pursuit of sustainable development, including achieving the NDP-9 goals. However, when there are competing priorities, it is unlikely to provide enough resources to enable the transition to a sustainable and inclusive blue economy, particularly in the face of economic shocks as a result of the COVID-19 pandemic. So, it is imperative for policy makers to prioritize tapping into any global post-COVID recovery funds and redirect public funds into the development of high-value quick impact blue economy sectors that private sector or foreign investors cannot fund. Focus must be given to investing sequentially and progressively in strategic projects with transformative and sustainable growth potential. Selected investment priority programs need to be simple, selective, realistic, and accountable.
Fourthly, consider establishing a task force to study the range of possible investment options or sources of sustainable finance that could be deployed to support the blue economy in Somalia. Once challenges are addressed, priorities are set and an enabling environment for investment is established, policy makers should consider exploring commonly used investment and financing options including but not limited to diaspora crowd sourcing, blended finance which strategically combines public and/or private development finance flows and it is widely used globally, debt swaps or any of the multi-donor trust funds such as World Bank’s “PROBLUE which is an umbrella multidonor trust fund that supports the sustainable and integrated development of marine and coastal resources in healthy oceans35.” There are also limited grants currently used to fund blue economy sectors.
Fifthly, consider improving data collection and measurement. It is a common saying that “what gets measured gets done36” and this is a true need in Somalia’s BE emerging sectors. What gets measured gets done, managed, monitored, financed and invested. The investment industry in all parts of the world places a great deal of emphasis on measuring both economic and social as well as financial impacts and returns. Measurement and data collection are critical to taking action, making decisions and investing in the Blue Economy.
Finally, despite the odds, Somalia has made steady progress towards debt relief and in attracting limited financing and investment; however, BE investment and financing have been piecemeal and limited to fisheries and port projects, and this has not been enough to realize the blue economy’s transformative potential. An increased policy effort by Somali policy makers and strengthened support from international development partners can accelerate blue finance. It is likely that for the foreseeable future, technology and other barriers will limit the ability to attract funding at scale in some new ocean industries.