Ministry of Energy and Minerals inviting locals to invest in the vibrant mining sector for a bumper-harvesting. and so, to ignite Somaliland’s Economy.

Jointly co-authored by Mohd Faisal Hawar and Mohamoud Faisal Hawar, both Oil and Gas Management Graduates, specialized in Oil and Gas Fiscal Regimes, Oil and Gas Economists, Trainers & Consultants on all the Extractive Fiscal Regimes. Both are currently attached to the Ministry of Energy and Minerals of Somaliland, as Internship – junior Upstream Petroleum Economists / Advisers.

Throughout the history, right from the bronze & iron-age days when mankind discovered the bronze and iron ores, till these present and booming days when the much sought after like Coltan “Columbite–Tantalite” metallic ores fueling the rat-race for the prevailing electronic-age, the economic mainstay of the Somali race in general and Somaliland, in particular, remained to solely depend on livestock. This was status-quo right from the early days when our ancestors set foot on this blessed land till this modern date of boom and bonanza, our main occupation remains rearing livestock, providing us with the thin line of livelihood needed. This paradox of plenty of goats, sheep, and camels had a greater impact and lockout all our other economic initiatives and strives to explore other alternative means, so to ignite and leapfrog our ever-dormant economies year on year, since the great camel years of our ancestors!

Although the inter-trade and exports of livestock are the largest traded commodity for the Somali race and therefore the biggest contributor to the feeble macroeconomy in general and is the biggest impactor to the GDP (Gross Domestic Production), for instance per the records of FAO, in the year 2015 alone the combined traders pocketed $384 million in exports, and the industry witnessed an annual growth of 6%. Yet the throat-cutting international competition for livestock and the meat business, the ban on livestock import by the gulf states, as well as recurring severe-droughts are few of the major challenges thrown at the Somali society at large.

Hence the Ministry of Energy and Minerals of Somaliland have taken great strides forward and recently held a workshop titled “Invest into the Mining sector of Somaliland and reap a bumper-harvest return of investment”, inviting over hundred local investors and industry experts for this well-organized mining summit in the capital. The Ministry’s aim of the workshop was to let the usually stereotyped local investors, traders and business houses who over-invest only into few known and comfort sectors, to instead consider the mining business as an alternative venue for rewarding businesses, also, allowing the mining to become an economic catalyst for Somaliland.

At the fore of this great endeavour, in his opening speech, the Minister of Energy and Minerals of Somaliland, Hon. Jama Hagi M. Egal recounted “We are indeed very grateful to our private sector for their role and valuable contribution to the economy, job creation, development and progress of our country, however, the time has come for us all to stop investment duplications and dependence on the overcrowded traditional business lines, and instead  explore the rich mining sector as new business frontier”. Hon. Minister Jama eloquently emphasized the mining sector of the country and its rich rewards to local investors when they do invest, and how the ministry is ready to assist the local investors by guiding and handholding, so to let them succeed.

Mineral-rich countries located in the continent of Africa have enjoyed the inflow of needed investments during the mining boom between the years of 2002 and 2007. Lots of local and foreign investors competed to locate and extract those lucrative minerals in the continent in order to meet the world’s growing demand for commodity and mutually yielding higher profit margins themselves, while noticeably benefiting by swelling the macroeconomy of the host nations. Hence the Ministry’s noble initiative to let Somaliland better its GDP with the revenue from the extractive resources.

Somaliland, in the past missed to take advantage of its rich natural resources, little wealth has ever been drawn from this sector despite having all those rich resources in the ground due to country’s politically locked to Somalia in the past, lack of detailed geological data, absence of adequate mining and geoscience expertise, decline of the world commodity prices and the absence of the legislative laws like investment laws, mineral extractive laws, and all those facts have led Somaliland to be kept away from its rightful seat in the mining market place, and deprived the country to exploit its rich minerals resources, therefore leaving the people in poverty. The recent emergence of more stable institutions and accountable government institutions in Somaliland has favourably bettered the chances of harnessing the power of mining for development and has combatted all those negative effects in order to improve the country’s technological, social as well as economic conditions. This has created more stability, a mature political system, and security which all will assure the investors and abated their risk worries about disarray occurring in their long engagement with Somaliland and its people.

Despite all the risks assumed to be allied to mining businesses, the benefits and profits of the mining outweigh the risks and can be seen in many southern African countries that have less stability or unattractive fiscal regimes than Somaliland thriving with their mining business programs. Take Botswana for example, throughout the 1980s until the 21^st century it was regarded as a high-risk nation to invest. However, since then, the country is considered Africa’s most successful mineral exporter. This came as a result of the country’s ability to renew and evaluate most of their mining laws and contracts which were negotiated back in the 1980s when the world commodity prices were lower, and the country was seen as a high political risk that deterred their foreign investments.

Somaliland should take a leaf out of Botswana’s book and note that reviewing older mining contracts (if any) and bringing up to date all the investment-oriented legislative is very important in order to respond to the growing competition for the inflow of foreign direct investment into the mining industry of Somaliland. Also, this is a great opportunity to attend to the possible pressures from local communities who want to be compensated and rehabilitated for their land after decommissioning of the mining operations. Another measure Somaliland should consider is to focus on the integration of national development measures set by the government like infrastructures airports, ports, jetties along with that of the great infrastructure that mining could bring into the country, so as to reduce the total cost of extractive expenditure. Somaliland needs to apply long term development goals in the process of extracting minerals, creating the downstream value chain mining services like beneficiation plants and smelting facilities in the country.

Another area Somaliland could improve is by revisiting its mining tax regime and also implement failsafe tax collection processes. If you take a closer look at our sisterly country of Zambia, at first, they attracted investors with some attractive tax reliefs, perhaps that is an example Somaliland should follow suite during the early days of this venture. However, smartly after mineral prices have soared-up in the past few years, Zambia has successfully raised its taxes on mining companies from 25% to 30% with a smart windfall tax regime, resulting in exceptional profits and this alone generated an extra revenue of $415 million for Zambia. Ever after, this became an exemplary success story for the continent and taken notice and adjusted their tax regimes, for example, Tanzania and Nigeria. This trend is likely to continue as more nations are bettering their expertise on how to manage the tax revenues from their mineral resources.

Somaliland’s economy has thus far relied on the livestock and the wealth coming from diaspora remittance to the tune of $2 billion annually. This cash flow is not sustainable and therefore Somaliland needs to create its own internal earnings and sure the Ministry of Energy and Minerals sees the mining sector as a very low hanging fruit and a tool to leapfrog the country’s economy. What better way is there other than the rich mineral deposits available in the mountainous region of the country for such economy awakening scheme. We can expect the mining sector to kickstart the entire economy into high gear, similar to that of the other African nations that mining-economy boost their standard of living and upsurge the nation’s purchasing power. Such acceleration of the mining business would benefit the country further, by generating more taxes for the government to investing in sustainable socio-economy development.

Somaliland is blessed to be having mineral resources in abundance, and vastly untapped. Also, the country is blessed with access to the busiest shipping passage in the world via the Gulf of Aden sea. What is missing some might ask? A detailed geological, geophysics and geochemistry studies of the land showing the definitive areas where these resources are located will go a long way in helping Somaliland to attract investors. Some geological maps alone will not suffice the need and will not convince the investors, and therefore the Ministry needs to bring in foreign expertise for the job and also at the same to train the local staff, in order to better the bankable geological data of the country.

It is fair to say Somaliland is late to the party of mining and needs adequate time to catch up with their African brothers, but it is certainly better late than never as the window of opportunity of this mining boom has not yet sailed. Shifting from reliance on livestock economic base to minerals based economy will take some time and steadfastness and great program management disciplines are required from all the branches and institutions of the government. There is no denying the importance of livestock economy, but the benefits and sizes of the mineral-based economy far outweigh the former. This can be used to jumpstart the other services such as hotels which may now get more customers such as investors. How will the rooms of the hospitality industry of our private sector ever get filled if all we do is business as usual?

As the director of the mining department under the Ministry of Energy and Minerals Eng. Omar Yusuf Omar assiduously said, “We are a rich country as far as the rich mineral resources deposits are concerned, but with poor people, since we are yet to exploit and benefit from our resource wealth.” This exemplifies the need for mining investment to flow into our country and jumpstart the economy. To achieve this, the government set out investor-friendly policies while maintaining its own interests, top up the security and stability of the country over the past two decades, and therefore nurtured the perfect environment for investment and business in Somaliland.

Our parting sage advice on the economic awakening endeavors of Somaliland is that mining is a very lucrative business and government and the local communities’ perception of mining must change positively, as it promises great wealth for the country, a high return-on-investments for the local and international investors while providing employment opportunities for its employees. The communities will have a chance to train their human resources with the new skills demanded by the mining sector, since most of the citizens living in those remote areas will be exposed to new trade and technologies, giving them another choice to make a higher living standard. The country’s infrastructure will also have a second chance of financing with the wealth received from mineral resources.

The authors, young graduate brothers, Mohamed (22 Yrs old) and Mohamoud (21 Yrs old) are currently attached to the Ministry of Energy and Minerals of Somaliland, and could be reached at: