With relative stability compared to previous decades of conflict and a burgeoning middle-class that includes diaspora returnees, Somalia is experiencing economic growth, and many economic sectors are recording progress. Investment activity is seen in the agriculture, food, education, health, transport, logistics, banking, financial sector, energy, oil and gas, and real estate. Private investments in the agricultural production sector alone were estimated to reach $67.5 million over the last five years. In 2022, primary U.S. exports to Somalia totaled $85.1 million and goods imports totaled at $1.1 million. Primary U.S. exports were cereals, vehicles, electricals, and machinery equipment.
According to demographic data, about 47 percent of Somalia’s population resides in urban cities and towns. Somalia’s urbanization and changing consumer habits are generating greater demand for shelf-stable and ready-made products throughout major urban centers. Much of this demand surge has been met by low-cost imports, creating stiff competition to match cost and quality for locally produced and processed products, particularly by the country’s growing Small and Medium Enterprises (SMEs). The country imports processed food valued at over $1.5 billion annually, including raw sugar (14 percent), rice (5.8 percent), wheat (3.9 percent), pasta (3 percent), and other food-related products. Somalia may offer especially promising opportunities to invest in its agribusiness and food sectors.
Agriculture and food play significant roles in Somalia’s economy, both in terms of employment and in terms of food security. The agricultural sector currently accounts for about a quarter of overall employment, is the second largest export sector, and plays a significant role in partially meeting domestic food demand. According to the ninth National Development Plan and estimates available from a World Bank/Food Agriculture Organization (FAO) report, Somalia has about 8.9 million hectares of cultivable land, of which almost 2.3 million hectares produce or could produce crops under rain-fed conditions. Demand for food has been high and is expected to grow for domestic and imported food. This demand is being increased by rapid population growth and large remittance inflows.
In the electricity sector, Somalia has Africa’s highest renewable energy potential (USAID, Power Africa). Solar power could potentially generate an excess of 2,000 kWh if the country reached its total capacity, and onshore wind power could generate between 30,000 to 45,000 MW. The African Development Bank highlighted research showing that Somalia had more “on-shore wind potential” than 21 other African countries, including Algeria, Egypt, Libya, Mauritania, Morocco, and Tunisia.
Studies suggest Somalia has one of the highest potentials for gas and oil in the region. Geo-seismic studies have shown that Somalia may have more than 30 billion barrels of oil and gas reserves. The country began the licensing of offshore oil and gas blocks in 2022 after the parliament passed legislation on oil and gas revenue sharing and agreed on a legal framework for the exploration and extraction of oil and gas resources. Coastline Exploration was issued the first oil and gas exploration Profit Sharing Agreement (PSA) in 2022. Additional licensing for other multinational companies is expected in the coming years.
Mobile money is widespread and estimated at 73 percent of penetration. According to a World Bank report, Somalia has a large diaspora, and diaspora remittances are estimated at nearly $2 billion annually, comprising about 20 percent of GDP. Transfers, mobile banking, and payments present opportunities for inclusivity and broad access to financial services.
The aviation sector in Somalia is growing in terms of volume and quality of services, presenting opportunities for investors. After over 30 years, Somali airspace has regained its Class A classification by the International Civil Aviation Organization (ICAO). As a result, increased air traffic and passenger travel is expected to and from major global destinations, opening trade and investment opportunities in the country.
Somalia is among the Heavily Indebted Poor Countries (HIPC). According to the Federal Ministry of Finance, Somalia is anticipated to meet the completion point for the IMF’s HIPC initiative in the last quarter of 2023, significantly reducing its total debt burden. Somalia will then be eligible for international loans which is expected to increase public investment in infrastructural development. Major government contracts in the infrastructure sub-sector are expected to be announced in order to repair and expand dilapidated economic infrastructure.