JAMHUURIYADDA FEDERAALKA SOOMAALIYA WASAARADDA BEERAHA & WARAABKA
ﺟـﻣـﮭــﻮ رﯾﺔ اﻟﺻـﻮﻣـﺎل اﻟﻔﯾدراﻟﯾﺔ وزارة اﻟزراﻋﺔ واﻟري
FEDERAL REPUBLIC OF SOMALIA MINISTRY OF AGRICULTURE & IRRIGATION
Invest in Somalia
Agricultural Investment Opportunities & Guide
“Now is the time to invest in Somalia.� H.E. Hassan Ali Khaire, Prime Minister, Somalia
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Agriculture in Somalia
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II. Welcome to Somalia
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III. Agriculture investment policy and regulation
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IV. Investment opportunities in agriculture
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V. How to establish an agribusiness in Somalia
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VI. Finance and labour 10
CONTENTS
A farmer in Afgooye tending to her growing banana plants.
Najma from Somfarm Fresh with Somali bananas on display at the Gulfood Fair in Dubai.
Agriculture in Somalia Agriculture is the backbone of Somalia’s economy, contributing to approximately 70 percent of the country’s Gross Domestic Product (GDP), 80 percent of the employment, and about 50 percent of exports. Somalia is emerging from post-conflict and despite the challenges faced, my ministry is working to achieve food security. We are party to the United Nations Sustainable Development Goals (UNSDGs) and working towards a hunger-free nation by 2030. We import food worth over USD 1.5 billion annually. To address this deficit the government encourages investment in the sector and support the increase in domestic food production. We have adopted several measures to boost growth and address underlying constraints. For example, we’re working to increase the production of major food crops like maize, sorghum, and beans through innovation, capacity building, and technology. So far, the government of Somalia has expanded the hectares of land under production, modernization of the agricultural output, adopted climate-smart agriculture, rehabilitated critical irrigation systems, and improved the capacity of farmers through training. Food security is one of our key priorities, and as you read our agricultural investment guide, we hope you find exciting a eas for investment in Somalia. Said Hussein Lid Federal Minister for Agriculture and Irrigation
Cucumber cultivated in greenhouses using drip irrigation harvested and ready for markets.
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A farmer piling up harvested sesame stalks to dry in Balad.
Welcome to
Somalia
The Federal Government of Somalia, through the Ministry of Planning, Investment, and Economic Development (MoPIED) and the National Investment Promotion Office (SOMINVEST), places the agriculture sector as one of the highest priority investment areas due to its contributions to the socio-economic development and livelihoods of the country. SOMINVEST recently developed the National Investment Promotion Strategy (NIPS) to provide clear and comprehensive investment guidelines in key sectors of the economy, including the agricultural sector, whose share of GDP has risen significant y from its pre-war levels of about 62 percent to 70 percent. Before the State collapse, the crop subsector was the second largest contributor to GDP and exports, after livestock. The NIPS has been strategically aligned to Somalia’s National Development Plan (NDP), which is the overarching medium-long term development and poverty reduction strategy. The plan sets out our government’s agricultural transformation agenda by guiding the process by which Small-Medium Enterprises in agriculture could shift their activities from subsistence-oriented towards more specialized and market-oriented production. Moreover, the National Investment Promotion Strategy embraces an Enterprise Driven Development (SEDD) approach, which fosters business capabilities to deliver solutions and economic value through partnerships between the government, private sector, and international cooperations. It underpins the principles of Global Sustainable Development Goals (SDGs) for inclusive and equitable growth as well as food security by prioritizing investments in Somalia’s productive sectors, identifying investments at the sector and subsector levels while promoting the attraction and retention of deliberately targeted investments, that is the anchor and ancillary investments, as catalysts for economic development. Successful implementation of the NIPS will entail close coordination and collaboration between all stakeholders and proper harmonization of investments and alignment of programming. Vital programs like the GEEL project should also be sustained. SOMINVEST, through the MoPIED, is committed to providing leadership and coordination in the implementation of this investment strategy and will facilitate other stakeholder participation, primarily the Ministry of Agriculture and Irrigation (MoAI), for this vital sector.
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In this regard, we invite all stakeholders, including farmers and development partners, civil society, and the private sector, to work closely with the government in driving the NIPS agenda forward. Together, we can transform our Investment sectors, the economy, and the lives of our people. Hassan A. Farah Director – SOMINVEST
$8,900,000 Ha
FERTILE ARABLE LAND
3 MAIN RIVERS
STRETCHING OVER 2,300km
7
TH
LARGEST PRODUCER OF SESAME GLOBALLY
3,333km
LONGEST COASTLINE IN MAINLAND AFRICA
81.5%
SOMALI POPULATION UNDER 35
600,000 Ha IRRIGATED LAND
The agricultural sector contributes 40 percent to the GDP and earns 50 percent of Somalia’s export earnings. The agriculture sector is not only the driver of Somalia’s economy but a top livelihood earner for most of the country’s population. The sector comprises of crop production, livestock, and forestry. Somalia’s agricultural exports are growing, dominated by sesame, lemon, and banana.
Why Invest in Somalia’s Economy?
There are joint venture opportunities for foreign investors seeking local counterparts. The following factors underpin Somalia’s competitive advantage as an investment location: • Insufficient domestic production to meet subsistence demand • Available export markets for traditional and new agricultural products • Highly under-invested sector Raw • Access to affordable labor Agricultural • Opportunities for innovation and new technology trials Material • Vast agrarian land for production and expansion • Regional market access through Common Market for Eastern and Southern Africa (COMESA), Intergovernmental Authority on Development (IGAD), and World Trade Organization (WTO) • Preferential trade policies in Turkey and most of the Organization of Islamic Cooperation countries • Proximity to the international transshipment lines • Efficient telecom unications system. • Supportive and dedicated Investment Promotion Office committed to investor protection and retention, and provision of after-care services
Ubah Mohamed harvesting kale she planted during the agricultural TV competition, Tartan Tacab.
Vast Agricultural Land Preferential Trade Agreement: Turkey and Organization of Islamic Union Innovation and Technology Investment
AGRICULTURE IN SOMALIA
Agriculture, the Mainstay of the Somali Economy
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A young farmers sorting animal feed at a dairy farm.
The Federal Republic of Somalia has put in place laws and regulation related to attracting foreign direct investment to support economic growth. Over the last years, the government has undertaken deliberate effort to revise laws to promote investment in the multiple productive sector. Some key laws passed by the parliament include; • Somalia Investment Law 2015 • Somalia Agricultural Laws 2020 • Somali Agricultural and Inspection services (SARIS) • Somali Agrochemical policy • Seeds and Varieties Act • Plant Protection and Quarantine Law • National Fertilizer Policy • National Pesticide Policy
Sominvest is the national Investment Promotion Office which supports international investors, promotes and markets Somali products globally and interfaces to Somali ministries and government agencies. The National Investment Strategy prioritises investment into agriculture and livestock, energy and the blue economy. A National Investment Promotion Strategy and Foreign Investor Protection Framework have also been developed.
Somali markets are relatively unregulated giving investors great flexibil ty. The Somali government is keen to work with businesses to develop regulatory frameworks which support them and improve their access to international markets and financ . The Somali Agricultural Trade and investment are the key drivers of de- Regulatory Agency and Somali Bureau of Standvelopment in Somalia that will ensure Somalia ards have been established to develop the reguplays the fullest role in a changing and interde- lations and standards. pendent world. In support of this goal, Somalia has adopted one of the most flexible foreign The recently passed agricultural laws will proinvestment laws in the world. This Investment vide a legal framework for agriculture regulaw, most importantly, treats both foreign and lation in the country, and also covers quality national investors as enjoying similar econom- control of agri-inputs and agri-outputs. These ic and social advantages. Foreign investors have frameworks have been deliberately put in place free access to all sectors of economy unless by the movement to facilitate trade and investinvestments infringe national security, environ- ment in the agricultural sector, which is a signifment, religion and heritage concerns or are icant pillar in the National Development Plan. deemed morally unviable.
INVESTMENT POLICY & LAW
Agriculture Investment Policy, Law and Regulation
Livestock ready for export at the Port of Mogadishu.
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Farm workers washing newly harvested bananas in Afgooye, before they are packed and ready for export.
Somalia’s agricultural production mainly relies on 2,300 kilometers of productive land in riverine regions. As such, the agricultural sector provides opportunities for investment with high returns, including: • Large scale specialist crop production • Agri-inputs and machinery • Grains and pulses production • Fruits and vegetable production • Food processing, distribution, and export • Agri-inputs including equipment and technology • Cold chains and warehousing • Transport and logistics • Quality assurance and testing • Agricultural financ
Large Scale Crop Production
Lack of water and the high cost of irrigation, energy, and mechanization mean that most large scale agriculture is not cost-effective and competitive as imports. Therefore, investors should focus on specialist crops indigenous to Somalia or those suited to the constraints of its climate.
Fruit Production
Somalia’s tropical climate is well suited for the commercial production and export of fruits and vegetables, including cultivation in climate-controlled environments for increased productivity. • High-value fruits like lemon, mango, grapefruit, and banana: • Banana is one of the major high-value export crops with lower production cost compared to major competitors in Latin America. Farmers in Somalia have produced bananas for more than 100 years. With over 50,000 hectares available for cultivation, banana production and exports provide lucrative opportunities for investment. Bananas grown in Somalia are not affected by endemic pest and disease and therefore require little or no chemical intervention to thrive, thus reducing production costs. Additionally, the governments of Somalia and Turkey signed a preferential free trade agreement, reducing import tariffs for the Turkish market. • Large intensive production and exports are achievable with a high risk of return. The global banana industry generates around USD 8 billion a year. However, international exports only make up15 percent of these trades. The rest is consumed locally, especially in countries such as India, China, and Brazil.
Sesame harvested across Somalia, and processed in Mogadishu, packed and ready for export.
INVESTMENT OPPORTUNITIES
Agriculture Sector
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Central pivot irrigation system in use at a fodder farm in Somalia.
Somalia’s rising urbanization has led to increased demand for processed food. The country currently imports processed food valued at USD 1.5 billion annually, mainly from neighboring countries and the Middle East. Numerous investment opportunities exist in agro-processing and value addition as no major agro-processing company is in operation in Somalia. The sector reports between 55 and 60 percent post-harvest losses, which need attention. Investment opportunities exist; • Fruit processing: mango pulping, juice, jam, and sauce processing. On average, 50,000 tonnes of mangoes are available for processing annually. • Vegetable processing: Tomato production is estimated at 35,000 metric tonnes annually, halve available for processing. Other vegetables like lettuce and chilli are also available for processing. • Oil crops and seeds processing: Somalia is the 7th largest producer of sesame in the world, producing approximately 500,000 metric tonnes annually to meet a 150,000-metric tonne local demand. Opportunities exist to invest in sesame processing to utilize the surplus. • Grain and pulse processing: Somalia continues to face shortages of maize, rice, beans and other cereals, with imports estimated at USD 600 million annually • Others include sugar, wheat and cotton.
Agri-inputs and Modern Irrigation Systems
The lack of multinational seed and agrochemical companies in the country provides investors a unique opportunity to invest in Somalia’s agri-input sector. For instance: • Seed production and processing: demand for quality and certified seed exceeds 10,000 metric tonnes annually, with only two local companies supplying below 1,000 metric tones. The deficit is an oppo tunity to invest. • Pesticides: almost all the pesticides used locally are imported, providing an opportunity for pesticide formulation and marketing. • Fertilizers: The Somali market demands over 10,000 tonnes of fertilizer a year, but none is manufactured in the country despite the availability of raw materials. • Greenhouse technology: increased uptake of greenhouse farming by farmers in Somalia has shot-up demand for the required technology, but almost all greenhouse equipment is imported. • Commercial irrigation and water harvesting: There are 8.9 million hectares in Somalia with potential for irrigated agriculture, but only 6000,000 ha is irrigated.Therein lies opportunities for large scale public-private partnerships. • Research and breeding: there are currently no research and breeding centers in Somalia, a lucrative sector with high demand, and potentially high returns.
Tomato cultivated in greenhouses using drip irrigation.
INVESTMENT OPPORTUNITIES
Agro-processing Industries
Farm workers inspecting harvested bananas in Afgooye, before they are processed, packed and prepared for export.
Cold Chain and Warehousing
Increased export of fresh produce from the country has resulted in a growing need for cold chain storage and warehousing. Areas of potential investment include sea ports in Berbera, Kismayu, Bosaso, Mogadishu, and Hobyo, and international airports in Mogadishu, Garowe, and Hargeysa, and the soon to be established export processing zones.
Almost all farm machinery, including tractors, are imported, with average imports of 1,000 tractors per year. There are opportunities to manufacture tractors locally, with more than 3,000 tractor units required by farmers as well donor supporting farmers over the next few years, and a minimum average of 1,000 tractors to be replaced annually by commercial farmers. Tools used small scale farmers are Quality Assurance and Testing also high in demand, and present opportunities for As agricultural production increases, there is a local assembly investment. growing demand for laboratory testing and quality certification and the opportunity to set up private Agricultural Finance laboratories for quality control of agricultural proThe collapse of the National Agricultural bank in duce. Possible areas of investment include; the 1990s drastically affected agricultural produc- • Laboratories: investment in an accredited laboration in the country, leaving many farmers unable to tory in the country for soil, H20, fertilizers, and access credit from banks. Despite the re-emergence chemical residue testing. of local banks, there are investment opportunities • Certification Bodies: the establishment of Global to partner with the government or banks to set up GAP, ISO Certifications Food safety certification an agricultural focus portfolio. Key areas include: centers in Somalia. • Investment in the establishment of the Somali • Business development services: capacity building, National Agricultural Bank in partnership with auditing, and compliance. the government • Export Certification investment in Public-Pri• Public-Private Partnership to provide credit to vate Partnership for export and import quality micro-finance to support small scale farmers, control. credit on agri-inputs and Islamic compliant banking for large scale commercial farming, international trade, and asset financing A farm worker blowing washed bananas in Afgooye.
INVESTMENT OPPORTUNITIES
Agricultural Machinery and Equipment
A lab technician testing samples at the Somalia Banana Tissue Culture Laboratory.
Livestock ready for export at the Port of Mogadishu.
Other Areas of Investment
• Packing facilities and materials: There is a significant opportunity for investment in the production of paper and plastic bags, and aluminum, glass, plastic, paper, and rubber articles used for packing. For example, demand for banana packing materials will exceed 500,000 pieces per year in the next four years. The use of plastics is expected to triple in the next fi e years in Africa and demand for consumer plastic products continues to grow in Somalia. • Air and sea cargo logistics for fresh perishable products • Off-season storage
Benefits of Foreign Direct Investment in Agriculture
• Aligns with food security strategies • Technology transfer and upgrading • Job creation and poverty reduction • Increase in quality and quantity of food produced, thus food security • Large-scale agriculture and commercialization • Diversification and value-a ded production
INVESTMENT OPPORTUNITIES
Somali banana and livestock ready for export.
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Camels enjoying fresh fodder at a dairy farm in Somalia.
Creating a company in Somalia is easier with the launch of E-government services managed by the Federal Ministry of Commerce and Trade. Investors can register their businesses on the www.ebusiness.gov.so website and receive a certificate of incorporation in one working day. However, foreign investors must familiarize themselves with Somali Foreign Investment laws to avoid complications.
Visitors learn about Somali products at the Somalia Rising Booth at the Gulfood Fair in Dubai.
DOING BUSINESS IN SOMALIA
How to Establish an Agribusiness in Somalia
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A technician repairs a refrigeration unit during a cold storage training in Mogadishu.
The majority of the capital used to create businesses in Somalia is raised by the business owner, their family, and friends. These funds are often not enough, and other local sources of finance are requireD. Banks are increasingly willing to invest in agriculture and agri-food businesses, mainly using Sharia-compliant loans. Terms are typically under two years, but longer terms and initial grace periods are becoming more common. Profit rates are often perceived as high but are in line with international norms for frontier development markets. Businesses typically need to provide land or other existing assets as collateral, and a guarantor. FCA Investments invests in agriculture and agri-food businesses and input suppliers and supports more extensive projects that require at least USD 111,029 over terms of 5 to 6 years and can be structured as equity, mezzanine, or loans using Islamic instruments. Shuraako makes Sharia-compliant loans of at least $100,000 over extended terms and at lower profit rates than the banks. International Development Finance Institutions (DFIs) are also beginning to enter the market and are mainly interested in larger transactions in specialist areas. Investor guarantees and specialist risk insurances are beginning to become available but are likely to require transactions of at least USD 10 million.
Labor Market
Somalia boasts a robust and well-educated population, with 81.5 percent under 30 years of age. However, 67 percent of youth between 14 and 29 years of age are unemployed. Fortunately, Somalia’s friendly labor law is attracting talent and investors alike. A recent surge of highly skilled Somalis from the diaspora returning to work in Somalia has led to an increase in innovation, investment, and capital. Monthly salary ranges between USD 300 and 600 for skilled labor, and USD 100-300 for unskilled, more competitive than regional labor markets.
A lime farmer admiring her bountiful harvest.
FINANCE AND LABOUR
Financing the Agriculture Sector
Tomato cultivated in greenhouses using drip irrigation.
Ministry of Agriculture and Irrigation Address: Mogadishu, Somalia Website: www.moa.gov.so/ Email: minister@moa.gov.so Tel: +25261 2266277
Somali Agricultural Regulatory Agency (SARIS) Address: Mogadishu, Somalia Website: www.moa.gov.so/ Email: minister@moa.gov.so Tel: +25261 2266277
Ministry of Commerce and Industry Address: P.O. Box 30, Mogadishu, Somalia Website: www. moci.gov.so Email: ministry@moci.gov.so/ info@moci.gov.so
Somali Bureau of Standards Address: P.O. Box 30, Mogadishu, Somalia Website: www. moci.gov.so Email: ministry@moci.gov.so/info@moci.gov.so
Somalia Investment Promotion Office (SomI vest) Address: Afgoye Road, KM5, Mogadishu-Somalia Website: http://sominvest.mop.gov.so Email: sominvest@mop.gov.so Tel : +252619111530
A farmer in Afgooye tending to his growing banana plants.
KEY CONTACTS
How to Reach Us
This publication is made possible by the support of the American People through the United States Agency for International Development (USAID) through the USAID/Somalia Growth, Enterprise, Employment and Livelihoods (GEEL) project. The contents of this publication are the sole responsibility of International Resources Groups (a subsidiary of RTI) and do not necessarily reflect the views of USAID. or the United States Government.
USAID KA TIMID DADWAYNAHA MARAYKANKA
