Creating a stock exchange for Somalia

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By: Abdirahman Yusuf

The Somali Economic Forum, a group bringing together professionals and businessmen in and out of Somalia is mooting the idea of establishing a working stock exchange to bring in investors into the country’s companies.

The investment vehicle will allow the listed firms to attract investors from all over the world who will buy stakes into the firms and pump in capital to provide the financial muscle needed for expansion.

The Forum’s Managing Director Hassan Dudde said the aim of the forum will be to ensure that the companies in Somalia are able to create wealth to other people willing to pump capital in them and reap dividends from the profits.

“We have so many people who would want to invest in this country but they have no formal channel to invest through and that is why we believe once we have the stock exchange running, it will be a smooth ride for investments into this country. We hope to have several profiles with ready statistics to give which is what listed companies provide and enable easer investments,” Mr. Dudde told The Somalia Investor Magazine.

Investment levels in Somalia are still very low with many investors kept in the dark about which companies they can put money in for the best returns. This is coupled by the lack of transparency of Somalia firms- their financial reports are not even made public.

Net investments accounted for only 8 per cent of GDP. Exports were equivalent to about 14 per cent of GDP, while imports accounted for more than two-thirds of GDP. The large trade deficit was financed mainly by remittances and international aid.

Livestock is the largest sector in Somalia, the largest employer in rural areas with nomadic cultures, and the largest export. While engaging much of the population nationally, livestock is concentrated in the arid and semi-arid. It is the major export commodity, accounting for more than 80 percent of total exports.

According to FAO (2015), Somalia exported a record 5 million heads of livestock to markets in the Gulf of Arabia in 2014 (4.6 million goats and sheep, 340,000 cattle, and 77,000 camels), with an estimated total value of $360 million. The livestock industry has been recovering following the lifting of a nine-year ban on the import of livestock from Somalia (aimed at preventing the spread of Rift Valley fever), with exports of live animals on the increase at both the Berbera and the Bosaso ports.

Early March, this year, Somalia also sent over 2,000 camels to Egypt for the first time in two decades following an agreement signed between the two countries.

The resurgence of the livestock sector reflects the large investments being made to help make the sector more competitive in international markets. Such lucrative markets have not had sufficient attention from foreign investors whose understanding of the market is limited and the listing of companies is set to change all that.

The Somalia Stock exchange will also provide investors with the opportunity to avoid risks associated with companies not listed whose transparency levels are low and future is hard to  predict.

Listed companies will have to involve shareholders in decision making and transparently share profits and losses as well as raise capitals through various channels available for them in the market.

The Somali Business Forum is now benchmarking with the Nairobi Stock exchange to understand the dynamics applicable in the Somalia environment as the stock market hope to list her first company this year. It is prudent that major companies in the Somalia economy to team up with the forum in setting up a functional stock exchange that has the confidence of the business community.