by AYAN ABDI DIRIYE
Somalia is in a stage where its urgent need for funds cannot be overstated. Its education, health, sanitation, water, electricity and road infrastructure amongst other sectors need to be restored if not built from scratch. It will take billions of dollars for the country to have a semblance of its neighbours.
And here is where the Egyptian model comes in. Egypt has been able to create a fund raising model that overlooks international lending institutions by relying on internally generated funds for huge infrastructural projects. This is basically infrastructure bonds that a number of countries has come to adopt.
Somalia has many lessons to learn from. According to the World Bank, Somalia’s 76 percent of its domestic revenue is from taxes on international trade. A livestock export, the mainstay of the country’s economy, generates 80 percent of its foreign currency. Remittances from Somali nationals in the diaspora in 2012 totaled to $1.3B. In 2014, as per a World Bank report, Somalia’s domestic revenue accounted for half of its budget while the other half was from development partners. Put in other words, Somalia relies heavily on Aid and remittances.
The statistics above might not look as rosy but Somalia is working hard at transitioning from fragility to sustainable stability. African solution for African problem is a renaissance philosophy that is gaining traction in the continent. In no other country was this recently exemplified than Egypt.
Egypt demonstrated beyond doubt the power of pooling up resources and taking charge of a country’s mega infrastructural project that would otherwise have to be subject to backbreaking negotiations with international lending institutions or developed countries.
Funds sourced from such institutions normally come with conditions that might not necessarily be beneficial to the recipient country and are subject to high interest rates and delays owing to bureaucracies involved.
It is against this backdrop that President Abdel-Fattah al-Sisi went against the grain and sourced for a colossal mount from within, from the people.
$8.5B is what it would take for Egypt to widen and deepen part of the Suez Canal, adding 72 kilometers to the existing canal. The canal, one of the most important waterways in the world forms a crucial link between the Red and the Mediterranean Sea. The expansion turns the Suez Canal zone into a global logistics, industrial and trade centre.
After making known his intentions, the president made a call for national subscription in which the population was invited to buy interest-bearing investment certificates. In a record eight days the subscription was closed by the Central Bank because the targeted amount had been raised. Work commenced immediately and the project that was slated to take three years to completion took one year.
It is said that close to half the funds contributed for the project was money that had been lying outside the formal financial channels.
The immense benefits of this project are as dizzying as they are mouth watering to the populace that invested in the new canal as well as the country at large. The country’s go at this capital-intensive project is a rare and radical stab at financial independence. It is an echo that should rip across the African continent. The challenge it has posed to an African shackled on loan dependence syndrome is gigantic.
What a better place for this philosophy to extend its footprint than Somalia. Somalia’s population of nine million might not be as formidable as Egypt’s 83 million. Somalia’s population might not be as rich as its counterpart. Yet, Somalia’s capital needs are not as mindboggling as those of Egypt.
Somalia’s financial needs are unique to those of Egypt. Adopting and adapting the concept to suit their unique environment is the call they need to make without losing sight of the prize: breaking out of the vicious cycle of borrowing while spurring economic recovery that is by and for people.
Embracing this philosophy will not be as smooth as it was in Egypt. Somalia will need to gain confidence of both the locals and its populace in the diaspora. They will need to strengthen their institutions, weed out corruption while showing cause that they are practicing sound financial management. If they can manage well the funds they get from development partners then this will be a clear indication that capital sourced from within will be in safe hands and invested as intended.
Transparency will be of paramount importance in how they handle public affairs. Enabling the civil society to operate freely will galvanize the public trust in the government.
Indeed related laws should be up to par and the judiciary should be independent and efficient enough to enable for recourse where investors feel the ship has started taking in water.
The government will also have to burn midnight oil sensitizing the populace why they need to rise up to the philosophy of being the answer to their problems. If the people are bought into the philosophy then they will board the ship more than willingly.
For Somalia, this will be a big deal. Pooling together resources for a common goal will solidify a highly fractured society. This has the ripple effect of creating and sustaining peace.
Analysts are in agreement that peace becomes evasive if the post-conflict populace is not empowered economically. Funding development projects creates employment, consequently improving livelihoods which otherwise had been decimated by protracted
conflicts. This way peace is sustained.
Money raised from such sources frees the government meager resources to be utilized in other needy sectors that would otherwise have been neglected by a tight budget.
Pooling together to fund communal, regional or national development projects creates a sense of ownership, a sense of entitlement, sense of pride as well as fostering nationalism. These are all important portions in the cocktail of spurring development and its concomitants.
The psychological effect of embracing this philosophy augurs well for a nation that would fit to be declared as economically young. 70 per cent of its population is below 35 years. Hence it is a young nation by all definitions. Practiced well, this philosophy of selfreliance will nurture this generation as well as generations to come that, “Yes we can.” What a better lesson for transitioning from debris to sky-scrapping economy.