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Somali stock exchange: Unleashing growth

By Ayab Abdi Diriye

The Somali Stock Exchange (SSE) in May 2017 took part in the sixth annual Building of African Financial Markets Summit (BAFM). SSE was recognized as Africa's youngest and most unique stock exchange at the event.

The Somali Stock Exchange (SSE) in May 2017 took part in the sixth annual Building of African Financial Markets Summit (BAFM). SSE was recognized as Africa’s youngest and most unique stock exchange at the event. The summit offered the SSE an unprecedented opportunity to share best practice and exchange ideas over a dozen African Stock Exchanges.

Somali Stock Exchange made history by becoming the first ever stock exchange to operate in Somalia when it launched in 2014. Historically, Somalis sell their shares and invest through the utilization of familial tie links and through known, close networks. This system of trust is otherwise known as ‘Hawala’ and has been the foundation of Somalia’s multi-billion, international remittances sector.

The SSE is projected to grow as there are large amounts of money held by the Somali diaspora according to Hassan Dudde of the Somali Economic Forum.

Over $3 billion flows into Somalia every year, with most of the funds coming from private investors in the form of remittances.

Due to the intense competition between start-ups, few investors look to pay shares of the well performing companies with long term growth. The SSE aims to overcome this issue in order to allow Somalia to meet its burgeoning economic potential in the future.

Previously, diaspora investors would be forced to invest their capital in other markets, principally Nairobi or Dubai. However, with the emergence of the first Somali Stock Exchange, this is bound to change. According to Dudde, the SSE will for the first time allow Somalia’s private sector to dip into a Somali owned capital pool connecting investors to thriving businesses.

The growth of a Somali-led stock exchange will allow companies to grow and employ youth who suffer disproportionately from high rates of unemployment and in the process act as easy prey for Al Shabab recruiters. Uniquely, Somalia’s private sector overwhelmingly dominates Somalia’s economy and is responsible for the existing positive trends in Somalia such as mobile banking and remittances. The existence of a stock exchange in Somalia will allow companies to raise the capital they need to expand and grow their workforce whilst simultaneously overcoming chronic levels of poverty.

Previously, diaspora investors would be forced to invest their capital in other markets, principally Nairobi or Dubai. However, with the emergence of the first Somali Stock Exchange, this is bound to change.”

Hassan Dudde.

Currently, in its initiation phase, over 20 firms are already listed on the stock exchange as it aims to attract even more firms in the near future. The SSE complimented its launch with a road show, which started in Bosaso and Mogadishu with the aim of expanding to the nearby markets with large Somali populations such as Nairobi and Djibouti. The SSE also held its first conference at the Puntland Chambers of Commerce in Bosaso during its launch phase in 2015.

Economists predict that the SSE is set to expand rapidly due to the current high levels of demand for capital among the largest Somali firms as well as foreign firms looking to invest in Somalia’s ever growing private sector. The headquarters of the exchange is based in Mogadishu, Somalia’s political and commercial capital. Nevertheless, SSE is looking to hold similar investment conferences in Hargeisa, Mogadishu and potentially Kismayo.

The BAFM summits are held annually and it is an initiative founded by the African Securities Exchanges Association with the core aim being to promote the growth of African capital markets.

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