The euphoric reception that the election of President Mohamed Abdullahi Farmaajo elicited on February 8 is confirmation that the Somali people have faith that he has abilities to lead the change that the war-torn country faces.
His election was received with gunshots by members of the security in celebrations as an indication that he is the savior the country has been waiting for in the last 25 years since the collapse of the Siad Barre’s regime.
The nationalistic fervour was expressed for the
first time in 25 years and the confidence of the people in government was reborn. Many hail it as the first step towards Somalia’s stability.
President Farmajo’s in-tray was already full the moment he walked out of the Mogadishu airport hangar, the venue of his election. In his inauguration speech, the new president promised to rebuild Somalia based on three principles: security, fighting graft and poverty. These pillars will contribute to the achievement of the economic development if implemented well. Farmajo’s immediate task will be to battle with the current drought that affects more than 6 million people nationwide.
The new president comes into office at a time when Somalia’s per capita income is $435, ranking it as the world’s fifth-poorest nation, according to the World Bank. The country depends on agriculture as the key economic activity that accounts for 40 percent of national production. The main export is camels to the Middle East. The IMF estimates that the economic growth may slow to 2.5 percent in 2017 from 3.7 percent last year. The economy is sustained by $2.3 billion a year by diaspora’s remittances.
Developing the small and medium enterprises (SME) in Somalia is vital for reconstruction strategy of post-conflict Somalia. The SMEs have contributed and sustained Somalia’s populations for more than 25 years without (proper) government policies and regulations in place. SMEs have also been responsible for employment opportunities for the budgeoning mass of youth as well as generating revenues for the government.
The sectoral policies should be introduced to regulate the business environment. The development of the infrastructure and rebuilding the government institutions is key to the initial growth of SMEs. The economic development is very crucial for the stability of Somalia especially jobs for the youth that are currently estimated to be 70% of the populations. The creation of jobs is regarded as the first route to stability.
The economic shocks of 5% in the post conflict countries can increase the risk of civil war. To avoid this Farmajo’s government must uphold good governance and accountability of donors’ support of the economy. The suitable political settings will be the major determiner of SMEs growth in Somalia.
The International Monetary Fund has already pledged to partially forgive $5.3 billion debt if the current government will reform its economy and promote good governance. IMF will be printing the new Somali shillings this year to reduce inflation and boost the economy.
The major setbacks for the SMEs development in the country is the lack of basic business skills by the entrepreneurs in areas like business planning, bookkeeping, technology applications, funding opportunities or access to finance and marketing skills. This lack of technical skills in business applies to both men and women, but women suffer more because of cultural backlash.
The government should support entrepreneurship development in the country through partnership with investors and donors to boost SMEs growth. Strengthening the entrepreneurial culture in the country through educational curriculums.
The international and local NGOs were the key players in the training of the SME owners in Somalia. They have helped many young entrepreneurs to launch their businesses by providing funding and tailored training.
The World Bank has also initiated a program of funding new or existing SMEs in Somalia called Somali Business Catalytic Fund (SBCF) and Development Alternative Inc. (DAI) manages it. The fund is to boost the economic growth of SMEs whether establishing new or expanding the existing business. Somali Stability Fund (SSF) and Shuraako are also key players in financing of SMEs in Somalia.
The local banking industry should support the sector by scaling up microfinance loans based on Islamic principles to SME entrepreneurs. The technical assistance to banking industry to open the lending windows for SME for entrepreneurial growth in Somalia.
Entrepreneurship is not a magic wand for economic development in post conflict Somalia. However, the government needs to support the growth of SMEs by fighting corruption, support women led SMEs through women entrepreneurship funds, rebuilding governance institutions, initiating proper taxing mechanism, adopting appropriate policy reforms, establishing long-term public-private partnership and providing incentives for SME sector to alleviate poverty.
Ali is a Small Business Consultant & Freelance Writer based in Mogadishu, Somalia. ([email protected]) (Twitter@90_somo)