Startups in Somaliland.

The history of Somaliland is closely connected with that of neighboring Somalia. Legends associate this region with the main source of Ancient Egypt’s gold — the Land of Punt. In 10th century AD it had been included into the Adal Sultanate, and then into the Ottoman Empire. In 1884 Britain established protectorate over Somaliland. In 1960 it became part of the independent Somalia. 27 April 1991, after the prolonged civil war led by Somali National Movement, Somaliland declared its own independence.

Today Somaliland is the unrecognized independent territory of Somalia. It has its own President as well as the popularly elected bicameral parliament — 82-members House of Representatives and the House of Elders. Somaliland political system uniquely combines the democratic governance with the traditional clan-based power-sharing structure. Somaliland has the agriculture-based economy, with more than 3.5 million people living close or under the poverty line. Although Somaliland is not officially recognized by the United Nations, some of the western governments (including USA and UK) maintain close diplomatic contacts with Hargeisa.

Somaliland has a tiny economy, which, however, is more decentralized than that of most other African states. For example, its telecommunication sector is comprised by multiple small and medium-size mobile operators and is not dominated by one corporate giant or by government’s monopoly. This type of situation is not limited to telecommunication market only and presents a number of opportunities to daring high-tech entrepreneurs.

At the same time, local startups have to face several fundamental risks, which may far over-weight potential rewards. Somaliland GDP is very small, its population is extremely poor and most of it is unemployed. Local legal and administrative regimes are not conductive for small businesses. On top of that, Somaliland remains largely isolated from international community (and, consequently, from foreign capital) by its unrecognized territorial status.

Business Notes for Startups Founders:

  • political climate: not friendly;
  • economic climate: not friendly;
  • regions to focus: locally;
  • industries to focus: FinTech, e-commerce;
  • major limitations: very small subsistence agriculture based economy (GDP is less than $2 billion), low-income population (per-capita is less than $400), extremely high unemployment rate (more than 70%), high administrative barriers to SME, high level of political uncertainty;
  • stimulus: relatively stable, democratically elected government, low competition, low costs of running business, fast growing number of mobile Internet users among young generation (61% of population are mobile subscribers);
  • opportunities: to build an e-business aimed at young generation of mobile Internet users.