Somalia, strategically positioned along the Horn of Africa, holds immense potential for economic growth. Its wealth of natural resources, coupled with direct access to major maritime routes, positions the country as a potential hub for trade and investment in East Africa. Yet, the journey toward sustainable economic prosperity is deeply intertwined with establishing peace and stability. Stability is more than just an abstract ideal; it is the foundation for a thriving business environment. It cultivates long-term growth, reduces risks, and significantly bolsters investor confidence. For Somalia, overcoming decades of conflict and political fragmentation is essential to unlocking its economic potential.
Somalia’s business landscape has shown remarkable resilience and adaptability in recent years. Key sectors such as agriculture, livestock, and telecommunications continue to form the backbone of the economy, providing employment, supporting communities, and contributing to GDP. Agriculture alone accounts for approximately 60% of Somalia’s GDP, while livestock makes up around 80% of total export earnings. Yet, despite these promising numbers, challenges remain. Political instability, inadequate infrastructure, and security concerns create a high-risk environment that deters foreign investment and limits local entrepreneurship. Somalia’s heavy reliance on imports due to limited manufacturing capacity further exposes the economy to global price fluctuations and supply chain disruptions.
Positive developments are, however, emerging, particularly through technological innovations. The rapid expansion of digital payment systems has increased financial inclusion, making transactions more accessible even in remote areas. Today, Somalia has one of the highest rates of mobile money usage in Africa, with approximately 73% of the adult population using these services, according to the World Bank. This progress signals a shift towards modern business practices, driven by tech-savvy youth and a growing entrepreneurial spirit.
Progress in peace and governance is gradually reshaping the business environment. Initiatives focused on conflict resolution and institutional strengthening are creating a more predictable climate for investors. This renewed sense of stability is crucial for attracting investment into sectors with growth potential, such as renewable energy, infrastructure, and agriculture. The telecommunications sector, for example, has flourished in relatively stable regions. Companies like Hormuud Telecom have become leaders in digital innovation, revolutionizing financial inclusion through mobile money services.
Achieving political stability and peace in Somalia could be transformative for the business sector. Stability mitigates risk, allowing businesses to operate with greater confidence and plan for the long term. It attracts both local and foreign investors, fostering a cycle of economic growth that supports job creation, infrastructure development, and community resilience. A stable governance framework also brings policy predictability, enabling businesses to thrive within consistent regulatory environments.
Take the example of Somaliland, a region that has maintained relative stability compared to other parts of Somalia. This peace has attracted investments, particularly in the livestock and port sectors. The African Development Bank noted in 2023 that Somaliland’s Berbera Port saw a 25% increase in trade volume, highlighting how stability fosters economic opportunities. Similarly, in stable agricultural regions of southern Somalia, collaborative initiatives between international organizations and local farmers have led to increased crop yields and enhanced food security.
However, challenges persist. Even in relatively stable areas, the risk of localized conflict or political shifts can disrupt progress. To secure sustained economic growth, Somalia needs to focus on reinforcing governance structures, addressing regional disparities, and promoting inclusive peace efforts that involve local communities. Building infrastructure that supports business growth—like roads, ports, and reliable power supplies—is crucial for unlocking the country’s full economic potential.
Stability also influences investor confidence in tangible ways. When businesses can anticipate political developments and rely on consistent policy frameworks, they are more willing to make long-term investments. This confidence is crucial for sectors like energy and infrastructure that require significant capital and long planning horizons. For instance, the Berbera Corridor project, supported by international partners, demonstrates how stable governance can facilitate major infrastructure development, boosting regional trade.
Looking ahead, Somalia’s economic future hinges on maintaining and expanding stability. By fostering peace, the government can unlock new business opportunities and attract more sustainable investment. With the right policies, infrastructure improvements, and continued conflict resolution efforts, Somalia has the potential to transition from a fragile state to a resilient economic hub in East Africa. Building on successes in digital innovation and leveraging the entrepreneurial energy of its young population can further accelerate this transformation.
The path forward requires commitment from all sectors—government, business, and civil society. Prioritizing peace and governance reforms, investing in critical infrastructure, and empowering local communities to participate in economic planning are essential. By doing so, Somalia can build a business environment where peace and prosperity reinforce each other, creating a brighter future for all its citizens.
Mohamed Shueib, Researcher
