Doing Somaliland Fishing Industry

Somaliland Fishing Industry

Current State of the Market
Somaliland boasts an expansive coastline along the Gulf of Aden and Indian Ocean. These
waters are home to an extensive list of fish species, including various species of tuna,
albacore, lobster, swordfish, shark, and many others. Table 1 shows recent data regarding the
value that some of these species possess. About 60 tons of fish are brought into Berbera port in
Somaliland, each year.i The most common style of fishing in Somaliland is artisanal. This
entails fishing in smaller boats, which are between five and 8.5 meters in length, and host
around seven crewmembers.
While some efforts to take advantage of the offshore resources exist, there is a great
opportunity to responsibly expand and improve fishing operations in Somaliland.

Industry Opportunities
After its self-declared independence from Somalia in 1991, Somaliland has been a relatively
stable democracy. The Somaliland government is dedicating a significant portion of its
revenues to improve security, and they are seeking to promote investment by maintaining a
relatively low level of bureaucratic ‘red tape,’ and offering tax incentives. These factors serve
to make Somaliland a viable region to invest in.
The market for fish within Somaliland is expanding. Between 1,000 and 1,500 kilograms of fish
are reportedly brought to Hargeisa, the capital of Somaliland, on a daily basis during high
fishing season, and this supply does not satisfy the demand. Fish vendors constantly run out of
fish well before the local markets close each day.
No town in Somaliland is located very far away from the coast. Despite this, many markets
supplement the local catch by importing fish from Mogadishu and abroad. This additional fish
supply arrives by plane, and are generally all in fillets, which demands a higher price.
Nonetheless, they sell rapidly, and the demand remains. For example in Hargeisa, 50% of the
daily fish supply is brought in from Mogadishu. If fishing supply chains were improved in
Somaliland, this would increase profits in the region and better support market demand.
It has been conservatively estimated that the yearly sustainable catch available to Somaliland
fishermen is 40,000 metric tons.iv Since the amount of fish supplied to Hargeisa on a daily
basis is about 1,500 kilogramsv (or 1.5 metric tons). That equates to only 550 metric tons a
year, and this leaves (at the very least) an impressive 39,450 metric tons of fish available for
catch that could go towards meeting the demand for fish in Hargeisa, other Somaliland towns,
and export markets.

Risks to Consider
Valid risks and concerns are always present when pioneering any opportunity. The concerns
discussed here have deterred others from attempting to develop the fisheries sector, derailed
prior attempts to exploit the fish stocks, or have presented themselves since previous
attempts were made. Clearly these are legitimate concerns, but when properly addressed,
great opportunity still remains. This report addresses the following risks:
a) Cultural Norms
b) Infrastructure
c) Additional Fishermen
d) Land-Based Threats
a) Cultural Norms
In the past, cultural norms in Somalia and Somaliland have framed fishing as an inferior
industry, and fish meat has been considered to be of a ‘lower status’ than others. Recently
though, there has been a shift that has seen a greater acceptance of fish and fishermen. Much
of this has to do with Somalis increasingly recognizing the health benefits of eating fish. The
healthfulness of fish has been promoted by local doctors, the government, the United Nations
Development Program (UNDP), and the United Nations Food and Agriculture Organization
(FAO).vi In such a volatile environment that is often affected by drought and famine, the
importance of dietary diversity is gaining salience.
b) Infrastructure
There are many aspects to take into consideration when dealing with infrastructural
limitations throughout the fishing supply chain:
• Boats: The quantity of appropriate boats is limited. Any effort to catch a larger portion
of the fish stocks will require investment into sea-worthy vessels. A shift away from the
vessels currently being used is advisable, as other variations would allow better fuel
efficiency, safety at sea, and the ability to handle and store fish hygienically. This
consideration also includes accounting for required fishing equipment such as nets, and
standardized motors.
• Training: Somaliland currently claims an unemployment rate hovering around 50%.
Rates in urban areas and among youth spike to 61.5% and 75% respectively. While this
suggests there is a large supply of Somalis available to recruit into the industry, an
effective training program would be necessary for each person hired. This goes for
fishermen, captains, boat repairmen, mechanics, fish handlers, fish processers, fish
transporters, and fish sellers. Proper training would expand the capability of the entire
industry.
• Storage: After the fish are caught, an appropriate system of storage is required. This
means that investment into on-vessel freezing options is needed. Storage and freezer
space, along with the availability of ice, is not exclusively a concern on the boat.
Greater investment will also need to be made into onshore facilities. Currently there
are only dilapidated facilities and equipment available to fishermen seeking to store
their fish, and often these do not meet hygienic standards.
• Quality Control: At the moment, there is no consistent form of quality control. To
improve the reputation of the fishing industry and to gain acceptance into new
markets, implementing standards of quality is a must. This will be necessary for each
step of the supply chain, starting from when the fish are caught and stored on the boat, and continuing with each individual who comes into contact with the fish prior to
their sale.
• Infrastructure: Properly handling, processing, and storing fish will not just require
hygienic equipment and standardized practices, but also better systems for the
procurement of fuel, electricity, and clean water. Prices fluctuate but seem to average
around $1.20 per kilowatt for electricity in Somaliland. This compares to an average
of about $0.11 per kilowatt in developed nations. On top of this prohibitive price, the
quality of service is limited, and regular outages occur. There are options to consider
when seeking to mitigate these challenges. In response to electricity, potential
solutions include purchasing generators, using solar power, generating wind power, or
even investing in tidal power. In terms of fuel, a more efficient fleet of boats would
help cut costs significantly in the long run. Finally, in regards to water, wells could be
dug where appropriate.
Prior attempts to build up the infrastructure in Somaliland have been severely affected by the
civil war, which erupted in 1991. However, in recent years the region has been relatively
stable. Somaliland is eager to develop and they recognize the importance of a more efficient
infrastructure. With stability, well-developed efforts to build up infrastructure will be met
with great support and opportunities to partner with other entities should be pursued. A
testament of this can be found in the Somaliland Government’s five-year plan for 2012-2016.
In this, nearly $500 million has been budgeted to address infrastructural needs.ix
c) Additional Fishermen
There are clear risks on the seas off the coast of Somalia. Piracy, while diminishing due to
international efforts, brings with it hazards for fishing vessels. There have been instances of
pirates seizing fishing boats and taking provisions (including the motor), then leaving the
vessel and crew adrift. Partly in response to this risk, fishermen have begun to carry arms with
them for self-defense. This creates a risk that navies and larger foreign vessels that operate in
the same area may mistake fishermen for pirates.
The political situation in Somaliland is complicated as it is not a formally recognized state.
Because of this, their stance on maritime issues remains directly tied to that of the central
government of Somalia in Mogadishu, which has not yet officially declared authority over their
exclusive economic zone (EEZ). Each country with a coastline has a right to declare authority
over economic activity occurring in the EEZ, which extends up to 200 nautical miles offshore.
Since Somalia has not declared their claim to this, international actors are able to exploit this
zone for their own interests without serious threat of repercussion.
Steps to regulate the exploitation of fish stocks off the coast of Somaliland can still be taken.
As the fishing infrastructure is built up and more Somalis are drawn to the industry, more
weight will be given to their concerns. While the relationship between Somaliland and Somalia
is fragile, there is a real potential for a more authoritative claim to the EEZ off Somalia’s
coast. Similarly, the recent Presidential elections in September 2012 were the first in over two decades, which shows great promise. Developments of this nature should prove to bring more
stability to the region as well as the fishing industry.
d) Land-Based Threats
Potential pitfalls do not lie only at sea. Competition between fishmongers also has the
potential to escalate into conflict. To avoid this, new ventures should be sure to cooperate
with those already existing. As all actors operating in Somaliland desire improved
infrastructure and economic development, there is a common ground that discussion amongst
potential competitors can begin with.
Another of the biggest concerns on the ground is the lack of available credit. Banking
institutions that are most familiar in developed economies, are currently non-existent in
Somaliland, and the implications of this should be fully considered prior to operating in the
region. This means that money flowing to and from ventures will need to be transferred via
mobile money and Hawala systems. Adapting to these institutions will require proper planning
prior to investing. A shift in the banking industry does appear to be imminent. Saba Islamic
Bank and Dahabshiil both plan to address the current gap in 2013 by expanding operations in
Somaliland. Saba Islamic Bank will specifically deal with commercial banking, and Dahabshiil
will be working with trade finance.
The final onshore challenge is a constant state of fragile governance. Continual changes to the
Ministerial staff within major governmental institutions, requires added attention. Consistent
communication with government offices to ensure their continued support will be required.
Investment Opportunities
To reach a level where significant yields become possible, the Somaliland fishing industry will
require investor assistance. This assistance should be directed towards mitigating the risks
mentioned previously. After properly addressing those issues, progressive growth should
prevail.
Initial market development should be focused on Somaliland itself. At the moment, fishermen
expect an average wholesale price of around $1.20 per kilogram of fish. After their own costs
are taken into account, they are left with a 10-20% profit margin. The vendors that purchase
fish then charge a retail price of between $2.00 and $2.50 per kilogram, and receive their own
profit.xi These numbers relate to the sale of whole fish, but do not take into account what
would be possible if individuals involved themselves in the fillet market. In the fillet market,
prices (and profits) multiply quickly. At the moment, the large majority of fillets are flown in
from Mogadishu and fetch a market price of nearly $6.00 per kilogram. It is evident that with
proper training and tools, market returns could expand quickly.

To attract investment into Somaliland, the government offers significant tax incentives. The
first three years of operation in Somaliland are offered at a 0% tax rate for foreign investors
and diaspora. Following that period, investors are eligible for a 50% reduction on taxable
profits making it a lasting attractive option. In addition, all materials and equipment brought
to Somaliland for the purpose of business development are also exempt from import taxes.
After developing the local market in Somaliland, other markets will open. With a rising level of
standards and professionalism, markets in Ethiopia, Djibouti, and Saudi Arabia among others,
which have all expressed interest, will be more receptive to importing Somali fish.
Conclusion
Fish stocks off the coast of Somaliland present an immense opportunity for motivated
investors. Somaliland fishermen are currently capturing only 1% of the estimated sustainable
catch in their waters. Demand for fish is rising in Somaliland, and neighboring countries are
eager to import more fish. Clearly there are financial incentives to bolster the efforts to
increase the annual catch. To do so will require determined investors that seek to not only
profit from their investment, but also desire to positively impact the lives of those living in
Somaliland. Investments into the fishing industry will introduce numerous jobs opportunities
drawing on a wide array of skill sets. This will prove to be an effective method to provide
prospects for the high number of unemployed individuals seeking stable work. Profit margins
already exist in the current state of the industry and investment into infrastructure and
processes will widen those margins while also assisting in the development of Somaliland as a
whole.

http://somalilandeconomic.com

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