Hiiraan Online

Somalia is a country in ruins. With 70% of the population living below the poverty line and international relief largely cut-off by civil war, it’s a place where survival is a full-time occupation.

Yet, in an anarchic country divided into vague fiefdoms subject to the whims of roaming warlords and freelance militias, one thing is strangely in order: telephone services.

Comment:

The CIA Factbook reports that, as of March 2007, there were 100 000 landline telephones and 500 000 mobile cellular telephones in use. The general assessment stated that the public telecommunications system was almost completely destroyed or dismantled by the civil war factions, but private wireless companies offer service in most major cities and charge the lowest international rates on the continent. In the domestic market, local cellular telephone systems have been established in Mogadishu and in several other population centers.

Under the shadow of ruined buildings and in the middle of dusty streets, large numbers of Somalis walk about with a mobile phone in their hand. For a country that does not even have its own government, Somalia has an amazingly developed telecoms industry.

Spreading the word

It’s one of the few industries that have managed to grow since the socialist government of Siad Barre was overthrown in 1991. Telecommunication now reaches all 83 main districts as well as 18 regional capitals in a place the UN describes as a ‘failed state’. And the system is more advanced than in most African countries.

“Every week and every month we are setting up telephone centres in a new town and village,” says Abdulkadir Diini, head of technical development for Nationlink, one of the biggest telecommunications companies in Somalia.

How the industry has grown is a story of how one of the most conflict-ridden lands on earth has also spawned a huge diaspora of nearly two million – many of them financially successful – who in turn have fuelled the growth of business in their homeland.

Repatriate investors

The phones in Somalia began ringing in the early 1990s when many Somalis started to return after years abroad, coming with valuable foreign currency which they invested in the starving economy. The telecoms infrastructure, which had been almost completely destroyed in the war, was the first to benefit when returnees from Norway, in partnership with Norwegian telecoms giant TELENOR, installed limited satellite-based telecoms links. Without landlines, this was the easiest way to get the ball rolling.

Returnees from Gulf States and America then set up an earth station gateway – a monitor and control system that is used from one remote location to another using a second workstation – with help from the US-based Starlight Communications. Within a few years, that initiative turned into a successful multi-million dollar business. Another telecommunications venture, Al-Barakaat, then opened shop in partnership with the American telecoms giant AT&T and by the beginning of 1997, Somalis were benefiting from their first brush with market competition.

Cheaper rates

Initially, charges were high. Calls to Europe and America cost US$4 per minute, going up to $7 per minute for the rest of the world – roughly equivalent to the cost of a sack of maize or sugar and out of reach of most Somalis. But it didn’t take long for prices to drop as more companies arrived and telecommunications spread.

Now, telephone calls from Somalia to anywhere in the world cost no more than $0.5 a minute – reflecting a staggering 88-93% fall in less than nine years and cheaper than many of its far richer African neighbours. The number of telephone lines operating in the country is estimated to be 100 000 (pop. about nine million), according to Diini. Although most of them are in the capital Mogadishu, they are still more than 10 times the number in 1991. By comparison Ethiopia had 263 000 lines for 66 million people and Kenya 307 000 lines for a population of nearly 31 million in 2000 (the latest year for which figures are available).

The telecoms boom has also spurred a sophisticated financial system, allowing Somalis abroad to safely and easily send money back home, despite the chaos.

“It is a good combination to have both [telephone and wire service],” attests Kamaal Hersi Mohamed who runs a phone shop and money-transferring centre in London. “When someone sends money, the sender needs to phone the recipient to say money is on its way.”

According to the UN, Somalis living outside the country repatriate an estimated $500 million to Somalia every year, benefiting more than half the population.

None of this would have happened without there being a strong underlying economic reason. Apart from the Diaspora factor, telecommunications are needed for the continuation and smooth conduct of business. Somalia is a major exporter of livestock in cattle, camels and goats to oil-rich Gulf countries, mainly the United Arab Emirates, Saudi Arabia and Yemen. The same goes for the import of food, clothes, utensils, cosmetics, fuel and vehicles from Hong Kong, Thailand, Brazil and Italy.

Slow rural expansion

But not everyone has a relative living abroad, not everyone is in business and not everyone has access to the telecoms boom. While urban centres are well covered by telecoms, villages are not. “The expansion has become a regular business but that is not to say success is even throughout the country,” says Diini. Ironically, it is Mogadishu – one of the most dangerous and divided places of all in Somalia – that hosts the major telecommunications companies in the country, probably because people there can afford it.

One of the factors hampering the expansion of telecoms is in fact the conflict itself. “Companies do not want to risk the life of staff or invest in volatile towns such as Kismaio and Buale,” says Mirey Oomar, who runs a retail phone shop in Buale, 345 km southwest of Mogadishu. The two towns are among the focal points of the conflict in Somalia.

These disparities hint at the underlying problem of trying to run an industry without a formal government: since there’s no one to regulate and licence the industry or administer tax collection, abuses are rampant. The result: rich investors prosper, while the poor remain without access. And since there’s no tax collection, almost every dollar made by foreign telecoms companies is a dollar that leaves Somalia – this in a country that desperately needs revenue for even the most basic development of infrastructure.

Somalis are the poorest people in the world, ranking the lowest in the UN table of economic and social indicators used to assess human development levels. According to the UN, more than 70% of Somalis live below the poverty line, earning less than $1 a day. Life expectancy is just 48 years.

Somali investors decline to say how much profit telecoms companies make. “That is not important,” Diini says, as these companies provide thousands of jobs.

No regulations

Notably, Somalia’s telecommunications sector grew despite the fact that it does not have its own national telecommunications operator, as companies merely filled the void left by the government. But that is not a model that wins the approval of experts: the International Telecommunication Union (ITU), which closely works with the Somali telecoms companies, says the lack of any regulatory body is a big worry.

According to Ebrahim Al-Haddad, ITU Coordinator for the Arab Unit, the system – if one can call it that – in Somalia should not be seen as an example to other developing countries, despite the appearance of success. “The main problem with the Somali telecoms environment is that operators work independently and interconnection agreements are nearly non-existent. This is not the example that ITU preaches,” he said.

“We preach a well-organised and transparent competitive marketplace and there are many examples of this set up in many least developed countries where successful competition is introduced to the benefit of the country and its people.”

Diini says Somali telecommunications operators are well aware of this problem. “We know the current system is open to abuse because there are no restrictions on it,” he says. For instance, the absence of a Somali network operator means companies have to buy lines from different international companies, having to pay more than they would have if they had agreed on using the same network provider.

This means domestic calls can be quite costly, according to Osman Ali, a switchboard operator in Mogadishu. “Those friends and families who have got lines from the same company can call each other freely,” Ali says. “But if you have Nationlink line and want to call your neighbour who is with ASTel you get charged the price of an international call.”

Effect of 9/11 on Somalia

There is a more sinister side to Somalia’s potentially explosive mix of lack of governance and business boom. Following the September 11 attacks, the US government closed down the bank accounts of the biggest foreign exchange remittance company, Al-Barakaat, as well as its international telecommunications network, suspecting that they may have links with the al-Qaeda terror network.

This prompted a marathon campaign by the UN Development Programme (UNDP) operating in Somalia to avert any further closure of Somali companies by the US. UNDP argued that the Somali money transferring companies play a major role in setting the basis for longer-term economic and social recovery. The agency then launched a project to help these companies legitimise their financial services.

But on the whole Somali leaders are happy with the success of telecoms in the country and insist they will one day have power to regulate the industry. “Tax is very important for any government to work and I don’t think Somali business people should worry too much about that,” says Alideeq Hassan Abdi, one of the presidential candidates.

The problem is Hassan Abdi isn’t even in Somalia and, after months of negotiating with other leaders at a conference in Nairobi, there’s no guarantee that he or someone like him will be setting up a government anytime soon.

In the meantime laissez faire, having found its corner on earth, rules.

Useful links:
International Telecommunications Union
Digital Opportunity Channel

This feature is published by courtesy of Panos.org