Political Power Becomes a Barrier to Entry in the Puntland Water Supply Market

[Deeq A.]

Nugal Water Company (Nuwaco) is the sole water supplier in Garowe.

Garowe (PP Business Desk) — If only one water supply company exists in a city, does its monopoly explain the higher water bills? Is it reasonable to conclude that a single water supply company might exercise privileges to charge unreasonably high prices for the benefit of its investors? In Garowe, the administrative capital of Puntland State of Somalia, Nugal Water Company (Nuwaco) supplies water to residential and business customers. Consumers complain about the poor water quality and high water bills. “I pay $30 per month for water supply, but there is still a water shortage because only one company operates in Garowe,” said Dr. Ibrahim Hared.”

After 1991, businesses in major Somali cities tend to be owned by local business notables who wield political power that translates into a formidable entry barrier for new companies. Consumers in Garowe would benefit from more water supply companies in the market, but the absence of consumer rights legislation in Somalia hands water and electric supply companies an advantage to exploit their monopolies.

Hared: “I pay $30 per month for water supply, but there is still a water shortage because only one company operates in Garowe.”

One way some companies in Puntland stifle competition is by selling shares to any new potential entrants or persuading the regional administration to deny applicants the right to apply for water supply and electricity supply licenses. The dominant position of water supply and electricity supply companies discourages potential investors from entering the market.

Early market entry grants utility companies opportunities to use their political influence, often based on connections within the city or town. The often-repeated entrepreneurial flair of Somalis is an anti-consumer rights credo.

A clip of the interview with Hared.

One way to address these growing anti-competition trends in many business sectors in Somalia is to enact consumer protection legislation and establish consumer rights associations. Even when the playing field is made level for all competitors, consumer legislation will remain relevant to protect consumers against cartels, duopolies and other anti-competition business cliques. The lessons from the Garowe-based water supply company will resonate with consumers throughout Somalia.

© Puntland Post, 2024.

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