Economists Puzzled by Trading Slowdown in Mogadishu’s Bakara Market

[Deeq A.]

Business activity in Mogadishu’s Bakara Market has significantly slowed, with traders reporting fewer visitors and reduced sales since the introduction of new tax policies.

Mogadishu (PP Business Desk) — Business in Mogadishu’s well-known Bakara Market has slowed noticeably in recent months, a change observed since President Hassan Sheikh Mohamud delivered his Friday sermon at the Villa Somalia mosque nearly eight months ago, where he spoke on the government’s new tax collection policies. Traders in Bakara Market report a sharp drop in sales of various goods, manifested  in fewer visitors to their shops. Many businesses have also adjusted their opening hours, with the afternoon shift now favoured. As one trader put it, “It has become common for people to shop after 2 PM.”

One woman, speaking to a relative on the phone, was overheard by Puntland Post correspondent saying, “I am going home now but haven’t sold anything today.”

Tax policies, including rental and sales taxes, introduced by Bihi Egeh, the Finance Minister, are perceived as burdensome by businesses.

Economists remain uncertain about the precise causes behind this decline in activity in Somalia’s largest market. One knock-on effect has been a perception that the government’s tax policies, designed to increase revenue, are adding strain on businesses. Some landlords in Bakara Market have reduced rents to support tenants, but these efforts are proving less effective than hoped.

Empty retail outlets are now a common sight. “Even when shops are vacant, the Finance Ministry expects rental tax to be paid. Once you are listed on their landlord register, you are obliged to pay rental tax on quarterly basis,” said Adan, a landlord. An accountant in Hodan said “revenue protection officers are able to investigate traders for allegedly not charging sales tax, but landlords face fines if they miss rental tax payments, even when their outlets are unoccupied.”

The Federal Government of Somalia’s tax policies, introduced in early 2024, have been met with mixed responses from Mogadishu’s business community. For the first time since 1991, traders charge a sales tax, but many see the government’s approach as extremely and unaccountably extractive, dampening the entrepreneurial spirit of  Somali traders and investors.

 © Puntland Post, 2024

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