Surprise success story

[Mursal]

The telecoms sector in Somalia is one of the country’s few success stories. But there are pros and cons to doing business in a country without a government, writes DIANNA GAMES

After years without a central government and an economy in ruins, the success of Somalia’s telecommunications sector comes as something of a surprise.

 

For several years, the country was, to all intents and purposes, disconnected from the rest of the world.

 

Prior to 1991, when Somalia last had a national government, this country of nearly 10 million people had only 8,500 operational fixed lines, most of which were in the capital, Mogadishu.

 

In the ensuing political turbulence, that infrastructure was destroyed, along with its Public Switch Transmission Network. This left Somalis without the means to connect to the large expatriate community of friends and relatives outside the country.

 

In time, VSAT was installed by private operators and the services of international companies such as AT&T and Telia were employed to provide transit facilities for incoming and outgoing calls.

 

Infrastructure had to be built from scratch but the situation has developed quickly off a low base. There are now an estimated 68,000 phone lines, divided between fixed (48,000) and mobile (20,000), according to the Somali Telecom Association. Internet services have 4,500 subscribers and an estimated 18,000 users.

 

The International Telecommunications Union estimated the total number of lines at the end of 2000 at 15,000.

 

Telecoms operators have moved quickly to take advantage of the lack of restrictions and regulation made possible by the lack of a functioning central government. This environment also allowed equipment to be brought in cheaply.

 

Somalia currently has one of the cheapest call rates in the world, at $1 a minute on average.

 

Out of 74 towns in Somalia, 47 have got telephone coverage over the past eight years, the association says.

 

“It is a no-man’s land. Anyone can bring in equipment and no licences are required,” says Secretary General of the Somali Telecom Association, Abdigani Jama.

 

Interviewed at the recent ITU Telecom Africa 2001 show in Johannesburg where a large telecoms contingent of Somalis was present, he said the companies were 100 percent Somali. “No one else is prepared to take the risk.”

 

“Somalis in the diaspora have come back after seeing the opportunities in telecoms and started their own companies.”

 

Demand is high for contact with family and friends outside the country. Incoming traffic is almost 10 times as high as outgoing traffic.

 

There are four telecoms companies, down from five a few years ago. They include Al-Barakaat, the company currently battling with terrorism allegations and frozen assets (see page 45), and the Somali Telecom Group, an umbrella for a number of companies.

 

Both have mobile operations in addition to fixed line, while the other two, Somtel and Telecoms Somalia, are looking at setting up mobile operations. Three of the companies provide internet services.

 

As there is no longer a formal banking system in Somalia, much of the investment money is routed through the famous money remittance systems which are short on paperwork and big on trust.

 

The companies are headquartered in Dubai. Al-Barakaat is the biggest, with operations in 40 countries. Although it commands an estimated 37 percent market share with operations across Somalia, it also has tentacles in other sectors such as money remittance and construction.

 

The association was set up in 1999 at the urging of the UN Development Programme which wanted to bring the separate operations within a framework, says Jama.

 

The association has a rotating chairman drawn from one of the telecoms companies although Jama’s post is full time. It works closely with the ITU on a range of issues such as setting up standards as well as training programmes and data collection.

 

The ITU has expressed concern that none of the networks is connected to each other and is looking at ways of addressing the problem.

 

The association acts as a regulator in so far as it provides guidance for the operators. The issue of frequencies is dealt with co-operatively between the companies in consultation with the association.

 

Jama says that if and when the country has an internationally recognised central government in place, the association is likely to assume the role of a regulator.

 

Operating in an ungoverned, war-torn country is not easy. Large sums of money have been spent on building infrastructure from scratch, something that would normally be done by the state.

 

In some areas companies have high expenditure to protect their offices and installations. Many parts of the country do not have power and generators need to be installed.

 

Association president Abdirizak Ido has taken the provision of services one step further. In his home town of Galcar, he electrified the entire town of 100,000 people at the company’s expense. “I collected money from my partners and bought two big generators as well as poles and cables from the US, street lights, and distribution and transmission material.

 

“Since then, wherever we have set up business, we have given the town street lights.”

 

Ido is also president of telecoms company Nationlink, part of the Somali Telecoms Group.

 

Jama says business can be done much faster and more efficiently without the constraints of government bureaucracy.

 

“We have developed this whole sector without a government. We are now the largest employer in Somalia, employing between 5,000 and 7,000 people.”

 

“But we know our limitations. There are just some things we cannot do without a government.

 

“We miss the benefit of incentives from government for investment and international finance, for example.”

 

Jama says the companies are not worried about being nationalised. “A new government could not nationalise these companies without encountering major problems. But we do need a stable government in order to get international investment.”

 

Nationlink’s Ido is confident that any new taxes that might be imposed by a central government will be more than offset by a saving in security which he anticipates being provided by the state.

 

Increased state security will also open up new areas of business that are currently too high-risk. The companies do pay some taxes levied by individual states.

 

“But a national government will not be allowed to set up a government operator. The companies will not allow it.”

 

When there was a government service, it took more than a year to get a telephone line. Now it can take as little as 24 hours, says Ido.

 

The largest market is still Mogadishu, but many of the operators have their local headquarters in the separatist states of Somaliland and Puntland.

 

This has traditionally been the more peaceful part of the country.

 

However, the latter has recently been the scene of fighting following a political impasse between forces loyal to former Puntland leader Col Abdullahi Yusuf and the recently-elected leader, President Jama Ali Jama.

 

The current leadership of Somalia in Mogadishu, the result of a peace process in Djibouti last year, has been largely dismissed as being inadequate by Somalis themselves and the international community.

 

“They don’t even control the whole of the capital let alone the whole country,” says Jama.

 

The dilemma for businesses in Somalia is the fact that although Mogadishu is the biggest market by far, it is also the most unstable part of the country, dominated by the activities of four or five warlords.

 

Ido says many companies have capitalised on patriotism and self-interest to boost business and in some cases protect it from security problems.

 

Outside the major conflict areas, the community polices the service it depends on. Many services are very localised, with shareholdings in the companies being offered to the communities in which they operate.

 

“People become protective of their telephones. They need the service. A telephone becomes a very important tool in a country of anarchy or civil war.”

[Medley of extemporanea]

Am very happy to hear this.