Somaliland Budget Growth Statistics

[Abu-Salman]

Somaliland Budget Growth & Statistics

 

It is now common to revise GDP and other figures in the African context, leading to gains of 40% in some cases (Nigeria, Ghana ect) but even at their current level there seems to be serious discrepancies.

If we consider the current figure of Hargeysa central State budget of $152 millions (not including local, regional or other revenues), which has markedly increased since 2010 thanks to a major anti-corruption drive and better management (spearheaded by eng Mohamed Hashi), this level of income seems surprising on many counts.

First of all all, it's very hard to believe that the relevant taxation level, with all its exemptions and remaining inefficiencies, can represent more than 5-7% of the total GDP (all the consumption or production within the country).

It's expected that the central state taxation level in Somaliland will increase from 11 to 15% (in theory, since collected revenue has been much lower in practice).

 

So does that means that Somaliland, or parts of it, are already or well on track to becoming "middle-income" zones (Djibouti with estimates of roughly $1600 GDP per capita has already became a lower middle-income country in the relevant jargon).

Of course, there is also plenty of scope in raising further the state revenues while the economy is still at infancy stage in some ways: eg, Eritrea collect contributions from its diaspora (a major source of revenues for the state) etc.

 

The interesting issue is that, theoritically, it's now largely possible to fiannce primary healthcare, basic litteracy, water & irrigation schemes and even some infrastructure out of central revenues, which is much more sustainable and accountability inducing.

 

 

 

 

Budget Growth from 2010 to 2014 ($US millions)

2010: 47; 2011: 88; 2012: 108; 2013: 126; 2014: 152

[Tallaabo]

What is the GDP growth of Somaliland? Has anyone measured it yet?

[OdaySomali]

Have the accounts been audited? Are the figures which are published to the public figures that give a true and fair account of the financial position? I highly doubt it.

[Alpha Blondy]

interesting.

 

 

i went to the opening of a major investment conference last week.

 

if you factor the SDC into your predictions, the budget will exceed it's projected growth this financial year.

[Abu-Salman]

OdaySomali;983843 wrote:

Have the accounts been audited? Are the figures which are published to the public figures that give a true and fair account of the financial position? I highly doubt it.

The figures from 2010 onwards are much more credible given the credentials of M. Hashi and his successor Abdiaziz Samale (better collection and less corruption doubled the state budget within a year).

 

An average annual growth of 4% since 2000 and a GDP per capita of $500 seems the minimal limits, to have a guess, but statistics and taxation capability are still low.

[IsseRiyole]

Here is one suggestion I have raised a recent meetings, if you belong to part or wholly to any of the two independent Lands, Somaliland and Puntland,their diasporas need to pay Taxes to their respective lands to support their budgets. It is necessary to collect these Taxes and well managed, I hope the result to be a positive one. Waiting to hear back.

[Abu-Salman]

There are many caveats, eg rural production (at their market value) such as milk are overlooked, but the GDP per capita will probably be very similar to that of Kenya, Eritrea (roughly $700) etc.

Of course, given that much of the production is discounted, those figures are somewhat arbitrary but they are a rough guide to what can be more easily taxed, or potential state revenue.

In final analysis, one guess is an interval of $750-1500 (without rural incomes); which means that a very moderate taxation rate of 15% could potentially yield annual state spendings of around $100-225 per capita (some countries in the region have much higher taxation rates: eg at 30%).

And Djibouti has an annual state spending of roughly $700 per capita, again with all the caveats and minor tax collection;

there is thus absolutely no reason to attain a level similar to that of eritrea at roughly $200-250 or a third of the Djib level within a ten years period (the least ambitious scenario).

Also, Eritrea generates steady state revenue through diaspora taxation, which helps in the face of minimal foreign aid but impressive records for an African recent country.

 

As anyone well acquainted with the region know, there is no very high disparity between the economic activity levels of djibouti and that in the Western Somaliland region in particular, as Djibouti advantages of higher port and foreign rents revenues is compensated by its less free entreprise system of monopolies or higher costs.

Thus, an upgrade of irrigation & beekeeping or construction (low-cost, appropriate technology), the major foreign currencies earner of cattle export resumed, linked meat and hides processing etc as well as better tax collection with increasing rates will easily match the current high growth on the other side in both the GDP and state budget.

 

The importance of all that is not just the figures or even growth, already very high in Ethiopia and East Africa in general, but the potential to lower transport, water and power costs through public-private partnership, multiply rural incomes through irrigation etc, but above all, to deliver basic nutrition and public services in primary care or essential skills to those that can not afford the booming private sector.

 

 

PS there is this interesting Somalilandinvest.net under the direction of the other forward looking minister of trade, Dr. Mohamed A Omar.

No politics please, it's all about budgets and how best to ensure basic services to the masses or equality.

[Wiil Cusub]

Abu-Salman;984414 wrote:

There are many caveats, eg rural production (at their market value) such as milk are overlooked, but the GDP per capita will probably be very similar to that of Kenya, Eritrea (roughly $700) etc.

Of course, given that much of the production is discounted, those figures are somewhat arbitrary but they are a rough guide to what can be more easily taxed, or potential state revenue.

In final analysis, one guess is an interval of $750-1500 (without rural incomes); which means that a very moderate taxation rate of 15% could potentially yield annual state spendings of around $100-225 per capita (some countries in the region have much higher taxation rates: eg at 30%).

And Djibouti has an annual state spending of roughly $700 per capita, again with all the caveats and minor tax collection;

there is thus absolutely no reason to attain a level similar to that of eritrea at roughly $200-250 or a third of the Djib level within a ten years period (the least ambitious scenario).

Also, Eritrea generates steady state revenue through diaspora taxation, which helps in the face of minimal foreign aid but impressive records for an African recent country.

 

As anyone well acquainted with the region know, there is no very high disparity between the economic activity levels of djibouti and that in the Western Somaliland region in particular, as Djibouti advantages of higher port and foreign rents revenues is compensated by its less free entreprise system of monopolies or higher costs.

Thus, an upgrade of irrigation & beekeeping or construction (low-cost, appropriate technology), the major foreign currencies earner of cattle export resumed, linked meat and hides processing etc as well as better tax collection with increasing rates will easily match the current high growth on the other side in both the GDP and state budget.

 

The importance of all that is not just the figures or even growth, already very high in Ethiopia and East Africa in general, but the potential to lower transport, water and power costs through public-private partnership, multiply rural incomes through irrigation etc, but above all, to deliver basic nutrition and public services in primary care or essential skills to those that can not afford the booming private sector.

 

 

PS there is this interesting

Somalilandinvest.net

under the direction of the other forward looking minister of trade, Dr. Mohamed A Omar.

No politics please, it's all about budgets and how best to ensure basic services to the masses or equality.

Thnk Abu-Salman good analyses. I belief that Somaliland GDP isn't lower than that in Ethiopia and Eritrea, but text collection is very low and liberal state forming with small governmental organisation. Djibouti and Eritrea annual state spending is killer for economical development and Somaliland shouldn't fellow them. To create investment they should do more about banking laws and energy cost.

 

This new portal is interesting looking provisional good case studies. I like green house that is exactly my dream.

 

[OdaySomali]

Ive managed to obtain a copy of the budget and, as I suspected, its a hot mess and fraught with error.

[Abu-Salman]

OdaySomali;984535 wrote:

Ive managed to obtain a copy of the budget and, as I suspected, its a hot mess and fraught with error.

As with the rest, it's a work in progress; however, they used the sudden, huge increase in revenues to double salaries and proclaim free primary school for all.

Whether it is the optimal use of scarce resources is open to debate as school vouchers, low fees private schools, or focus on subsidising vocational training, esp. in priorities rural needs such as irrigation are all well-researched fields.

It can be the worst of both worlds, very low quality public schools that monopolise public funds in the same way as the vastly oversized security and administration costs.

Again, this would fail in promoting equality as the elite or better-off can pay for private lessons (law of the jungle or only the stronger having access to basic necessities).

 

The other issue about other countries experiences, in particular those diabolised but with well-known achievements in equality, health or education, is that much of it is glossed over.

Eritrea, albeit crippled in many ways, atill seem well run for a sub sahara African country and commended for its healthcare or education achievements (among others) despite almost no aid, harsh environment and very short existence.

In the case of Djibouti, there are lessons too; taxes are very low for investors actually and it's trying to collect taxes more efficiently (with some progress).

They manage to get high spending per capita for an African country but there is still plenty of scope to tax further the local elite or businesses (those non priorities sectors that get high margins without major investments).

The country just gained 12 places in the World Bank Doing Business report within a year, so very quick gains are realised again just through better management and simplification: Doing Business 2014 data for Djibouti.

It's funny how a country can almost overnight metamorphose into a middle-income country with respectable infant mortality and litteracy rates, all with minimal investments if public will is present (just better water access and hygiene change a lot instantaneously).

 

 

..................................................................

 

Message from the Minister of Trade and Investment

 

 

[...]Somaliland has deepened its economic engagement with foreign governments, both within the region and beyond. With Ethiopia, Somaliland is engaging in negotiations to finalize their first official bilateral strategic cooperation agreement. Djibouti has invested heavily in Somaliland’s economy, including investing roughly $15 million in a Coca Cola factory last year. Somaliland has used diplomacy to help facilitate FDI from Turkey, the UAE, Egypt and China into Somaliland’s key sectors such as livestock and fishery.

 

Thanks to stringent public financial management, increased tax revenue and more safeguards against corruption, Somaliland’s 2013 budget is the largest and most balanced in its history. Moreover the government has no debt. Our children receive free primary education; we are expanding medical services and water distribution in urban and rural areas; and our mobile banking and money transfer industries have allowed for commerce to flourish.[...] (Dr. Mohamed A Omar)

.

[Abu-Salman]

Meeting the challenge of promoting pro-poor investment in Somaliland

((theguardian))

 

[...]A small but growing number of investors, mainly from the diaspora but also numbering amongst them those from further afield, are making their first, tentative moves. Early in 2012 a Djibouti-based firm (Somaliland Beverages Industry, part of the Osman Guelle Farah Group) invested $17 million in a Coca-Cola franchise and bottling plant – the largest single investment in Somaliland since 1991. UK-based investment fund Invicta Capital and Jacka Resources, an Australian firm, are currently preparing an investment in oil exploration and development. Two further investment funds, based in the UK and Kenya respectively, are considering their options, and Chinese ICT giant Huawei is actively involved in the expanding mobile market.

 

[...]Thirdly, the bulk of economic activity is concentrated in a small number of sectors and dominated by a handful of large and well-connected players. The Indhadeero Group, for example, is not only the largest animal trader in Somaliland but also has businesses in light manufacturing, food retail and hospitality, whilst the group behind Daallo Airlines, an international airline based in Hargeysa, also owns firms in livestock and logistics. Such monopolistic tendencies hamper competition and new market entrants and weaken market governance."

 

...................................................................

 

 

Q&A: Unpacking Somaliland’s business potential(howwemadeitinafrica.com)

 

Len Tiahlo is the co-founder, co-director and secretary of the Somaliland Development Corporation (SDC), a UK-based organisation dedicated to facilitating international investment into Somaliland (howwemadeitinafrica.com):

 

 

[...]The SDC is working to build up new business in this sector, initially through the exporting of hides and skins from Somaliland to Ethiopia, with a British leather goods company being a potential buyer.

 

Building a trading link between Somaliland and Ethiopia is potentially [the] most attractive agenda. Ethiopia has a population of about 90 million, with a GDP [growth] of 10%+. Major infrastructure developments (including the availability of hydroelectric generated power) are underpinning local economic growth that is placing the region towards the top of the economic power houses of Africa.

 

[...]The potential to trade livestock slaughtered for chilled or frozen sale opens up major new markets in Ethiopia and beyond, to Malaysia and Asian markets. This potential is best realised initially as with the SDC approach of operating via Jigjiga, where electrical power is in cents per kWh versus Somaliland cost of power presently in the range of US$1.3 to $1.5 per kWh.

 

Somaliland does of course have potential oil and gas resources, though these have yet to be proven. This investment sector has in the past attracted the less established oil companies and, as elsewhere, the reality of oil and gas exploration is that it is a long term highly capital intensive investment, with high risk that typically is the reserve of major corporations, which in turn have the technical capacity to do the work as well as the asset spread to diversify risk.

 

In this regard, the SDC is on record as having the agenda to open up dialogue with the major oil companies that have held concessions in the region and to develop good relationships with the local communities where future oil and gas exploration and hopefully development activity is likely to take place.

 

Presently economic growth is coming from local and diaspora Somali investment. The investment into the extension of the optical fibre system from Djibouti through to Somaliland is a good example.

 

You may be surprised to know that just 10 minutes from Djibouti lie offshore islands that offer unique boutique resorts potential, so eventually there is the potential for the establishment of high end tourism."

 

 

PS It looks like, indeed, good old tomatoes horticulture (green pepper seems extremely lucrative) holds massive returns very quickly with drip irrigation ect.

[Abu-Salman]

Rwanda, despite very high density (arable land per capita is much more limited) and challenging geography (enclaved), as well as an overextended military, is now one of the world fastest growing economy as well as one of the top emerging Business spots (even beyond Africa).

It is progressing faster because of their better management and leaders with a vision and lower tolerance for corruption, that also partly compensated the difficult circumstances:

 

 

"Moreover, literacy rates for the 15-24 year olds, a proxy for the efficiency and quality of the education system, have improved from 76.8% in 2005/06 to 83.7% in 2010/11.

 

Vocational education has benefited from an increase in the number of training centres from 98 in 2011 to 116 in 2012. As a result, enrolment increased by 15% to 13 303 students.

 

Health: The share of public spending on health (including donor support) has increased from 10.2% in 2009/10 to 16% in both 2010/11 and 2011/12. The successful implementation of the Community-Based Health Insurance scheme introduced in 1999 has improved access to health services. The scheme covered 91% of the population in 2011/12, 1 percentage point above the target and a substantial increase from the 35% recorded in 2006." africaneconomicoutlook.org

 

 

This clearly shows that by focusing on equality and access to basics such as healthcare, water and litteracy, tremendous progress within a short time is possible (eg, Rwanda GDP per capita almost quadrupled since the genocide in 1994); a vision and quality leaders are essential for the local masses's quality of life to metamorphose from very difficult to semi-decent (firmly on track into the middle-income club).

 

 

PS It seems Ethiopia and Rwanda have both relatively low levels of corruption at the admin level, Eritrea seems to share this aspect too, with Asmara being very clean and well organised in comparison to many other African cities (this plays a role in East Africa record levels of growth on par or higher than Asian levels).

[Wiil Cusub]

Politics made difference, compare Burundi with Rwanda. They have almost same limited sources and high density and landlocked geographic aleatory. Last 15 years economy of Rwanda grows two times higher than Burundi .

[Haatu]

Very nice debate.

 

Abu Salmaan, do you by any chance know the price per Kwh in Kenya?

[Elf]

Not bad, it's doing well for itself.