This report offers an analytical assessment of the impact of the 18-month long clearing operations on businesses in Somalia. It draws on survey responses from over 100 professionals in the banking, telecommunications, transportation, and shipping industries operating in areas affected by military operations against Al-Shabab.
Clearing operations cause substantial disruption to business activities, incurring increased costs, service disruptions, and physical damage. Prominent among these disruptions is the notable impact on Hormuud, Somalia’s leading telecom provider. Eight of Hormuud’s transmitter towers were destroyed by government forces and allied factions, leading to substantial economic burdens and service disruptions. Furthermore, the enforced shutdown of 22 Hormuud sites by Al-Shabab highlights the use of telecommunications infrastructure for political coercion.
In the banking sector, operations have been seriously disrupted with extortion and corruption threatening institutional stability and undermining the sector. Extortion practices by both Al-Shabab and government officials amplify the challenges businesses face, further eroding public trust in institutions.
The broader economic consequences of these challenges include the potential for capital flight, strained public finances, and reduced tax revenues. These impacts, combined with the erosion of public trust and challenges faced by businesses in adapting and expanding, pose significant threats to Somalia’s long-term growth prospects.
Moreover, the clearing operations, while aimed at enhancing security, inadvertently undermine stabilization efforts in newly liberated areas. The resultant disruptions to business operations not only impose immediate economic costs but also foster an environment of uncertainty and insecurity, which can stifle efforts towards sustainable development and peace-building.
The report proposes recommendations to address these challenges. Strengthening anti-corruption measures, establishing supportive mechanisms, enhancing security measures, fostering public-private partnerships, developing risk mitigation strategies, investing in infrastructure and services, prioritizing capacity building, and seeking international support are all essential steps to mitigate the negative impact of the clearing operations.
Close collaboration between the government, businesses, and international stakeholders is fundamental to overcoming challenges and harnessing the opportunities that arise in the post-clearing operation phase. Ultimately, it is imperative for Somalia to address these challenges and risks, safeguard the integrity of its banking and telecommunications sectors, and lay a robust foundation for economic resilience and sustainable development.
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