Somalia rising as source of remittances for Kenya and Uganda

Published: April 28, 2024

Somalia has emerged as a new source of remittances for Kenya and Uganda, accounting for $180 million and $21.9 million respectively per year, diplomatic sources say.

According to data at the diplomatic missions in Mogadishu, there are more than 35,000 Ugandans in Somalia, remitting between $50,000 and $60,000 per day, compared with Kenyans, whose remittances average $500,000 million per day.

“We just need to wake our people to add value to the skills that we want to market here in order to get more from this economy,” Nathan Mugisha, Uganda’s Deputy Head of Mission in Somalia told The EastAfrican in Mogadishu. “We have a lot of opportunities here in agriculture, human skilled labour, especially in the construction sector and mining. We just need to get more organised. This mission contributes $50,000–$60,000 per day in remittances, but that’s nothing compared with what Kenyans send home.”

The diplomat said Kenyans offer highly skilled services but he did not elaborate, but sources indicate that a majority are in corporate, humanitarian, services and hotel and hospitality management roles. Diplomats have recently stated that there are more than 30,000 Kenyans currently employed in Somalia, and this number is expected to grow fivefold in the next five years as a result of the Horn of Africa nation joining the East African Community, guaranteeing free movement of persons within the bloc.

Somalia is not captured in the latest Central Bank of Kenya report on remittances for the year ended March 2024, which lists Tanzania, Uganda, South Africa, Nigeria, South Sudan, Zambia, Ivory Coast, Egypt and Malawi as the top sources of money transfers by diaspora Kenyans to their country.

Robert Mugimba, Uganda’s Counsellor at the Embassy, says with 35,000 workers in Somalia, the country now ranks second to Saudi Arabia in terms of labour exports, and that the numbers have jumped in nearly two years after a joint permanent commission between Uganda and Somalia in August 2022.

“In that joint permanent commission we signed a Memorandum of Understanding on co-operation in trade, diplomacy and negotiations, and recently a follow-up agreement for bilateral labour agreement was signed to facilitate Ugandans who are getting employed here,” he explained.

Somalia remains a flagged as a country in conflict with an ongoing civil war that has plagued it for decades, the main threats of which stem from the Al-Shabaab militant group that launches deadly bomb attacks in the capital and other towns, using vehicle-borne improvised explosive devices and indirect mortar fire.

East Africans seeking employment in the nation remain security conscious, although others have ventured farther into the countryside to find more opportunities and at times get caught up in sticky situations, Uganda embassy officials said.

“We have had challenges of Ugandans ringing us from Al-Shabaab-controlled areas,” said Amb Mugisha, who said only 6,000 Ugandan nationals in Somalia are registered with the embassy.

The EastAfrican interviewed some Ugandans and Kenyans employed in Somalia’s hospitality industry and they described it as a “fragile sector” due to perceived security concerns that most visitors have.

“Many visitors come here and spend all their time in the hotel and conference halls, without venturing out to explore more that the city has to offer. Their spending is limited to only the places where they are residing or conferencing. That has an effect on the sector and the economy,” said a hotel worker, who requested anonymity for security reasons.

Other Ugandan nationals are employed in private security firms to provide specialised guard, search CCTV and reconnaissance services for top hotels, shopping malls, car-rental facilities, residences of diplomats and humanitarian agencies. Somalia and its partners paint a hopeful picture of the economy this year to strengthen, with real GDP growth expected to rise to 3.7 percent, on account of reforms, debt cancellation and improving remittance inflows, the International Monetary Fund says.

The government has removed a number of investment screening regimes that barred the deployment of capital, giving foreigners the green light to wholly own their investments, repatriate capital and enjoy full protection in the country.

Prime Minister Hamza Abdi Barre said trade and investment restrictions arising from foreign investment regimes cause output losses of about two percent, hence Somalia’s decision to enact the Investments and Investors Protection Law, 2023, to attract foreign capital.

He said despite its socioeconomic and political challenges, Somalia has turned a new page into an era anchored on the attraction of foreign direct investment while mobilising, consolidating and streamlining local business processes and environment.

Mr Barre was speaking in Mogadishu on April 24, when he officially opened the Invest Somalia Conference & Expo organised by the Nation Media Group in collaboration with Somalia’s Ministry of Planning, Investment and Economic Development and the Somalia Investment Promotion Office.

The PM said his government had designed plans to accelerate economic growth led by the private sector and facilitated by the government.

“My government did put together a comprehensive and elaborate, transformative political and security programmes to secure our people, investments as well as our future from insecurity and political instability. In a short time, these programmes have shown greater results, as large swathes of land have been secured for the first time in three decades. In order to navigate these geopolitical challenges effectively, our approach has been to decouple, de-risk and incentivise foreign investments,” he said.

He said Somalia had begun telling its own positive and progressive story, a sentiment echoed by Nation Media Group chief executive Stephen Gitagama, who noted that the African story must be told by African media.

“As a business whose mandate is to not only influence society but also tell stories of success and change, the Nation Media Group has taken the lead in championing the African story. We are a voice of the people, by the people, and that is why we are here today,” Mr Gitagama said.

“Central to the values and the purpose for our establishment is a mission to be a trusted partner to African democracies, a champion of the ordinary person, a voice for the rule of law, and a strong advocate for human rights and free market economies. As the largest media house in East and Central Africa, we seek to ensure that we have products and content that feed the needs of our varied audiences. As such, we boast a portfolio of 30 content products across four countries. Our weekly regional Newspaper, The EastAfrican, focuses on promoting regional integration through a comprehensive analysis of key economic, and political issues of the day and has a footprint across East Africa.”

Mr Gitagama commended Mogadishu for cultivating a favourable business climate, including the establishment of the Somalia Investment Promotion Office and introduction of a tax system that encourages investment and economic growth.

“The passing of the Anti-Terrorism Law by the Lower House of Parliament in 2023, which seeks to establish a legal structure empowering government security agencies in the fight against terrorism within Somalia, is set to stabilise the security landscape and incentivize foreign investments,” Mr Gitagama said.

He described Somalia as resilient in the face of adversity and emerging as a new frontier for entrepreneurship and investment.

“The theme for this conference, ‘Somalia: The New Frontier for Entrepreneurship & Investment,’ sheds light on a nation that often finds itself overshadowed by its turbulent past but holds immense potential for those bold enough to see beyond the headlines,” he said.

“For decades, Somalia has been plagued by conflict and instability, which have undoubtedly hindered its economic progress. However, amid these challenges, a new narrative is unfolding — one of optimism and opportunity.”

The admission of Somalia to the East African Community (EAC) in 2023 opened a host of investment and trade opportunities for the region.

As an EAC member, it gains access to a larger market, facilitating trade and investment across borders and also presents a market of 18 million people.

Somalia has abundant natural resources, including oil and gas and fisheries, a strategic location, and a youthful population. It has untapped potential in sectors such as agriculture, renewable energy, telecommunications and tourism.

Its fertile land offers ideal conditions for agriculture, with the potential to feed its own population and the region.

Its coastline, one of the longest in Africa, presents opportunities for the development of a thriving maritime industry.