Somali business groups: how Dahabshiil, Hormuud and other conglomerates are built

The source

The most detailed public study of Somali business groups is Transnational capital in Somalia by the Clingendael Institute's Conflict Research Unit in the Netherlands, published in June 2019. Its authors interviewed 49 people, from small business owners to money transfer owners, investors and ministers, in Somaliland, Dubai, the UK and by phone with Mogadishu, between September 2018 and March 2019 (Clingendael, Transnational capital in Somalia, June 2019, annex). Unless another link is given, the facts below come from that report. The report itself warns that, given the informal nature of many links, interviewees may have reasons to misrepresent events.

How the groups are built

• Many key Somali businesses are headquartered in Dubai, with boards of Somalis holding UK or other passports. Dubai, and to a lesser extent Djibouti, are the main financial hubs.
• The groups are run as shareholder companies, often incorporated under UK law in Dubai, or as an informal family group under one chief executive, even where Somali law has no framework for national incorporation or share trading.
• Their business models are built around Somali conditions: no banking system, wide use of mobile phones, and gaps such as the lack of insurance.
• A small number of conglomerates replaced many smaller firms. Smaller companies often work as distributors for the big groups, which act as wholesalers.
• Most groups run large social programmes (schools, hospitals, emergency aid) through foundations, which the report says builds public trust and a licence to operate.

The Dahabshiil model

Dahabshiil began in imports in the 1970s and moved into remittances in the 1980s, mainly from Somalis in the Gulf. During the war it paid recipients from the sale of goods bought abroad with the money sent, which kept cash flowing in the Somali regions. In 2019 it worked in about 126 countries with about 5,000 staff and 24,000 agents. It is incorporated in the UK, headquartered in Dubai and run from Hargeisa. The report says it keeps a controlling share of at least 51 percent in the firms it buys or builds, and lists interests in banking (Dahabshil Bank International), telecoms (Somtel), microfinance (MicroDahab), electricity (Sompower in Hargeisa and Tayo Energy in Berbera), the Berbera cement plant, property, food, cars and a shopping mall. It also lists three universities and seven hospitals the group supports. See Dahabshiil and Somtel.

The Hormuud model

Hormuud was set up in 2002, "largely on the legacy" of Al-Barakat, which was closed by US sanctions in 2001. The report, citing Africa Intelligence, names Ahmed Nur Ali Jim'ale as owner of both. It works from Mogadishu with "aligned entities" in Hargeisa (Telesom) and Puntland (Golis), each with its own local shareholders, and its core businesses are calls and the mobile money platforms EVC, Zaad and Sahal. The report says this spread-out ownership, with thousands of large and small shareholders, gives the group a licence to operate across territories. In 2019 Hormuud, Telesom and Golis together held about 81 percent of SIM cards; Somtel held about 16 percent. Since 2014 Hormuud had paid the federal government a flat $400,000 a month in tax, citing the UN Monitoring Group's 2016 report. See Hormuud Telecom, Telesom, Golis Telecom and Al-Barakat.

Other named groups

The report's list of sources on business entities names, among others: Al-Buruuj, Amal Bank, Amal Capital, Amal Express and Amal Group; FAACO; GSK Group and its nine logistics firms in Djibouti; Hormuud University; Indhadeero Construction and Indhadeero Group; MSG Trading; Nura Tiles; Ominco Group; Taaj Money Transfer; and TUSMO Medical. In livestock it names the Indhadeero and Omar groups as old Somali companies with strong positions. In Somaliland it describes a takaful insurer set up by Kenyan Somalis as the first insurer to operate across all Somali regions. See the Somali businesses and Somaliland Beverage Industries.

The debate over market power

• The Clingendael report describes the big groups as close to an oligopoly and quotes businesspeople saying small firms grow only as far as the big groups let them. It also credits the groups with keeping telecoms, remittances and imports working through the war years.
• The Somali site Halqabsi argued in 2023 for regulation of large companies' market power (Halqabsi, March 2023).
• The companies present themselves as broadly owned by Somali shareholders and as major employers and taxpayers; Hormuud says it employs more than 20,000 people (Total Telecom, 5 November 2021).

Sources disagree

• Who owns Hormuud. Clingendael names one owner; Hormuud describes thousands of Somali shareholders (Garowe Online).
• Dahabshiil's size. Clingendael gives about 5,000 staff; Wikipedia gives over 2,000 (Wikipedia, Dahabshiil).