The Horn of Africa States The EAC A Mousetrap for Investments

By Dr. Suleiman Walhad

May 26^th, 2024

The East African in an article entitled “Eastleigh: Kenya’s global Somali hub” and dated May 6^th, 2017, noted that Nairobi “generates something over 60 per cent of Kenya’s economic value.” Although this is now seven years old, it was, indeed, a bold statement. What was driving this phenomenon and is still driving it in a country that is some 582,646 square kilometers. The article in the same paragraph further noted that “The transformation made it the worthy subject of Prof Neil Carrier’s new book,Little Mogadishu: Eastleigh, Nairobi’s Global Somali Hub.” It is why I used it in the first sentence of this article to highlight the importance of Somali contribution to the growth of Nairobi in the past three decades and hence contribution to the economy of Kenya.

The same goes for cities like Kampala of Uganda, Dar es Salam of Tanzania, Kigali of Rwanda, Juba of South Sudan, Lubumbashi of DR Congo, Lusaka of Zambia, Maputo of Mozambique, Durban, Johannesburg, Cape Town and other cities of South Africa, and many other parts of the world, where “little Mogadishus” have risen up over the past three decades.

But this is not only Somali businesses but also Ethiopian and Eritrean businesses. Djiboutian businesses, which are often mixed with Somalis for being mostly of Somali ethnic background, are also part of Horn African States entrepreneurial spirits which have contributed to the economies of many other countries but mostly the East Africa Community, which receive large Horn African hard-earned diaspora remittances to kin and kith in that region. Horn Africans also invest in the region heavily, probably because of proximity and because of the existence of Horn African natives as part of the fabric of East Africa and particularly Kenya, where the East of the country is basically Horn African and should have been part of its natural region, had not the British Government then overruled on the region’s referendum in 1963, which overwhelmingly opted to join their brethren in the Horn of Africa States region.

The article here questions the wisdom of Horn Africans investing in East Africa as opposed to their native countries of Somalia, Ethiopia, Eritrea and Djibouti (the “SEED” countries). There are a number of major question marks to pose with respect to investments in East Africa as opposed to the Horn of Africa States region.

In this respect, one must first identify the Horn of Africa States region as opposed to East Africa. The region is the Horn-shaped easternmost region of Africa and primarily consists of the SEED countries but could also include Sudan, in which case it would become the SEEDS countries. It is a vast area of some 3.8 million sq.km and a population of some 216 million people. It has, of course, plenty of natural resources like the rest of the continent and presents itself as a large market in addition to also being the home base of a large youthful workforce.

The region is also geostrategically located and hence attracts intense geopolitical competition involving international and regional powers. It has, indeed, all the advantages of being a thriving region. However, this is not the case. It remains to be a conflicted region, as a result of these global competitions over its resources, natural or otherwise, which has caused many of its people to flee the region and settle in many other parts of the world, including the neighboring East Africa region.
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The ongoing international crises including the Ukraine war, the Palestinian/Israeli war, the Chinese spreading silk road building processes, the coups in the Sahel region of Africa, the Yemen Crisis and its threats to the Bab El Mandab chokepoint to international maritime trade, and other have added to the region’s plight.

The East Africa region primarily consists of Kenya, Uganda and Tanzania, although lately and because of multi-faceted reasons, the East Africa Community has brought into its fold other African regions, mostly from central Africa. They include the DR Congo, which finds itself at odds with East Africa Community after having joined it, South Sudan, Rwanda and Burundi. Unfortunately, Somalia from the Horn of Africa States regions has also joined it for the wrong reasons, which it will regret sooner than later.

The East Africa Community is marked by a number of issues that Horn African investors should take into consideration in the future before plunging themselves into uncertainties. These include, first, that many of the EAC members are currently facing similar issues as Somalia itself, namely insecurity and continuing crises that threaten not only their own citizenry but also neighboring countries as Horn African countries do. They include Burundi, which is unstable country and managed by a ruthless dictatorship, DR Congo, where a civil war is going on for decades and which was the place over which Africa’s first war took place involving many African countries, including Zimbabwe, Angola, Uganda, Rwanda, Dr Congo itself, Zambia, Burundi and Tanzania. They also include South Sudan, another unstable country where civil war has been a pain in the region from its birth, thirteen years ago.

The Horn African investor in Nairobi or Kampala or even Dar es Salam must know that there are intense tensions and disagreements between Uganda and Rwanda on border issues and territorial disputes between Uganda and Kenya. They must also be aware of the DR Congo’s longstanding troubles which almost push DR Congo and Rwanda to war at any time. The Horn African investor is probably not aware of the continuing tensions between Rwanda and Burundi related to Rwanda’s alleged financial and training support for the RED-Tabara group in Burundi. These are all matters that can threaten the stability of the East Africa Community region and its very existence, and hence may disrupt and cause great losses to those Horn Africans who have unknowingly invested in the region.

The Horn African entrepreneur must know that no African country is safe as long as there is no viable international order that assures of peace and in particular when there is acute competition over the resources of the continent. The current world bodies appear to have no powers over no one, except perhaps the weak and the meek. It is why the Horn African should invest in his home turf before moving onto other equally unsafe African environments as seems to have been the case lately.

A youthful population that is employed is a better savior and a better asset than any other asset a country or region can have or can ever hope to have. It not only provides the security of any investment but also the workforce for the investments. Disturbingly, however, for the Horn of Africa States region, its monied elite groups and its entrepreneurs have been persuaded by glittering other places, not knowing that all that glitters is not gold, and therefore, instead of investing in their home countries and employing their youth, invest in other parts of the world and mostly in the East African Community region and more particularly Kenya, which represents itself as another glittering place at best. The core countries of the EAC of Kenya, Uganda and Tanzania have all high foreign debts, which needs servicing and principal repayments. It is where the interest of these countries in the Horn African investor and the NGOs which operate in the troubled regions of the Horn of Africa is rooted. It is not a love for the Horn African!

Even the African Development Bank Group on the East Africa Community region outlook report of July 2023 highlighted that “domestic risks include gaps in infrastructure, domestic conflicts and political instability, macroeconomic imbalances, and adverse impacts of climate change.”For the Horn African investor, it should mean running from a troubled place – their own, to another troubled place – another’s i.e., the East Africa Community! One normally stay at one’s place despite all the odds and contribute to stabilizing it and providing jobs involving not only construction but also industrial, technological and telecommunications, provision of services (like banking and finance, tourism, educational and health), and food production (fishing, agricultural, sedentary animal husbandry) to engage the growing youth of the Horn of Africa States region.

The Horn of Africa does have gaps in infrastructure and of course all the different shades of fragile states from weak governance to terror and piracy issues, tribal and clan competition for power and all the paraphernalia of regions and countries in difficulties. But only its citizenry can extract the region from the current malaise and the entrepreneurial segment of the population should play a better role than they have hitherto done. A business needs a safe environment to operate from and the entrepreneurs of the region should work hard to ensure to make the region peaceful to be able to operate in peace and make more money and profits, which of course, is less risky than investing in other regions like the East Africa Community, which is not as safe as it appears to be.

Other than striving to make business and profits, the first responsibility of a business person is to pay its taxes. It is how a government would be able to raise funds to finance the services it is expected to provide in terms of health services, education, infrastructures such as roads, rail, bridges, ports and so on. It is how more jobs will be created and many more youth will be drawn back from the evil activities of terror groups and bad politicking.

The second responsibility of a business is employing the youth of the country instead of exporting jobs to other countries such is happening currently with respect to investing in East Africa and hence employing East Africans instead of Horn Africans, back home. There is currently a high unemployment level in the Horn of Africa region and its countries. Investing in another’s country negatively affects the region’s labor market. No wonder terror groups in the region have ready youth to bolster their ranks all the time. This not only affects the security of the region but also sucks away more of the meagre funds available through aid to fighting terrorism instead of using them for services and other more societal needs such as health and education services.

The third responsibility of a business is to be wealth creators and innovation in the region and not in another’s country and region. A Horn African first owes it to invest in his country and region and then may invest some, outside to make more money and repatriate it. That is what most international investors do, when they invest in other parts of the world away from home. It is most unfortunate to note that Horn Africans find comfort in settling in some other peoples’ countries, doing business and consuming all the money they make there and only use their wealth to cause more chaos to their home countries. It is most unfortunate again when even the leaders of some countries in the Horn of Africa States region are involved in this bizarre business model.

The fourth responsibility of a business is to help improve infrastructure gaps in one’s country and region first before contributing to other regions such is going presently in the Horn of Africa states region, where many of its entrepreneurs are investing in the East Africa Community region instead of their own. While there is nothing really wrong in expanding one’s investment platforms, there is the responsibility to fix one’s country and region first.

The fifth responsibility of a business in the Horn of Africa region is to build more hospitals and equip them instead of pushing people to travel to distant countries for medical purposes and even the East African Community. Many could ill afford to travel, suffer and perish for lack of adequate medical and health services in the countries of the region.

Most Horn Africans investing in the East Africa Community region are mostly ignorant of the legal implications involved in their investments. Many of them bribe themselves through East Africans, notorious for their underhand dealings who would not hesitate to take advantage of these semi-educated, clan-minded monied people running away from their countries, which they have ruined. It is not a surprise to see Horn African communities flourishing in Nairobi, Kampala and Dar es Salam. They could have done it better if they helped stabilize their countries and the rule of law therein.

Horn Africans should contribute to improving the security and governance of the region to make it an attractive destination not only for Horn African investors but also for others from far and wide. It should not only be the governments that should be responsible for ensuring peace and stability in the region. The businesspeople bear an equally heavy responsibility in this regard and the first step, as noted earlier, is to ensure that they pay their tax dues to the government.

The East African always views at the Horn African with a great suspicion and as a source of threat, but they also need the resources and capital of the Horn African, a dichotomy of serious proportions, but which so far works for the East African and represents a mousetrap for the Horn African Investments in that region.