|Home | Contact us | Links | Archives | Search|
Issue 487 -- 28th May- 03rd June 2011
Coca-Cola Boosts Somaliland Economy
By Katrina Manson
Berbera, Somaliland, May 28, 2011 – While no government recognizes Somaliland, the business stamp of approval is proving less elusive.
Coca-Cola has issued a second license within Somalia, which will cover Somaliland and neighboring, semi-autonomous Puntland, a tacit recognition of Somaliland’s functioning economy. The company’s other franchise, which is based in Mogadishu, is no longer able to function because of violence in the Somali capital.
Coca-Cola’s vote of confidence – long withheld – may do more to propel investor interest and confidence than any political move. Only two other Coca-Cola franchises remain to be given out in the world: Cuba and North Korea.
Ahmed Guelleh, a Somaliland businessman and owner of Somaliland Beverage Industries, had the franchise to Somaliland – then a region of Somalia – 26 years ago, before war broke out and he lost everything. He won the license back in late 2010 and production is due to start this year.
Mr Guelleh’s band of five brothers is a typical, if highly successful, example of a strong trading family. Their $5m-a-year import-export operation brings in everything from porridge oats to tires while sending out animal skins and frankincense, as well as serving as agents for a shipping company and DHL.
The Coca-Cola bottling factory, among the first manufacturing investments in Somaliland, with brand new machinery from Austria and Italy, has cost $10m and is expected to generate an annual $3.2m profit, bottling 11,000 an hour and employing 130.
Its establishment has required a tailored approach. SBI found and secured its water supply after drilling for six months in 200 sites. It will sell plastic, rather than glass, bottles because glass takes too much water to wash and can take months to return from the hard-to-reach and insecure east. Instead the company will pay locals to collect empty plastic bottles and ship them to a recycling company in India that will pay for the refuse in a break-even deal.
The company says it will undercut the current Yemen-imported Coke price by about 40 per cent, saying Somaliland is the most price-sensitive market in the world.
“Recognition is the problem, not the place,” says Gavin Dehning, managing director of SBI. A South African who left his job of 14 years to come and set up the factory, he has had to overcome the damaging impact of piracy and the issue of Somaliland’s lack of diplomatic recognition.
When SBI ran out of bitumen to paint a septic tank, it took three weeks to replace it, as pirate-nervous ships dock rarely. Twelve Indian steelworkers critical to putting up the factory were prevented from travelling because the Indian authorities equated Somaliland with its anarchic neighbor — for which it has an advisory forbidding travel.
But Mr Dehning also says Somaliland port authorities are the most speedy and accommodating of any African country in which he has worked, offering none of the red tape or bribery with which he is familiar, and that the company has done everything to make sure it exceeds the requirements of the franchise.
“Coke is not going to destroy its brand because of one small little country,” he said.
Source: The Financial Times