The impact of Covid-19 on the informal economy of Mogadishu

COVID-19 has become the most talked-about global threat of 2020 as it has affected the lives of millions of people across more than 188 countries and territories. The latest statistics show that so far, more than 6 million people have contracted the virus globally and the deaths of more than 370,000 people have been reported. Apart from the direct effect that it has on infected people, COVID-19 also has a huge impact on the global economy and people’s livelihoods, particularly the vulnerable whose lives are dependent on the small income they make out of their daily work.

In Somalia, the virus has spread and has swept across the capital Mogadishu, and parts of the various federal member states. As of June 3rd, the confirmed cases in the country stand at 2146 with 79 deaths, according to the Ministry of Health of the Federal Government of Somalia.

On 29th March, the Somali government stopped all domestic flights within the country as a measure to curb the spread of the virus, while the same was earlier applied to international flights. Many restrictions were put on the movement of people and businesses. Moreover, the Somali government has imposed a night curfew in Mogadishu that started on 15th April between 8:00 pm and 5:00 am.

Many businesses have closed while others, mainly in the informal economy, have been hugely impacted by the restrictions and efforts to fight COVID-19. Some of the local and informal sectors that Covid-19 has had the greatest impact on either directly or indirectly include small and medium sized businesses such as roadside cafes, milk and tea vendors, hawkers, vegetable and fruit sellers, restaurants, teashops, shoe shiners, travel agencies, khat traders/sellers, remittances, Bajaj drivers, school and university teachers, clothes businesses and other imported goods businesses.

On 15th April, the government swiftly adopted short term measures to cushion the economic impact of COVID-19 by rolling out a 100% tax exemption for commodities like rice and dates, and a 50% tax waiver for wheat flour and cooking oil.

Small informal businesses

COVID-19 has had a huge impact on the livelihoods of the ordinary people whose lives were dependent on small daily activities. Their movement has been limited by the measures including the curfew. This has forced them to choose between a rock and a hard place: staying at home with no food (and going hungry) or getting infected with the virus. Many people who make their daily living from small businesses in places like the Bakaara (the largest market place in Somalia) and Suuq Ba’ad markets chose to look after their daily livelihood rather than staying at homes hungry – even though the market and its environs are densely populated and the risks of community transmission are high.

Hassan Ali – who owns a small portable shop that he carries with him – said: “I have 6 children. Some of them go to school, and I am the breadwinner of the family. I have to manage their living and education and raise income from this small portable shop that I carry throughout the day in the Bakaara market. Sometimes what I get from it is not enough. These days, the market is not good, and there are not as many people as before who buy from us due to the coronavirus. I’d rather just get the disease, – and I know that I can contract it easily because of my interaction with different people – instead of staying at home while I have a family to provide for”. Ali used to earn between 2 to 5 dollars a day, sometimes more, but as COVID-19 broke out in Somalia, particularly in Mogadishu, his income declined. Now he gets 1 to 2 dollars or sometimes nothing at all. COVID-19 has affected many others like Hassan who used to manage their daily livelihoods lives in different, but precarious, ways.

Small roadside businesses in Mogadishu

Some of the businesses that have closed or have reduced their number of working hours during this pandemic include the roadside businesses like small cafes and restaurants. These businesses used to operate both in the day and at night. The curfew imposed at night has affected them, and they have lost many customers. Many women – mostly single mothers – operated small businesses like selling tea and coffee as a source of income. They raised and provided for many family members. The coronavirus regulations including the curfew and the recently ended month of Ramadan (where most people were fasting) prompted the closure of their sources of income. They were left with no option but to stay idle at home. Before the pandemic and during Ramadan, they used to work at night but since there is a curfew in those hours, they cannot operate effectively.

Travel agencies

Another sector where COVID-19 has had a big impact is travel agencies. This sector largely depended on revenues from the aviation industry and the movement of people within and outside Somalia. After the Somali government stopped domestic and international flights indefinitely, many travel agencies in Mogadishu and other parts of the country have been closed since their main source of income has stopped. The travel agencies provided services like processing visas and tickets and also liaising cargos of goods and clothes for businesses in the country from countries like Turkey, Kenya, and China. All of these activities are no longer operational since the stopping of flights. This has resulted in subsequent loss of income and the closure of many travel agencies. Many people`s livelihoods were dependent on these businesses.

Hussein, operates a travel and cargo agency in Mogadishu and employs four people. He accounts for how his small business was affected. He has closed his office since there are no customers, and the cargo demand has stopped. His colleagues are wondering what the situation will look like in the coming months. He has to pay the rent of the office or else he will face eviction. The employees have no other source of income either. Hussein says that COVID-19 and the restriction measures that have resulted from it have had a deep economic impact on their business and livelihoods.

The rickshaw (Bajaj) business

Another small business that COVID-9 and the restriction measures have had an impact on is the rickshaw (Bajaj). This is very popular in Mogadishu and most parts of the country. About twenty thousand rickshaws are believed to operate in Mogadishu, and it’s one of the most common and convenient forms of transport since government erected roadblocks on many main thoroughfares to prevent bomb attacks. Many young people make their living from this business.

As the Somali government imposed a night-time curfew, which starts from 8:00 pm in the evening, the livelihoods of many rickshaw/bajaj drivers have been affected by this in different ways.

Abdirahman is among the Bajaj drivers in Mogadishu. He says that COVID-19 and the curfew have not only affected him financially but also in terms of his mobility. He said: “I used to make between 20 dollars up to 30 dollars every day, but now I don’t make more than 10 dollars if I work the whole day. The best time that in which I used to make the most was in the afternoon and up until 11:00 pm. But now I can’t work at night due to the night curfew. There are many traffic jams in the day, which makes the mobility hard.” Abdirahman added that the cause of this high traffic is the night curfew since many Bajaj drivers used to work the night shift, but now have to work during the day. This has increased the traffic jam in some streets of Mogadishu, on top of the fact that many streets are still closed by security forces. This means rickshaw drivers can’t work and earn their usual average income in the day due to the heavy traffic and closed roads.

Moreover, the number of passengers using the Bajaj has reduced since many people decide to remain in their homes. The movement at night is also another obstacle that many Bajaj drivers are facing. “Last night, I drove from Hamar Wayne to KM4 and left my Bajaj there. The police refused me to access the road even after telling them that I was going to my home. This happened to me several times, and it is forcing me to stop working by 6 PM”, Abdirahman added. COVID-19 and the measures to curb its spread have become another additional constraint on the livelihoods of the Bajaj drivers who were previously experiencing many hardships including roadblocks and sometime deadly attacks on the streets.

Khat business

The Somali government, in a measure to contain the spread of coronavirus, banned the import of khat on March 19, 2020. The khat business constitutes a large proportion of the local economy in Somalia. More than 15 cargo flights are believed to arrive daily in Mogadishu and more than 30 flights arrive across the country. Most khat sellers and traders are women who support many families across the country. The ban on khat has affected their income and livelihood. The ban has also rendered many casual laborers and khat retailers jobless.

This sector and its traders have no alternative sources of income. The ban has largely crippled their business hence many families losing income. Moreover, the ban has brought about a huge increase in the price of khat that is still smuggled into the country via road. Also worth noting is the fact that the banning of khat has also deprived the government of a key source of revenue.

Remittances

Remittances are one of the key lifelines of the Somali people. Through remittances, many families are able to pay their bills, educate their children, and cater for a range of routine expenses. The Somali diaspora sends more than US$ 1 billion to Somalia. The diaspora – numbering over 1 million – mainly live in the US, Scandinavian countries, the United Kingdom, Canada, Australia and the Netherlands. These countries are hit hard by the coronavirus and as a result many people have lost jobs, can’t report to work or cannot send money due to the restrictions of lockdowns.

Conservative estimates indicate that remittances sent to Somalia have reduced by almost 50%. Money transfer agencies in Mogadishu have reduced the number of days in the week that they work since transactions and the number of customers have dropped. For example, according to a report by the UK based Anti-Tribalism Movement, around 89% of Somalis living in the UK are sending home less money than they used to before lockdown began. This will force many of the families back home to cut their expenses and not able to afford some of the basic amenities including food and healthcare.

Hotel industry

The hotel industry is also struggling amid the pandemic. The industry has seen rapid and significant decline in customers. Because of travel restrictions, there are barely any patrons, particularly the travelers who used to come both from inside the country and those who came from abroad. In addition, the demand for food has reduced as many customers tend to stay at home. Due to Coronavirus safety measures put in place, hotels lost a significant amount of money they had been making from daily wedding ceremonies, political events, trainings and clan gatherings. Many middle-sized hotels have either temporarily closed or reduced their catering capacity.

Policy considerations

  1. The government should invest in prevention measures and upscale hygiene activities in markets.
  2. Small businesses that are at the brink of collapsing will need financial help and loans to sustain their businesses post Coronavirus. The government could prepare economic stimulus modalities that will cushion the economy. The additional international emergency funding related to Covid-19 could be used for economic stimulus. The Government should consider best practices and viable approaches to counter the looming economic risk.
  3. The government, humanitarian agencies, and partners should not only prioritise humanitarian intervention. Strategies that will create new job opportunities and will allow small scale traders to sustain their employees after the coronavirus should be put in place.
  4. The government should maintain the tax exemption and waiver on essential commodities and if possible extend to other commodities that are hit hard.
  5. The Covid-19 has spread across the country. There are districts that have little or no healthcare infrastructure. Some people who contract the virus in these remote districts need to come to Mogadishu for treatment. Therefore, lifting the local travel ban could help such patients get access to healthcare in Mogadishu. It will also give livelihood opportunity to many Somali families whose living depended on travel agencies and related transactions.
  6. The nighttime curfew did not help contain the Covid-19 in Mogadishu and beyond. The Eid Al Fitr festival gatherings and reopening of the restaurants means social distancing measures have not been effective in Somalia. Therefore, the federal government could consider lifting the curfew altogether.

This commentary is co-authored by Abdimalik Abdullahi and Mohamed Sharif.

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