Hargeisa’s urban dilemma

Since its declaration of independence in 1991, Somaliland has mirrored much of the Horn of Africa in undergoing a rapid process of urbanisation, with the country’s urban population now exceeding 53%, according to government figures. This metamorphosis of a society once defined by nomadism to city life is subtly reflected in the increased consumption of imported powdered milk and the rise of a new generation of music artists succeeding their diaspora predecessors, who dominated the 2000s. Yet, amid the gleaming high-rises overlooking the capital Hargeisa, a city once likened to “Hiroshima” by a veteran Somali general, it seems that many of its governance structures aren’t up to the task of guiding its rapid evolution.  

Hargeisa’s urban land management challenges stem from the informal evolution of administrative systems since 1993. The collapse of the Somali Republic left much of the city in ruins, with displaced communities returning to their homes, which had been destroyed, and public infrastructure in left disrepair.  

The 1990s saw an ad-hoc approach to governance, where customary systems often took precedence over formal institutions in mediating land disputes and rebuilding social cohesion. Yet, customary systems carried inherent limitations for urban governance, as they traditionally focused on managing common property like grazing grounds and water resources, rather than the intricacies of urban land management. The result was an outbreak of land and property grabbing in Hargeisa.

The consequences of this fragmentation manifested most visibly in the emergence of precarious informal settlements, where returning refugees formed a new urban underclass, such as the State House, a former British administrative quarter, which hosted roughly 25,000 people in 2017.  

To complicate matters further, this chaotic situation became the engine of a booming and unregulated real estate sector in the 2000s. Brokers’ greed and government corruption resulted in plots of land often having multiple ownership claims, leading to various violent outbursts across the city. Former Mayor Awl Elmi Abdalle (2000–2002) condemned the practice, saying that the “disgrace of land grabbing reaches all the way to the presidency”. Yet it was precisely the lack of effective land management by the government that led to swathes of public land being occupied or contested well into the 2010s. Notable cases include the Birjeex military base in southwest Hargeisa, where informal settlements had resisted eviction for over 20 years through tribal interventions before eventually being relocated in 2019 by the city council in collaboration with the army.  

Centralisation and its discontents

Attempts to formalise urban governance through land management laws adopted in 2001 revealed a fundamental tension between centralisation and local autonomy. The laws were largely modelled on those of the former Somali Republic, while still acknowledging the demand for decentralisation in the wake of the regime’s collapse. Land Management Law No. 17/2001 (amended in 2008) reinforced state ownership of all land, dividing management responsibilities between the central government and the local councils of Grade A districts. In practice, however, the central government has retained primacy over the sale and management of public land in Hargeisa. This dynamic has weakened the city council’s ability to regulate urban development and has frequently displaced vulnerable communities in the city centre through the sale of public land to businessmen.

The reluctance to decentralise is still a strong impulse, in part due to self-inflicted fiscal pressures that force the central government to monetise public assets. Amendments to Law No. 23/2002 in 2019 introduced further conditions for city council approval of public land sales, requiring mandatory audits and inclusion in the municipal budget. Yet, despite these legal measures, tensions persist between Hargeisa’s city council and the public works ministry, primarily due to unclear jurisdictions over land management in the city.

Increasingly publicised accusations of corruption surrounding this issue have further highlighted the impotence of local government. In late 2023, an additional 22,000 m² of land in an area known as the ‘Police Line’ in the centre of Hargeisa was sold, following the 9,600 m² previously sold to Dahabshiil. The area has been designated as public land since the British colonial administration, hosting the homes and small businesses of police and military families. According to independent researcher Mohamed Dahir, the sale of this land, at an estimated market value of $132 million, was included in the 2024 national budget at just $14 million. Similar controversies surround other high-profile land sales, such as Xero Dhifta, reportedly ordered by the former president, Muse Bihi, in which 36 families were displaced.

Fiscal constraints and revenue inefficiencies  

There are significant data limitations constraining a comprehensive analysis of the Hargeisa municipality’s fiscal landscape. Much of the publicly available municipal financial and economic data, including revenue and expenditure statistics, are outdated, with the majority of municipal data used in this article primarily concentrated between 2016 and 2018. However, since major structural reforms have yet to be implemented under the current local administration, these figures remain highly relevant, offering valuable insights into the persistent weaknesses and inefficiencies within the city’s revenue systems.  

Hargeisa’s municipal council has struggled to harness its pivotal role in the national economy to promote its sustainable urban development. The capital has consequently been described as a “two-speed city” in which the private sector thrives while the public sector stagnates, failing to deliver essential services to the majority poor. Although the Constitution and Law No. 23/2002 grant considerable political, administrative and fiscal autonomy to municipalities, in practice, their capacity to make independent decisions remains “in transition”, with minimal progress made in diversifying revenue sources or improving tax collection efficiency.    

The capital has consequently been described as a “two-speed city” in which the private sector thrives while the public sector stagnates, failing to deliver essential services to the majority poor.

Hargeisa’s revenue model is particularly problematic, relying heavily on daily market collections that are both regressive and acutely vulnerable to external shocks, such as the Waheen market fire in April 2022. By 2016, it was reported that the local government had introduced 67 separate taxes disproportionately burdening market vendors and small to medium-sized businesses. These local fiscal challenges are exacerbated by Somaliland’s broader macroeconomic structure, characterised by heavy import reliance and limited diversification beyond livestock. This structural vulnerability has been exposed more severely by recent global disruptions, including the Red Sea blockade which has significantly impacted local traders.  

The substantial size of Hargeisa’s informal economy presents an additional challenge to its fiscal capacities. Accounting for an estimated 77% of all employment, this sector remains largely outside the formal economy and the ability of government to utilise. In 2012, the city was reported to have one of the highest minimum capital requirements globally to establish a formal enterprise, with licensing fees accounting for 50% of start-up costs. Recognising the critical role of this sector in economic stabilisation, National Development Plan III has prioritised its inclusion in tax base expansion efforts through proposed reforms, including the implementation of an Integrated Tax Administration System (ITAS).  

Another key fiscal constraint facing Hargeisa is the diminishing role of central government transfers, which have consistently declined over the years. Transfers to municipalities are common in low-income developing countries (LIDCs), where local governments often rely on central support to complement their limited revenue streams. These transfers typically aim to equalise fiscal capacities across regions and support local service delivery, especially where own-source revenue generation is weak. Theoretically, when these transfers are limited, local governments are incentivised to improve their own-source revenue streams, yet this has not been observed in Hargeisa, where central government transfers as a share of the city’s budget actually dropped by 12% between 2008 – 2018.  

These transfers to Hargeisa are delivered through two primary mechanisms: (1) The Municipal Tax: Collected by the Ministry of Finance and gives municipalities a 10% share of custom revenues collected at local entry points. (2) The Municipal Subsidy (Kabka): A fund administered by the Ministry of Interior given to districts based on 12.5% of cumulative custom duties. 6% is allocated to Grade A districts like Hargeisa.

In an interview late last year, a city councillor revealed that the municipal subsidy for the past two budgets has been “almost zero”. While strained relations between the Waddani-led local council and the former Kulmiye government are likely to have contributed to this, a 2022 IGC report suggests this issue predates political tensions. The report highlights that the subsidy structure itself disadvantages the capital, said to account for 85% of Somaliland’s total economic activity. Revised distribution ratios have reduced its allocation to 30% of nationwide subsidy transfers, below its legal entitlement of 51%. The municipal tax, in particular, disadvantages Hargeisa by favouring districts with major customs entry points. For instance, Berbera, the country’s primary port, derived 68% of its 2018 municipal revenue from central government transfers despite primarily processing livestock (the country’s main export) from Burao and the eastern regions.  

Somaliland’s purgatory unrecognised status adds another layer of complexity to Hargeisa’s urban development challenges. Unlike other cities in the region, such as Addis Ababa, which can leverage the expertise of international development organisations, Hargeisa struggles to attract international investment in large-scale infrastructure projects. Somaliland has also failed to exploit the few diplomatic ties it does have, such as its burgeoning relationship with Taiwan, to address its growing development demands. This international isolation is compounded by the “de facto protectionism” of the government that has favoured the monopolisation of services by large domestic corporations at the expense of alternative local businesses and crucially foreign investment. Beneficiaries of this policy, namely Telesom and Dahabshiil, despite their extensive real estate portfolios in Hargeisa, face minimal municipal taxation or levies that could support public infrastructure.  

Hargeisa struggles to attract international investment in large-scale infrastructure projects. Somaliland has also failed to exploit the few diplomatic ties it does have, such as its burgeoning relationship with Taiwan, to address its growing development demands.

Reimagining revenue for urban development  

The capital has made considerable progress since 2016, and under the current administration, the municipal budget has nearly doubled since 2018, reaching almost $20 million (2021 – 2023). However, potential reforms to tax revenue that can support its infrastructural ambitions, requiring $50 million annually, are yet to emerge. The recently proposed construction of the boqol iyo kontonka road is projected to cost $19 million alone, far exceeding the council’s current financial capabilities and raises important questions about how to sustainably increase its revenue to meet these development needs.  

Property and land tax has been widely considered an effective and reliable source of revenue for local governments in low-income countries. Lagos, Nigeria, is cited by urban economist Astrid Haas as an example, having managed to escape the cycle of low tax collection and poor service delivery through a series of visible public investments linked to property tax, leading to a fivefold revenue increase between 1999 and 2011. As of present, the potential of property and land tax for urban development in Somaliland remains largely untapped, accounting for only 16% of Hargeisa’s own-source revenues, compared to Kampala, Uganda, where it accounts for roughly a third of local revenue.  

The current property tax system suffers from structural inefficiencies, using a simplified area-based formula that calculates rates by multiplying the building’s size (width, depth, number of floors and location band) with a rate based on its location. While this approach is administratively straightforward, it does not consider key factors such as the quality of public infrastructure (roads) that can significantly increase property value. This oversight is increasingly concerning as Hargeisa’s growing real estate sector saw average prices in the city centre estimated at $6000 per square metre in 2023. Although transitioning to market-based valuations might seem enticing, experiences from other African cities suggest caution. Kigali, Rwanda, found limited success with this policy due to insufficient experience and technological infrastructure. In Hargeisa, where these challenges are even more pronounced, a similar reform would be highly impractical.  

A more feasible approach for property tax in Hargeisa was proposed in a 2024 ICTD report that discussed the points-based system adopted in Freetown, Sierra Leone in 2019. This system enhances the traditional area-based methodology with observable physical characteristics, assigning standardised points based on a building’s surface area and additional or deducted points for positive or negative features of the property (e.g. location, building materials, access to services, etc.). By circumventing the speculative risks associated with markets, it delivers fairer and more accurate valuations while remaining administratively manageable. Freetown’s reforms proved highly effective, more than doubling property tax registrations within just six months (from 57,000 to over 120,000 properties), using GIS, satellite imagery, and other technologies.  

The intrinsic relevance of Freetown’s approach lies in its potential to address structural and resource limitations seen across Africa. Hargeisa, with its class-integrated neighbourhoods and relatively consistent property characteristics, can benefit from the phased implementation of this system that emphasises observable and objective metrics. The city has already made significant strides in property identification, with a mass survey conducted in 2004-2005 supported by UN-Habitat and the implementation of GIS in subsequent years, registering nearly 200,000 properties in 2017. Furthermore, several challenges have already been identified that could streamline the reform process, such as legal frameworks for tax liability, particularly in cases where property owners are not easily identified.  

Beyond property tax reform, increasing the annual tax on undeveloped land presents another opportunity to boost municipal revenue. The local government currently collects a low annual land tax on undeveloped land, most of which belongs to the diaspora. As Hargeisa sprawls outwards, this undertaxed asset represents a key area for reform that could incentivise more efficient land use as well as increase municipal revenue, potentially following Gaborone, Botswana’s fourfold tax rate on vacant land. Furthermore, while the full implementation of land value capture mechanisms is unrealistic, the city council retains legal access to 30% of planned residential land (Law No. 17/2001), serving as another lever for much-needed public infrastructure development.  

The success of any tax reform in Hargeisa however ultimately depends upon commitments to enhanced transparency and oversight. Freetown’s experience demonstrated that linking tax reform to visible public service improvements and clear objectives helped overcome taxpayer resistance. Hargeisa, due to its unique state-building process, already enjoys relatively high tax compliance (70-75% in 2016) and positive local attitudes towards development yet remains an extremely horizontally high-trust society. The “intuitive and accessible” nature of the points-based system makes it well-suited to fostering civic engagement and can develop Hargeisa’s embryonic fiscal social contract. Any potential reforms should, therefore, be accompanied by clear communication campaigns and public engagement initiatives.  

Hargeisa, due to its unique state-building process, already enjoys relatively high tax compliance (70-75% in 2016) and positive local attitudes towards development yet remains an extremely horizontally high-trust society.

Controversies surrounding Hargeisa’s GIS-based land management system exemplify the need for independent oversight and accountability. Allegations of mismanagement involving the company Geosol contracted to modernise the system have raised concerns about transparency in property deed administration. To ensure that public systems are not exploited for private gain, and build public confidence in future reforms, the city council must establish clear mechanisms for oversight, including public reporting and citizen involvement in monitoring land management processes.  

Hargeisa has demonstrated remarkable resilience in its post-1991 recovery, yet its current trajectory is increasingly highlighting the unsustainability of promoting unregulated private sector development at the expense of public infrastructure. The launch of Master Plans in 2022 and the recent establishment of a local government and urban development ministry signals Somaliland’s renewed commitment to addressing urban challenges, offering an opportunity to bridge the long-standing tensions between Hargeisa’s city council and central government authorities. Drawing lessons from cities like Freetown, Hargeisa can adapt proven approaches to property valuation, land use reform, and revenue generation that balance administrative feasibility with equity. While Hargeisa has thus far avoided the extreme inequalities that are prevalent in other cities in the region, targeted reforms can mitigate this looming reality and allow it to emerge as a model for post-conflict urban development in the Horn of Africa.