Somalia’s economy was dominated by livestock herding and small-scale farming, with very limited industrialization and almost no resource exploitation. Its heavy reliance on foreign aid and imports, combined with weak infrastructure and environmental vulnerability, made it one of the world’s least developed economies. While the country had potential in fisheries, energy, and minerals, these sectors remained largely untapped. By the early 1980s, the Somali economy was fragile, aid-dependent, and struggling to meet the needs of its growing population.
Somalia’s economy in the late 1970s and early 1980s was shaped by its socialist orientation under Siad Barre. The state controlled banks, large industries, and wholesale trade, while livestock herding, small-scale farming, traditional crafts, and retail trade remained largely in private hands. Despite the government’s efforts to centralize planning and modernize, Somalia’s economy was weak, underdeveloped, and heavily dependent on foreign aid. Frequent droughts, poor infrastructure, and a shortage of skilled labor made it difficult for the country to sustain growth without outside assistance.
Agriculture and pastoralism formed the backbone of the economy, employing around 80 percent of the labor force. Livestock herding, in particular, was the dominant sector, providing a livelihood for most nomadic and semi-nomadic Somalis and serving as the main source of export earnings. Camels, cattle, sheep, and goats, along with hides and skins, were exported to the Gulf States, especially Saudi Arabia. Crop cultivation was mainly subsistence-based, with sorghum, maize, and beans grown for local consumption. The most important cash crop was bananas, cultivated in irrigated areas along the Juba and Shabeelle rivers and exported to Europe and the Middle East. Sugarcane, fruits, and vegetables were also grown, mostly for domestic markets. Yet Somalia’s agricultural potential was limited by erratic rainfall, soil degradation, and the constant threat of drought.
Despite its long coastline of nearly 3,000 kilometers, Somalia’s fisheries remained underdeveloped. From the mid-1970s the government encouraged fishing as an alternative to pastoralism, but production levels were still low due to lack of investment, technology, and infrastructure. Similarly, forests were exploited mainly for firewood and charcoal, with only limited output of timber. Frankincense and myrrh, however, remained valuable traditional exports.
Mining contributed very little to Somalia’s economy. Although some deposits of iron ore, uranium, and other minerals were known, exploration was limited, and most mining activity focused only on construction materials. Manufacturing was small, employing fewer than 15,000 workers by 1980. It was dominated by about forty state-owned enterprises producing textiles, sugar, cement, and food products, most of which struggled with inefficiency and losses. Alongside these, more than 200 medium and small private companies produced consumer goods, while over 6,000 informal workshops and household operations provided employment in urban areas.
Energy supply was another major challenge. Most households relied on wood and charcoal, while the country imported nearly all of its petroleum. Electricity was provided mainly in Mogadishu and about eighty smaller towns, but access was limited and unreliable. Some hydroelectric potential existed along the Juba River, but development was still at an early stage. Oil and gas exploration began in the 1970s, though no major discoveries had been made by 1981.
Somalia’s transportation system remained underdeveloped. The country had no railways, and although there were nearly 19,000 kilometers of roads, most were unpaved and often impassable during the rainy seasons. Camels and donkeys still carried a significant share of goods. Air travel was more advanced, with international airports in Mogadishu and Hargeysa and services run by Somali Airlines and foreign carriers. Three deep-water ports—Mogadishu, Kismaayo, and Berbera—handled most maritime trade, though equipment was limited and unloading often relied on ship’s tackle.
Foreign trade revealed Somalia’s economic weakness. Exports were almost entirely agricultural—mainly livestock and bananas—while imports included consumer goods, fuels, and capital equipment. The trade balance was chronically negative, with imports far outweighing exports. Arab countries, particularly Saudi Arabia, were the main export destinations, while Italy remained the largest supplier of imports. Since Somalia’s break with the Soviet Union in 1977, trade with Eastern Europe had diminished to a minor role.
Prices, wages, and employment reflected the structural problems of the economy. Inflation was persistent, and unemployment, especially in cities, was high. Many Somalis remained underemployed in subsistence farming or pastoralism. The government’s finances were heavily dependent on foreign aid, both to cover trade deficits and to finance development projects. Defense spending had risen sharply after the Ogaden War of 1977–78, further straining the budget and diverting resources from development.