Sunday, October 31, 2010

Religion is the Opium of the People

Karl Marx wasn’t kidding. Police in the Parisian suburb of La Verriere failed find a trace of any other hallucinogenic drug after a family of 12 leapt from their second floor balcony claiming to be fleeing Beelzebub. According to police, the incident occurred when a wife awoke to find her husband moving about naked in the room. She began screaming 'It's the devil! It's the devil!' and the man ran into the next room where the others were watching TV. One woman grabbed a knife and stabbed him before others pushed him out through the front door. When he forced his way back in, the terrified lot leapt from the balcony screaming 'Jesus! Jesus!' Inexplicably, the nudist also leapt from the balcony. Detectives are treating it as a case of mistaken identity.

Zimbabwe’s Governor of the Reserve Bank, Gideon Gono, likes to portray himself as very religious. He is apt to quote the Bible in his speeches, sometimes adding a few revelations of his own, such when he divulged God’s advice to Jesus in the Garden of Gethsemane: "My Son, take it like a man …" Last week, however, it was reported that Sabina Mugabe, the younger sister of octagenarian president Robert Mugabe, had had a revelation of her own to make regarding Gono. Shortly before she died three months ago, she reportedly told her brother that Gono and Mugabe’s wife of 14 years, Grace, had been making a cuckold of him. Though the President is said to be "ready to go to war," things might still turn out OK for the former tea-boy. As one intelligence official put it, "once Mugabe hears something like that, I think someone will go and meet God."

Many self-declared religious types abhor any discussion of sex outside the home. In keeping with this, an Australian church has kicked out a woman who dared to act in an impotence treatment ad. Libby Ashby told the Melbourne-based radio station, 3AW, that she had been “disfellowshipped” from her local congregation, following her starring role in a commercial where seems to use her husband’s erect penis as a stepping stone to higher things. In the ad, after she asks for his help to reach a container above the fridge, he opens up his dressing gown to reveal a sight which the viewer can’t see – but which she is clearly happy about. Ashby then steps onto the hidden prop and gets the jar. The single mother said she knew the advert would be controversial with church-goers but a lack of funds left her with little option. “My Visa was calling out for mercy,” she revealed. The church is unlikely to be so charitable. “They have said I will not be reinstated until the advert comes off air,” Ashby said.

In a bid to restore morality and fight the vice of sexual harassment, the mayor of the Italian sea-side town of Castellammare di Stabia, south of Naples, has ordered his police to fine women who wear 'very short' miniskirts or tops that display too much cleavage. Luigi Bobbio, who was elected on Silvio Berlusconi's People of Freedom party ticket, won a council vote to ban anything that doesn’t fully cover underwear. Police, who now have the authority to hand out fines of up to $450, were however cautioned against being too zealous identifying offenders. "They won't need to carry out checks up close. One glance will be enough to judge," said mayor Bobbio, who also wishes to criminalize blasphemy and playing football in public parks.

Kenyan President Mwai Kibaki’s sermons about the evils of corruption have a decidedly hollow ring to them. While campaigning for re-election three years ago, he promised to run a clean government. Now, barely a week after he and Prime Minister, Raila Odinga, were forced to suspended William Ruto, a cabinet minister facing graft charges, another, Foreign Affairs Minister Moses Wetangula has resigned (or in the parlance of the day, stepped aside to allow for investigations) after he was named in a parliamentary report looking into shenanigans surrounding the acquisition of property by Kenyan embassies abroad. And that may not be the end of it. Other members of the “clean” cabinet with the proverbial Sword of Damocles hanging over their heads include Kiraitu Murungi (under whose watch $100 million worth of oil disappeared in the Triton Oil scandal), Prof. Sam Ongeri (in charge when another $100 million in free education funds went missing) and Naomi Shaaban (whose ministry was blamed for the loss of $2.5 million meant of resettling the internally displaced).

Thursday, October 28, 2010

Somalia: Mission Possible

Two weeks ago, the African Union’s Peace and Security Council recommended that the mandated strength of its peacekeeping mission in Somalia (AMISOM) be raised from 8000 to 20,000 troops. It also called on the international community to blockade Somali ports and enforce a no-fly zone over the country to interdict resupply for Islamist rebels fighting to overthrow the internationally recognized government.

As the UN mulls over this proposal, events on the ground continue to give an indication of the effect increased troop numbers can have.

Since 2007, AU peacekeepers from Uganda and Burundi have been deployed in Mogadishu under both an AU and UN mandate and at the invitation of Somalia’s Transitional Federal Government. Their task is to support the decade-long Somali peace process and the transitional institutions it has generated.

For much of this time, AMISOM has been seriously under-resourced and undermanned. Nonetheless, the troops succeeded in their foremost task of protecting the Transitional Federal Government from Al Qaida liked extremist groups who have foresworn the peace process. In July, however, the Inter-Governmental Authority on Development resolved to send a further 2000 troops, bringing the AU mission to its mandated strength of 8000. By mid-August, half of the IGAD troops had been inserted into Mogadishu and the effect have been quick and dramatic.

In June, the TFG controlled just 5 districts in the capital. Now, with the support of the IGAD reinforcements the TFG has managed to gain ground and now controls nearly half of the capital’s 16 districts. The gains are all the more remarkable considering that they were made in the face of a so-called “terminal offensive” launched by the extremist group, Al Shabab during the Islamic holy month of Ramadan.

These successes have provided a springboard for the TFG to launch its long-awaited offensive to retake the rest of the country. Last week, the TFG and its allies captured Beled-Hawo, a southwestern Somali town near the Kenyan border, deep in the heart of al Shabaab territory - a huge blow to the insurgents’ image of invincibility. Government forces are now at the doorstep of the strategically important town of Beled weyne, Hiiraan’s regional capital, threatening the insurgents’ grip over South and Central Somalia.

The losses suffered by the insurgents have amplified clan divisions and disputes over command, the policy of denying access to humanitarian organizations trying to help the suffering population in Central and South Somalia, and the role of foreign fighters. According to the Jamestown Foundation, a Washington think tank that monitors global security, the failure of the Ramadan offensive, led to “a major rift between Al Shabab’s emir, Sheikh Ahmad Abdi Godane and his deputy, Sheikh Mukhtar Robow.”

This is significant because, as US global security consultancy, Stratfor, says, it represents a split between the group’s nationalist and internationalist elements. According to Stratfor, Godane “is considered the leader of the internationalist elements, coordinating closely with foreign jihadists from al Qaeda who have joined its ranks over the last few years,” and is “responsible for propelling the Somali theater onto the global jihadist radar.”

Stratfor however notes that fighting to bring the global jihad to Somalia and basing such efforts in Somali territory is deeply unpopular, and the group has been at pains to hide their intentions under the guise of nationalism. A split with Robow, one of the more nationalist voices, and who had previously been replaced as the group’s spokesman in 2009 following his opposition to the policy of denying access to humanitarian organizations trying to help the suffering population, would not only significantly weaken Al Shabab, but also rob them of this platform.

Meanwhile, the TFG is exploiting the space created by the AMISOM deployment to deliver some services to people in Mogadishu and beyond. At the end of August, the Independent Federal Constitution Commission produced a draft constitution and submitted it to the people for consultation. The Mayor of Mogadishu, Mohamed Nur, is rehabilitating roads, providing street lighting and rebuilding markets in the capital. He has recently submitted a 4 year plan for regenerating the city to our development partners, the first time this has ever been done.

The people of Mogadishu are voting with their feet, and most of the city’s 2 million people now live in areas controlled by the TFG, many having moved there to escape the ‘reign of terror’ offered by the al Shabab. Even in areas not yet under their control, the TFG is, according to Prof. Abdullahi Sheikh Ali, Minister of State for Planning and International Co-operation, working with community elders and non-governmental organisations to launch projects such as the rehabilitation of canals in Hiiran area and Middle Shabelle.

Much of this progress, though, is sadly undermined by continued political disagreements and wrangling within the government. A few weeks ago, the Prime Minister was deposed and the process of selecting a replacement has been afflicted with delays and held hostage to disputes between the President and the Speaker. However, it is instructive to note that, while regrettable, the conflicts within the TFG are being mediated through political and constitutional processes, a clear break from the past preference for violence and war.

All this has been achieved by the insertion of just 1000 extra soldiers. Imagine the impact of sending twelve times that number.

Wednesday, October 13, 2010

Chile Rescue Inspires Kenyan Minister

Tuesday, October 05, 2010

Diaspora Crucial To Somali Economy

Somalia has been engulfed in civil war for 20 years, resulting in the collapse of central state institutions, the destruction of social and economic infrastructure and massive internal and external migration. However, despite the absence of a state and its financial, economic and social institutions, combined with other challenges, the traditional Somali spirit of entrepreneurship remains strong and the private sector resilient and robust.

Indeed, the private sector has managed to grow impressively, particularly in the areas of trade, commerce, transport, remittance services and telecommunications, as well as in the primary sectors, notably in livestock, agriculture and fisheries. Aggregate trade data reported by partner countries to the IMF reveal that by 2006, Somalia’s imports had almost doubled, reaching a historical record of $461 million in 2004. In the first six years of the new millennium, exports almost tripled, reaching $266 million in 2004.

This economic activity is powered by remittances from Somalia’s vast Diaspora which, as a proportion of the country’s population, is perhaps the largest in the world. One in every 8 Somalis lives abroad, most of them having either fled the repression of Siad Barre’s military dictatorship or the chaos that followed his ouster and the collapse of the state. They constitute 80% of the country’s skilled manpower and send close to $1 billion every year to relatives in the country.

Without these remittances, the country’s private sector would undoubtedly fold. It already faces significant challenges accessing credit and other financial services. The collapse of the central government in 1991 led to the ultimate collapse of the country’s commercial banking sector, which had previously been plagued by corruption and mismanagement. There are currently no formal financial institutions operating in Somalia nor any fully functioning formal financial sector regulatory bodies, making it impossible to encourage and harness domestic savings. Further, the country is also locked out of international capital markets. Somalia relations with international creditors were frozen in late 1980s due to the economic mismanagement of the Barre regime.

The remittances also dwarf any international aid the country receives as Overseas Development Assistance. Somalia is one of the poorest countries in the world with a per capita income less than half the regional average and, in 2003, it was estimated that nearly three-quarters of the population lived on less than two dollars a day. Per-capita aid to Somalia, had reached $41 in 2003, totaling $272 million. Remittances, at roughly four times that number, clearly show that the major inflow of “aid” comes from Somalis themselves.

Most beneficiaries live in urban areas, with the remittances constituting about 40 percent of the income of urban households. Less than 10 percent of transactions are destined for rural villages. According to a paper prepared for the UN conference on Somalia held in Istanbul in May this year, individual transfers are usually in small amounts averaging $132, sent regularly to cover basic family needs. In fact, household consumption, including expenditure on education and health, accounts for between half and two thirds of remittance spending. However, studies in Somaliland show that remittances are increasingly being used to fund new organizations and development projects, and such transactions usually involve larger sums.

Whether invested or consumed, remittances have important macroeconomic impacts generating positive multiplier effects, while stimulating various sectors of the economy. Studies in Mexico show that for every dollar received from migrants working abroad translates to a $ 2.69 in the Gross National Product. Other studies analyzing links between remittances and poverty in Ghana suggest that raising remittance by 10 percent reduces the share of those in poverty by 3.5 percent and has a negligible impact on income inequality. A study in Hargeisa found that households earning less than $2 a day had no direct access to remittances from abroad and had to rely on gifts from family members or neighbors.

It is not only by sending money that the Somali Diaspora is contributing to the resurgence of Somalia. They are also giving of their time and skills. Many have returned to help the fledgling Transitional Federal Government create lasting institutions while others are undertaking individual initiatives aimed at improving the lives of Somalis. In 1999, a Somali Canadian family returning to Hargeisa identified an unmet demand for English language primary education for the children of families returning from the West. They founded the Blooming Primary School, which by March 2005 had a student population of nearly 600. Fully a quarter of the pupils wee exempted from paying fees, including 60 from the Hargeisa Orphanage.

As Somalis work to rebuild their country from the ashes of the last twenty years, it is certain that those in the Diaspora will continue to play a critical role.

Monday, October 04, 2010

Banking on Somalia: Why Remittance Companies Are Crucial to Rebuilding The Shattered Economy

Somalia’s crippled financial system faces severe challenges even as the country struggles to emerge from two decades of conflict.

Peacebuilding and reconstruction work will cost billions of dollars. The question of how this is paid for is crucial. Though Somalia potentially has sufficient natural resources, these are yet to be developed and the current level of funding for the Transitional Federal Government does not inspire confidence that the international community is keen to foot the bill.

Further, the country has been suspended from accessing global financial markets, and cannot expect to borrow to finance the cost. Further, rampant borrowing by Somalia's former military regime has left a pending debt crisis and the country has not taken advantage of the many opportunities for debt relief that have presented themselves over the past 20 years. As of 2007, the national debt stood at US$ 3.3 billion, 81 per cent of which is arrears.

Though the private sector is growing the country lacks a strong banking sector able to mobilize domestic savings for investment, providing the fuel for economic growth and the resources for reconstruction. In January 1991, all state institutions that provided services and regulated the economy collapsed, including the Central Bank of Somalia and the entire banking system.

According to a 2004 report by KPMG, the banking sector currently comprises a virtually-non-existent formal sector and an active informal sector. The former includes central banks in Mogadishu, and in the self-governing regions of Puntland and Somaliland. The country has no commercial banks though the central banks in Bosasso and Hargeisa offer limited commercial banking services, creating an undesirable conflict of interest with their role as treasurer of their respective regional governments.

Though the Central Bank of Somalia reopened its offices in Mogadishu and Baidoa in December 2006, it continues to have limited functionality. Despite a draft Central Bank Bill and Banking Bill having been developed, these are yet to become law and the bank operates under Decree Law No 6 of 18 October 1968.

The informal sector, which is dominated by privately-owned remittance companies, offers more promise. What started as a way for Somalis fleeing poverty, repression and, more recently, anarchy, to send cash back to their extended families in Somalia has in many cases blossomed into full-blown financial operations. By 2004, the remittances had reached $1 billion and to date remain Somalia’s largest source of foreign exchange. Though a tiny proportion of the global remittance industry, which is estimated at between $100 and $300 billion, these transfers account for up to 40 percent of the income of urban households in Somalia. A survey conducted by UNDP estimated that more than a quarter of families in Somalia receive remittances from abroad.

Remittance companies, being the sole international financial institutions operating in Somalia, are a lifeline for many Somali families both in Somalia and in the Horn of Africa. They provide a conduit for hard currency entering and leaving the country, as well as an instrument for trade and commerce in Somalia and abroad.

According to Mohamed Abshir Waldo, founder and director of the Sandi Consulting Group, a political, business and strategic consulting group whose primary focus is the revival and reconstruction of the Somali nation, the system of sending remittances in the first half of the 1990s was highly informal and personalized. It typically relied on trust relations with a known broker based in Nairobi or elsewhere who would insure that funds were delivered (either by carriers who flew to cities with cash on daily khat flights or via local high frequency radio operators) to family members inside Somalia or in refugee camps in the Horn of Africa.

HF radio was at the time the only means of communication available inside Somalia at that time and local private operators thus handled most remittances. They founded the first, small-scale remittance sector and a lack of capital prevented them from expanding the service beyond very modest levels. However, revolutionary advances in the telecommunications sector in the 90s made remittance transfers from great distances much easier. The rise of the remittance companies specializing in global money transfers into and out of Somalia followed the introduction of the first private satellite phone companies in 1994-95. Most of HF radio operators have been absorbed into these larger remittance companies as local agents, giving the companies the ability to reach virtually every community in the country, though some independent operators in small towns and villages continue to play a minor role in remitting money.

It is a misnomer to call these Somali remittance companies. Whilst the owners and origins of these companies are ethnic Somalis, most of them have operations in the Gulf, United States, Europe and East Africa and almost all are, in fact, owned and managed by citizens of these countries. According to Waldo, Somali nationals own less 15 hawalas while the overseas-owned remittance companies could be in the hundreds. It is the close partnership and networking between the overseas hawalas and the local Somali hawalas that gives the impression that they are one and the same. Typically, the international operators create regional clearing centres or headquarters in key locations worldwide, and decentralize most of the operations at country level through ‘agents’ – either as branches owned by the company or agencies franchised to independent agents.

Major operators include Sahaan, Amal Express, Global, Al-Mustaqbal, Towfiq and Barwaqo Financial Services, all of which are based in Dubai. Others are Cidgal in Djibouti, Kaah Express and Dalsan Nairobi and Salama Money Express operates out of London. The largest is Dahabshiil which is based in Hargeisa, the capital of the autonomous region of Somaliland. According to a report published in The EastAfrican, industry experts estimate it handles up to two-thirds of remittances to Somalia and is fast emerging as the largest money transfer company on the continent.

Growing out of a small store in the tiny town of Burau, Dahabshiil, which also deals in telecommunications, is today a multi-million dollar empire, with bases in over 40 countries including Australia, the United Arab Emirates and Britain. The company maintains offices in the Democratic Republic of Congo, Uganda, Rwanda, Sudan and Ethiopia.

While the remittance companies rely mainly on the business of migrant money transfers from western economies for family maintenance and investment in Somalia, individuals and businesses within the country use them as crude savings banks, depositing funds for short periods. According to the KWPC report, this quasi-banking role continues to generate the most interest amongst major remittance companies. In fact, Dahabshiil is currently constructing a bank in downtown Hargeisa.

However, most other remittance companies face major constraints in converting themselves into banks, not the least of which is the lack of a centralized government and financial regulatory authority. The lack know-your-customer regulation coupled with the relative simplicity of hawallas creates the possibility of hiding the origin and destination of funds or breaking the audit trail. That has led to unfounded suspicions that these firms were being used by terrorists to transfer funds for terror plots and as a conduit for money laundering. Such accusations can have devastating effects.

In 2001, following the 9/11 attacks, the US government shut down the overseas money remittance channel of the then largest Somali remittance company, al-Barakat, labeling the company "the quartermasters of terror." This was despite numerous investigations turning up nothing linking al-Barakaat to terrorist activities as outlined by the 9/11 Commission, and the fact that the terrorists involved in the attacks received the majority of their funds through the conventional financial system.

Nonetheless, the closure of Al-Barakat significantly dented the confidence of the Somali business community in the remittance companies as a result of losing their deposits. And though other companies were quick to step into the void, the humanitarian impact of money frozen in transit was considerable because Al-Barakat handled half of all remittances to Somalia and was the country's largest private employer.

As Somalia strives to rebuild its shattered economy, a viable commercial banking sector will be indispensable. As noted in a UNDP report prepared by Dr. Abdusalam Omer, “commercial banks provide services that are not currently provided by the remittance companies such as retail banking, corporate banking, and loans for commercial and social development.”

In creating such a sector, the country would do well to take advantage of the remittance companies, most of whom are legally registered or in the process of legalizing their status and pay taxes in every country in which they operate. As the KPMG report says, there is no reason why the existing Somali remittance companies cannot expand to provide commercial banking services in Somalia, or anywhere else. Despite the lack of formal regulatory mechanisms in Somalia, all these companies exercise self-regulation of some kind and at a conference held in Dubai in June 2003, they committed themselves to move towards licensing and to formalize their operations preparing the ground for the expansion of financial services.

Dahabshiil, for example, embarked on a campaign to apply for and register its operations with concerned authorities in all countries where this is required, hired money laundering reporting officers and trained staff on rules and procedures. It incorporated appropriate checks in its IT software allowing for the reporting of suspicious activity and on transactions that exceed a certain amount by agents and published guidelines for its agents on how to detect suspicious transactions and report them.

Still, Somalia does not have much of the legal framework, technical expertise, security, or strong central bank needed to regulate the establishment of any commercial banks. This will only come with the establishment of the state and its institutions. This is what the TFG and the international community must strive to do with utmost haste.

As Dr Afyare Abdi Elmi, professor of international politics at Qatar University and author of the book, Understanding the Conflagration of Somalia: Identity, Islam and Peacebuilding, wrote in an article published by Al Jazeera earlier this year, “economic development is key to a sustainable peace in Somalia…. The time has now come for the international community to stop bypassing or ignoring the already weak Somali government institutions. Reinstituting a legitimate and functioning central authority should be the priority of all interested stakeholders.”