'The Role of Finance in Defeating Al-Shabaab' (allAfrica.com)

Two weeks ago, Somalia’s Prime Minister Sharmarke outlined his government’s aims for the coming year. He spoke of focusing on creating a permanent political solution, improving justice and people’s welfare, realization of the Vision 2016 plan, and national reconciliation as well as uplifting of the country’s infrastructure, but at top of the list he placed preparations for elections in 2016 – and security, primarily, of course, dealing with al-Shabaab.
The new Minister of Defence, General Abdulkadir Sheikh Ali “Diini” underlined the point after he was sworn in, saying his main priority was the rebuilding of the army. He spoke of the need to equip the army, rebuild the barracks and build a national force to enable the Somali National Army take control of the country’s security without any assistance from foreign troops.
Over the last few months the Somali National Army and AMISOM have had a good deal of success, putting al-Shabaab under considerable pressure. Operation Indian Ocean, last year, recovered a number of towns and ports, as well as cutting off some of al-Shabaab’s major financial resources. Nevertheless, al-Shabaab still controls significant areas of the country, and retains considerable military capacity and financial resources; and defeating al-Shabaab totally requires more than just military victory.
Last December, the UK’s Royal United Services’ Institute produced a report on “The role of finance in defeating al-Shabaab”. Its author, Tom Keatinge, produced fascinating detail of the way al-Shabaab has been funding its activities as well as an analysis of how to control and restrict these. The report also has recommendations for further national and international action.
The report pointed out that al-Shabaab developed a diversified and indeed innovative pattern of funding, using both domestic and external sources, when it controlled large areas of the country and even parts of Mogadishu a few years ago. This produced a substantial income. The UN calculated in 2011 that al-Shabaab had annual revenue of between US$70 and 100 million. It obtained this from “taxation and extortion; commerce, trade and contraband; Diaspora support; and external support”.
In the areas of the countryside it controlled al-Shabaab set up its own structures including a financial administration to collect taxes as well as organize larger scale activities including the export of charcoal. It used these to pay its tax collectors, security forces and military units. It also collected funds for larger projects including the building of mosques, schools or health centres, though it never provided details of how these contributions were actually used. Taxes have at times been collected for famine relief and businesses and market traders forced to give “voluntary” contributions to al-Shabaab. The level of these, like the taxes collected at checkpoints on the roads, fluctuated according to need.
The UN Monitoring Group suggested that in 2010-2011, al-Shabaab was getting US$35-50 million from the export of charcoal and the import of sugar through Kismayo. The Monitoring Group also estimated that another US$30-60 million was being raised by taxation of the 4,000 businesses operating out of the Bakara Market and the transport of goods. In fact, although al-Shabaab lost Kismayo in 2012, it retained considerable control of supply and distribution outside the port and, even now, after further defeats, it still continues to benefit from taxes it can impose on rural production and transport of charcoal going out of smaller ports.
Other related areas of finance include ivory poaching and smuggling. A report in 2013 suggested that up to three tonnes of ivory might be exported every month out of southern Somalia. Aid agencies were also forced to pay significant fees to continue to operate or to distribute in al-Shabaab controlled areas as well as taxed on their projects or forced to pay for security. One UN agency was allocating 10 per cent of its budget in Somalia to al-Shabaab in 2009. In June 2013, the UK’s DFiD said it had lost nearly half a million pounds to al-Shabaab in four months in 2011-2012. al-Shabaab also benefitted in the past from piracy though less from direct involvement than from taxing the proceeds of pirates operating in areas it controlled at a rate of 15-20 per cent. This is another area from which it can have collected little in recent months as piratical successes have been few and far between in the last year or two.
Diaspora support, driven to a considerable degree by the use of social media, was shown in the recruitment of foreign fighters as well as in remittances. The UN’s Food Security and Nutrition Analysis -Somalia, believes that remittances to Somalia amount to US$1.2 billion a year. How much of this ever went to al-Shabaab is unclear, but there’s no doubt the amount reaching the extremists has fallen significantly. The US designation of al-Shabaab as a Foreign Terrorist Organization and the increased controls in the US and Europe for remitting funds was one reason; another was al-Shabaab’s increasingly hard-line ideology and extreme violence which have lost it a lot of support in the Diaspora as well as in Somalia. The latest problems over remittances to Somalia from the US may further reduce the flow of funds to al-Shabaab but it will also have a far more serious impact on the Federal Government of Somalia as it will affect hundreds of thousands of people living in government-administered areas, now the larger part of the country.
Al-Shabaab has also been able to obtain larger funds externally though not, it seems, from Al Qaeda, which itself has been affected by international efforts to control its finances. Al-Shabaab can at times obtain substantial amounts of money from those who want to support jihadi fighters. In December 2013, for example, the US Treasury issued a Designation Order against a Qatari-based Al Qaeda supporter alleged to have channeled $250,000 to Al-Shabaab as well as funding other groups.
One other supporter of Al-Shabaab has been Eritrea. The report notes that the Government of Eritrea acknowledged that it maintained political links with Somali armed groups, including Al-Shabaab. It quotes the Monitoring Group which believed that this support, which included financial and military assistance, “at times amounted to as much as $40-60,000 per month”, funneled “via Eritrean embassies in neighboring countries and carried into Somalia via couriers”. The report suggests that the increased international scrutiny of Eritrea’s actions has led to a decline in the relative importance of Eritrea as source of military and financial support for al-Shabaab, but it adds that Eritrea appears to be looking for more subtle means of interfering in Somalia by building relationships with others as well as with ‘spoiler groups”. It quotes the Monitoring Group to the effect that Eritrea is likely to remain a “small but troubling part of the overall [security] equation” in Somalia for the foreseeable future.
The report underlines that al-Shabaab’s support in Somalia was often based on financial considerations rather than religious or ideological ones, especially among its rank and file fighters. These were paid US$100-300 with a US$400 bonus for new recruits. Some of those who have defected recently say they have not been paid for months. They also claim they have been kept short of food.
The implication of all this is that much greater effort should be made by the Somali Government to offer a better and more effective “financial alternative_ for the Somali people along with improved security and governance and the rule of law”.
The current crisis in remittances to Somalia, and neighbouring states needs to be resolved urgently. The report says the international community should also get the Gulf States and Saudi Arabia to engage actively in restricting al-Shabaab trade-based financing, and for the Gulf to provide increased transparency over remittances to Somalia. Another area for international action is over links between illicit wildlife trade and terrorist financing.
Other suggestions are that Kenya should be given substantial increased support to control its border with Somalia and assistance in dealing with extremism inside the country. Aid agencies should stop paying al-Shabaab for access, develop a dialogue, and prevent aid deliveries from being co-opted. In addition, the Government of Somalia must ensure that government officials and the military are paid regularly and fairly, and it must set up a reliable and transparent financial economy in the areas that it controls.
One final recommendation is that Eritrea should be continually reminded of its international obligations and deterred from providing any financial or military support to al-Shabaab or other groups aiming to destabilize the Government of Somalia. The report adds: “sanctions for ongoing interference must be clearly articulated and imposed”.