Somalia: Of waffle and remittances

YET another in a long line of international conferences on Somalia concluded on September 16th with a “new deal” for the world’s most failed state. Aid pledges, both old and new, were repackaged with some admirable language about a “Somali-led” process and unveiled in Brussels. It was the fifth such gathering in two years. The Somali jihadist group, the Shabab, hit uncomfortably close to the truth when its spokesman dismissed the gathering as “Belgian waffle”.

On the same day an arguably more important meeting between the British government, Somali money-transfer firms and banks which plan to close the accounts of the remitters was cancelled. Barclays, which dominates the remittance business in Europe, intends to follow the lead of American banks which have closed the accounts of Somali money-transfer businesses, citing concerns over money laundering and their potential to fund terrorist groups in the Horn of Africa. The Somali money-transfer operators, who send cash back to Somalia from the diaspora, need bank accounts in Europe and the United States in order to do business in their host countries. Should Barclays go ahead with the closures it is unlikely another bank would step in.

The London summit had been meant to find a compromise ahead of Barclays’ September 30th deadline for closing the remittance agencies’ accounts. For their part, the remitters have offered to undergo rigorous auditing and agree new industry standards for transparency. They argue that the future of Somalia’s hawala network—the money-transfer system that developed in place of the country’s collapsed banking system—is at stake.

The limp response to the threat to Somalia’s remittance lifeline from the governments who are at the same time pledging aid has left many observers confused. “No aid can be as great and effective as this instrument,” says Abdi Aynte of the Heritage Institute, a think-tank based in the Somali capital, Mogadishu. “If Barclays pulls the trigger, it will certainly have a deleterious impact on hundreds of thousands of people across Somalia.” More than 750,000 Somalis currently reside and work in North America, Europe, Australia, New Zealand and the Gulf states. The money they send home is equivalent to $1.3 billion a year, according to a recent study by Adeso, an African development charity. The new deal promised in Brussels is worth $1.8 billion split over three years.

There is also the issue of where this money goes. While Somali money transfers reach nearly half the population, the bulk of foreign aid goes to the federal government whose remit does not stretch beyond Mogadishu and a handful of other urban centres. Neither the northern breakaway territory of Somaliland nor the semi-autonomous region of Puntland recognises the government of the federal president, Hassan Sheikh Mohamud (pictured on the left with Jose Manuel Barroso, president of the European Commission), which the latter refers to as the “Mogadishu government”. Meanwhile the president has been forced to concede control of the southern port city of Kismayo to a former warlord, backed by neighbouring Kenya. Much of the rest of south and central Somalia is under the sway of the Shabab.

Given this fragmented picture many Somalis are more interested in preserving their old lifeline of remittances than in new deals agreed at foreign talking shops.

Source: The Economist