Category Archives: Development

Destroying What Works? Barclays and the Changing Somali Remittances Marketplace

By Emma Lochery

In May this year Barclays announced it would no longer supply bank accounts to 250 money service businesses as of July 10th – including four major Somali money transfer businesses. For most other countries that rely on remittances, there are alternatives for sending money, but Somalia is in a difficult position due to the weakness of its banking system, lack of banking regulation, and high level of need. After much protest from Somali diaspora and other civil society groups, the original deadline was extended a couple of times for particular companies, but as of mid-October only one Somali money transfer company had been allowed keep its account open pending the outcome of a court case arguing that Barclay’s decision violated competition law.

Oxford’s Horn of Africa Seminar met on October 15th to discuss the Somali remittance landscape and the challenges ahead.

Amidst the multitude of challenges facing Somalis today, money transfer agencies represent ‘what works’ in the Somali territories. As pointed out by a FSNAU report authored by Laura Hammond earlier this year, they provide an efficient way for an estimated minimum of $1.2 billion to be remitted back to Somalia every year, which is far more than what Somalia receives in international aid (on average just under $850 million for the last five years), foreign direct investment (just over $100 million in 2011), or exports earnings ($516 million in 2010). In the FSNAU study, which covered both rural and urban areas, 40% of all Somalis surveyed said they received remittances from abroad – and in urban areas that number rose to over 50%. Remittances helped meet basic needs; three-quarters of recipients said they used them to buy food and pay for services such as health and education. Three-quarters of recipients also said they shared what they received with others – demonstrating the way remittances help maintain a fragile but crucial social safety net. 93% of all recipients said they used money transfer companies to receive their money.

Money transfer companies in the Somali territories have also begun to offer more complex services, such as deposit accounts, debit cards, and credit to small businesses. They are a principal employer in the formal economy across Somaliland, Puntland, and Somalia. The bigger companies are also crucial players in wider Somali trade networks, facilitating financial transfers to the Gulf and cities in China and other trading hubs. Money transfer companies have helped to hold together economic networks, which are the mainstay of the Somali economy – from livestock to retail trade businesses. Based on informal mechanisms at first, but soon formalizing and adopting new technologies, they proved essential through the oppressive and extractive 1980s, helped families rebuild their lives amidst the wreckage of a state in the 1990s, and enabled people to survive conflicts in Somalia since then. They have been key in allowing Somali trade networks to expand and link into markets in Kenya, South Africa, and further afield. The names of the largest firms are household names – they are highly trusted brands in very insecure places.

However, the very factors behind the companies’ success are also some of the reasons for the current struggle with banks and regulators. To understand why, it is necessary to step back and look at the broader banking sector.  Since 9/11 in particular, there has been a huge growth in anti-money laundering regulations. Much of the pressure in the sector today comes from US regulators – and with operations spanning the globe, British banks such as Barclays cannot afford to ignore the changes. Last year in the US, HSBC was fined $1.9 billion by the US government for weak anti-money laundering controls in Mexico, while Standard Chartered was fined more than $300 million for violating US sanctions on Iran, Burma, Libya, and Sudan.

Money transfer businesses then find themselves in a difficult position. While the amount of money transferred as remittances is important to Somalis, for a bank like Barclays it is rather small in terms of their global business, and the small amount of profit is not worth the perceived risk of hosting the companies’ accounts.

While neither of the cases cited above involved transactions to Somalia, Somali money transfer businesses seem riskier to banks for two main reasons. First, they principally serve one country – and the less diverse a money services company’s customer base, the more risky they appear to a bank. So the reason that the major Somali money transfer businesses are so trusted in Somalia – that they are homegrown businesses with strong track records and connections at home and in the diaspora – means banks trust them less. Secondly, Somali money transfer companies generally rely on a third location as a clearinghouse – and these are most often in the Gulf States. Between a sender in London, and a recipient in Mogadishu, a transaction may also flow through Dubai, for instance. Dubai has long been a central economic node in Somali trading networks; Somalis migrated to labour in the Gulf in the 1970s, and in the 1980s, Somali businessmen took advantage of their relatively easy access to profitable and convenient Dubai markets. However the very ease of access and laxity of regulation that makes Dubai and its free zones attractive to Somali businesses makes large, global banks nervous that they might inadvertently end up flouting regulations in the other jurisdictions in which they operate – for very little profit.

To make matters worse, the UK government’s response has been rather slow and uncoordinated. The Economist hit the nail on the head with their article about the recent conference on a ‘new deal’ for Somalia in Brussels – much waffling about aid and not enough about how to fix the remittance question. Soon before the last and largest company was supposed to have its account closed, the government finally announced that over the next year it was planning to create a ‘safe corridor’ for transferring money between the UK and Somalia in partnership with the World Bank. However, it is unclear what will happen in the short-term before the corridor is set up. Questions remain as to if and when either the UK or US government will also create the regulation needed to assuage the banks’ concerns sufficiently. Somali money transfer companies have adapted to regulation before – but it is hard to adapt to regulation yet to be written.

Finally, last week’s speakers emphasized that people will find alternative means of sending money, sending cash in suitcases (risky for everyone involved and not exactly what the regulators want either…) or by using other companies on the market, many of which have a smaller geographical reach in Somalia. One company for instance has their clearinghouse in a more highly regulated location and connects with Somaliland’s mobile money system. Others are ‘small payment institutions’ (rather than authorized payment institutions), limited to remitting no more than 3 million euros a month. The largest company Dahabshiil, meanwhile, has managed to find a bank that will host its corporate client business, but not its small-scale remittance business that is so central to daily life in Somalia.

It thus remains to be seen how people will adjust to the closure of the accounts of the four major remittance firms – and what effects this will have on the overall market for money transfer businesses, some of whom are very powerful players on the Somali economic scene. As the Oxford event ended, we were still waiting to hear the outcome of the court case deciding whether Dahabshiil, the final company due to lose its account, had managed to escape the ‘final final’ deadline one more time.

This post is solely based on the opinion of the author, but we want to thank the seminar speakers who included:

Abdi Abdullahi, Chairman, SOMSA | Industry perspective

Edwina Thompson, Beechwood International | UK policy environment

Farhan Hassan, Somali Heritage Academic Network | Civil society view

Emma Fanning, Oxfam GB | Impacts on NGOs

Laura Hammond, SOAS | Livelihoods impacts

Chair: Anna Lindley, SOAS

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Filed under Business, Development, Diasporas, Somali diaspora, Somalia, Somaliland

Opening up historical wounds in Northern Kenya: were toxic wastes dumped in the Chalbi desert in the name of ‘oil exploration’?

By Hassan H. Kochore

Last weekend’s feature story by KTN, ‘Desert of death’, told the story of cancer patients in Marsabit County, northern Kenya. Young and old, they lay on their deathbeds, having exhausted their meager resources on hospital bills. With few resources and no government support, nurse Asunta Galgitelle cared for patients with the utmost dedication and humility.

The number of cancer victims in Marsabit County has been rising for some years ; KTN and other news reports have highlighted the increasing prevalence of throat cancer in particular. Suspicion has fallen on the oil exploration wells drilled in the 1980s by oil company Amoco Kenya. The KTN report argued some of the wells do not appear to have been properly sealed and people living in the areas around the wells fear the water table has been contaminated.

The people of the Chalbi Desert have for centuries occupied one of the most unforgiving terrains of the globe through resilience and perseverance – it is deeply unjust that they could now be subjected to such a man-made disaster.

Oil Explorers

In a book chapter in 2011 , American anthropologist John Wood described how the Gabra of Marsabit district were hospitable to ‘oil explorers’.  He says, “Contrary to my expectations, the Gabra did not see oil explorers as intruders or invaders.” It seems that at worst the Gabra were indifferent to the explorers: “sure they remembered the equipment, they had watched the activity but it was none of their business.”

For their hospitality, the people of Marsabit were paid with the defilement of their sacred land. Land in Chalbi does not only support human life but is central to spirituality in the region. The whole of the Chalbi Desert and Marsabit County more widely are dotted with ritual sites; movement across the landscape is not only a survival strategy but a spiritual necessity.

Today, the people of the Chalbi desert may no longer be able to trust the land and its resources. The polluted habitat renders the population in a perpetual state of fear, not knowing when the next patient will be diagnosed with the ‘silent  killer’ or when the next herd will fall one by one having drunk the waters from the ‘cursed well’. Herds have died in their hundreds before – at Kargi in January 2008, for example. A monster has invaded the land of the nomads. Things are indeed falling apart.

#weareone

Worse still, their own government may have been complicit. Northern Kenya has long had a fraught history with the governments of Kenya, both colonial and post-colonial. In these lands, the government has long been referred to as ‘nyaap’- ‘the enemy’ in the preponderant Borana dialect of the larger Oromo language. Seeing chiefs and government health officials in the documentary pointing fingers at the government is testimony enough that government here is not trusted even by ‘insiders’.

Massacres have punctuated the history of the North — from violence carried out during the Shifta War to killings at Wagalla, Bagalla, and Turbi. Some of these were orchestrated by the government, were carried out with its complicity, or came about because of its laxity, as revealed by the Truth Justice and Reconciliation Commission report released earlier this year. While many campaigned to air their painful memories to the TJRC and ensured that the suffering of the past was exposed, there are no signs at present that the recommendations of the report will be considered or even discussed.

Meanwhile, Northerners continue to be neglected more widely when it comes to the provision of basic infrastructure and services like roads and healthcare – most of the cancer patients in the feature had to go to hospitals in more developed ‘down’ country areas like Meru where they deposited all their hard earned cash.

It will be interesting to see how the Kenyan government will respond to this crisis in these times of #weareone and ‘national cohesion and integration’. What measures will it take to curb this epidemic, ‘detox’ the land and try and win back the hearts and minds of the population?

Community support will be central to the success of some of the government’s regional infrastructural projects such as the multi-billion shillings Lamu-Southern-Sudan-Ethiopia Transport (LAPSSET.) Great tracts of the railway, road and pipeline will pass through Northern Kenya. Community ownership of the project is key, and in these lands where the government is not very popular, a lot of ‘winning of hearts and minds’ will be necessary.  The oil exploitation in Northern County of Turkana will involve similar challenges. As a local lawyer said, summing up the feeling on the ground, “You cannot ignore us for 50 years then Turkana becomes the lingua franca after the discovery of oil.”

In summary, in order to redeem its legitimacy in the north, the government needs, as a matter of urgency, to begin fresh investigations into the rise in cancer cases and present a report to the County government of Marsabit, taking responsibility for any complicity it might have had in the disposal of toxic waste in the area. Without genuine efforts towards acknowledging and apologizing for its history in the region, the government will continue to alienate its Northern populations, the ‘integration’ rhetoric notwithstanding.

Hassan H. Kochore is a graduate student in African Studies at the University of Oxford.

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Somalia’s ‘Constructive Elite’ and the Challenges Ahead

Laura Mann reports from the first event of the Rift Valley Institute’s Nairobi Forum for Research, Policy and Local Knowledge – ‘A Somali Spring?’ A link to the podcast can be found at the end of the post.

On October 11th, the Rift Valley held its first ‘Nairobi Forum’. They invited Ken Menkhaus, Amal Ismail, Jabril Abdulla and Matt Bryden to discuss the post-election climate in Somalia. The former Kenyan ambassador to Somalia, Mohamed Abdi Affey, who was chairing the proceedings, joked: “We wanted to show Kenya what it means to be a democratic nation”.

All parties agreed that Hassan Sheikh Mohamud is a man who combines two clean hands with enormous street cred. There is reason for ‘cautious optimism’ even amidst the challenges ahead. Ken Menkhaus argued that it was not the election of this single remarkable man that was important, but the extensive support network behind him. Describing this network as a ‘constructive elite,’ Menkhaus clarified that this was not a mass uprising ‘Somali Spring’ but a civic mobilization of determined professionals tired of warlordism and ineffective foreign interventions alike. These individuals have been on the ground for the past 20 years, building hospitals, schools, universities and private businesses. They have spent the past 20 years “navigating the streets” as Ken Menkhaus put it. They have learnt how to negotiate deals with difficult parties, how to build trust across clans and most importantly, they know how to get things done. Jabril Abdulla added that these negotiating skills are important. The gradual expansion of the state will not just involve institutions, but people, some benign and some less palatable. Getting warlords to engage in politics is one of the key challenges.

Abdulla added that while elites had gotten him elected, there was nonetheless widespread public support behind his victory. He described how the public ‘legitimized’ the election by broadcasting the news on radios and televisions during the week following the election. However he also cautioned that there were some regions that did not share in the jubilation.

Nevertheless, as each of them said in turn, there is reason for cautious optimism. Continue reading

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Seeking inclusivity in Ethiopian healthcare

By Julianne Weis

In a guest lecture last week at Oxford, Harvard historian Emmanuel Akyeampong began with a methodological caveat, stating that he was not interested in the tradition and modernity dichotomy, but rather saw the two terms as existing in a constant interchange of causation and process. His argument made me think of Jake McKnight’s post regarding those excluded from modernity politics in Ethiopia. Blankedly disregarding “tradition” in pursuit of “modernity,” rather than investigating the constant interchanges between the two terms, leads to an elitist form of development.

It was this dichotomous thinking that formed the basis of failed development politics in Ethiopia under previous regimes – Haile Selassie most notably – and only served to alienate the majority populace. Ethiopia today continues to contend with this exclusionist legacy – particularly when providing services like education and health. In developing a modern health network for Ethiopia, Haile Selassie truly saw himself as starting from zero – any indigenous system or network was conveniently wiped aside as the Imperial regime attempted to inject a fully modern mode of healthcare. In 1944, a British nurse working in Ethiopia called the country a “doctor’s paradise… if to provide a pretty clean slate on which to work is a paradise then it may be agreed that Ethiopia is one.” What is implied in this type of rhetoric is that because Western medical systems were so underdeveloped, Ethiopians had no existent networks of health and healing – the population was merely succumbing to illness and death without making any effort to develop curative or palliative services for themselves. Under this line of thinking, the Selassie regime strove to develop what they termed the first public health network for the empire, training hundreds of community nurses and health officers to man village health centres throughout the countryside – over 400 built before 1965.

Unfortunately these health officers and nurses were notoriously ineffective, owing largely to the elitist core of their operations. The centres’ staff were trained to believe it was they alone who were bringing healing services to this community, completely negating the existing network of indigenous medical personnel already serving the same patients the new health centres were targetting. Anthropologist Simon Messing published several studies in the 1960s showing how the health centres failed to change even the most basic behaviours of the communities they served (e.g. more rigorous hand-washing), pinning that failure directly on the lack of involvement of indigenous health leaders (debetras and wogeshas). Continue reading

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Modernism and development politics in Ethiopia

By Jacob McKnight

There are two paths between Addis Ababa’s top hotels. If you ask the guards at the Hilton how to get to the nearby Sheraton, they will politely point right, up the smooth concrete road. If you ask one of the kids who variously shine shoes, sell gum, shout ‘Farenji!’ and offer to be your guide however, they will beckon you across the street, off the tarmac, and onto a scrub road leading along the Sheraton’s high walls. While the guard’s looping route takes you past manicured gardens, and the newly painted periphery of the Prime Minister’s residence, the kid’s route is quicker and dirtier. Tin-roofed, but long established huts are stacked tight, breaking only for steep, winding pathways and haphazard open drains. Thousands live in these simple homes and go about their business while tourists, businesspeople and aid workers swell the swimming pools beyond the fences and guards.

This stark divide was shocking to me five years ago as I walked the route as a first time visitor to the country, but the locals didn’t see what I did. Over time, I became aware of a diverse middle class of shop owners, taxi drivers, and civil servants who lived in the centre of Addis Ababa on mediocre earnings and gave the city a feel of openness and egalitarianism. They saw wealth but didn’t feel threatened by it and were able to live happy and full lives amidst the bustle of Addis Abba.

All across the country however, a new economic urgency seems to be taking hold. As quick as the capital’s concrete shopping centres continue to rise, so Ethiopians are asked to modernise, develop and participate in building the country anew. The government has led the way. Alongside Korean laid roads, Chinese foremen oversee the installation of fibre-optic cable, promising broadband internet access to newly connected populations. In the fields beyond, recently constructed tunnel tents house flower growing businesses born out of fresh international partnerships. More ambitiously, the government is building the largest hydro-electric dam in Africa and aims to be a net exporter of energy when it is complete. Even within the country’s notoriously bureaucratic ministries, the spirit of modernism is taking hold. The Ethiopian civil service has completed the largest implementation of Business Process Reengineering ever attempted, and now schools, council offices and hospitals all talk of processes rather than departments and customers rather than citizens.

There are many positives to this new spirit of progress and Ethiopia remains a country sorely in need of development. But despite the positive rhetoric of the Ministry of Information, something is not quite right. Continue reading

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