International Alert.

Local Business, Local Peace: the Peacebuilding Potential of the Domestic Private Sector

Case study Somalia*

* This document is an extract from Local Business, Local Peace: the Peacebuilding Potential of the Domestic Private Sector, published in 2006 by the UK-based peacebuilding NGO International Alert. Full citation should be provided in any referencing. © International Alert, 2006. All rights reserved. No part of this publication, including electronic materials, may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without full attribution.

Somalia
Somali enterprises: making peace their business
Aweys Warsame Yusuf
Businesses have played varying roles in Somalia’s conflict, with both positive impacts on post-conflict reconciliation and negative impacts that contributed to an escalation in violence at different times. This study focuses on the dynamics of an evolving private sector and its interactions with violent conflict at different stages, in an environment bereft of regulation. It specifically focuses on southcentral Somalia. It is based on desk-based research into secondary sources; surveys undertaken by the Somali NGO Centre for Research and Dialogue (CRD); as well as personal interviews with businesspeople, elders, civil society representatives and grassroots actors. Access to these individuals was achieved through CRD’s network of contacts.

Geo-political profile of Somalia
Somalia is located in the Horn of Africa together with Ethiopia, Eritrea and Djibouti. During the colonial period, south-central and northeast Somalia was known as the Italian Trust Territory of Somalia, while northwest Somalia was the British Protectorate of Somaliland. Two all-season rivers, the Juba and the Shabelle, rise in Ethiopia and flow south across Somalia. The inter-riverine area is fertile and was formerly known as the ‘breadbasket of the Horn’. Around a quarter of the population are settled farmers living in this fertile zone. Elsewhere, the semi-arid terrain and climate support pastoral and agro-pastoral livelihoods; about 60% of Somalis are nomadic or seminomadic pastoralists raising camels, cattle, sheep and goats. The remainder of the population (15-20%) is urban.

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Conflict dynamics
The Somali state collapsed in 1991 as a consequence of the gradual disintegration of its governance structures. One precipitating factor was the end of the Cold War, and the vast amounts of military and economic aid that the Somali government had attracted first from the Soviet Union, and latterly the United States. The impact of clan-based, armed groups, notably the Somali National Movement (SNM), the Somali Salvation Democratic Front (SSDF) and the United Somali Congress (USC) in different eras contributed to the collapse of the state. These factions had one clear goal – to depose the government – without formulating any unified, postgovernment plan. The military government came to power on 21 October 1969, six days after the assassination of elected president, Dr. Abdirashid A. Sharmarke. Somalia saw a brief period of parliamentary democracy after it became independent in 1960. Fluid clan alliances had dominated the political arena, however, with election votes cast based on clan loyalty rather than political issues. This created widespread grievances, particularly in the north (British Somaliland), where many felt that southern Somalis (Italian Somaliland) sidelined unity issues and manipulated politics in their favour. The alienation of the north and accusations of election rigging in many parts of the country created the grievances that eventually triggered Sharmarke’s assassination. Exploiting the moment, the army seized power ostensibly to restore law and order. General Siad Barre, who led the coup, gained popularity initially by banning the manipulation of clan in all walks of life and by introducing Somalia’s first written script. However, his rule soon evolved into dictatorship. Opposition figures were jailed or accused of treason, and freedom of speech was curtailed. The oppressive Barre regime fuelled the subsequent conflict and collapse of the state. Clan identities were manipulated in divide-and-rule politics and Barre capitalised on Cold War competition in the Horn to attract huge military and economic aid. After Siad Barre was ousted in 1991, the rebels who deposed him struggled for power in the capital, Mogadishu, which is now dominated by one major clan, the Hawiye. Major differences emerged between General Mohammad Farrah Aideed, chairman of the USC, and Ali Mahdi Muhammad, president of the first transitional government. A four-month conflict from November 1991 destroyed most of Mogadishu’s downtown landmarks and killed thousands of residents, while displacing tens of thousands more. A multitude of factions carved Mogadishu up into clan fiefdoms. Eventually, the conflict expanded from its epicentre to embrace all of south-central Somalia. The rest of the country remained relatively stable. The entities of ‘Somaliland’ in the northwest and ‘Puntland’ in the northeast enjoy relative peace, and their

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administrations restored an environment conducive to trade and development. Somaliland offers an exemplary case of democratic process in the Horn with its citizens going to the polls for the third time on 29 September 2005.1 After 14 years, Somalia’s capital is still unruly and remains the greatest obstacle to countrywide reconciliation, with Mogadishu-based clans disregarding the outcomes of several peace conferences. The Transitional Federal Government (TFG), formed in late 2004 as a result of the Somali National Reconciliation Conference led by the Inter-Governmental Authority on Development (IGAD), is still unable to agree on whether to establish its offices in the capital. Although the intensity of the conflict has subsided, flare-ups are common throughout south-central Somalia. The paradox in the Somali context is that many of the factors that drive the conflict have also been central in ending it.2 On the one hand, clan relations are used to fuel power and resource-based struggles, and to mobilise militia; on the other, clan elders are a primary source of conflict mediation and clan-based, traditional law is the basis for negotiated settlements. Secondly, the last manifestation of a centralised state under Barre, far from providing a model of stability, rule of law and the fair allocation of resources, was a conflict factor, and a source of violence and predation. Thirdly, economic interests have led to the emergence of war economies in some areas while, paradoxically, business interests have fostered peace and stability in others.

Socio-economic conditions
In the absence of central government, many assumed that Somalia would quickly degenerate into a state of continuous anarchy. However, compared to the benchmarks of wealthier countries within the region, Somalia fares better in key areas. For instance, Somalia has less extreme poverty and more income equality than richer countries in the region.3 Forty-three percent of the population lives on $1 or less a day, compared to 50 percent in West Africa and 52 percent in neighbouring countries. Two explanatory factors are the Somalis’ historical propensity for trade, facilitated by the country’s geopolitical position and remittances (estimated to be five times the annual aid budget and accounting for around 30 percent of Somalia’s GDP) from the extensive diaspora.4 These factors, coupled with easy access to markets, have enabled many Somalis to engage in trade. Economic activities with a short time-horizon, such as trade, are more likely to prevail in the insecure context of conflict, which makes longer-term investments less attractive. The long, porous and unattended borders with Ethiopia and Kenya, and the presence of ethnic Somalis on both sides of the border, make it possible for Somalis to provide neighbouring markets with comparatively cheaper products (tax on goods are almost non-existent in Somalia, compared to Mombasa port).

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Historically, the Somali economy can be viewed in four different stages: colonial era, the 1960-69 periods, 1970-90 period and the post-government era.5

Colonial economy
The colonial economy focused on the establishment of cash crop plantations in the fertile land between the two rivers, along with the creation of a salaried, official class. In the south, the Italians laid the basis for profitable exportoriented agriculture, primarily in bananas, through the creation of irrigation systems. The plantations also produced cotton and sugar. Banana exports reached $6.4 million in 1957 and cotton $200,000. In that year, plantation produce constituted 59 percent of total exports. Today, due to the reoccupation of fertile land and changes in international trade agreements, exports of agricultural products are no longer a significant element in the economy. Meanwhile, the appropriation of agricultural land by the colonial power left unresolved land disputes that are still outstanding.6

First post-colonial government
The Somali economy was at near-subsistence level on independence, and the new state lacked any capacity to collect taxes from herders and farmers. It could extract customs taxes on international trade but they failed to meet the needs of a government with ambitious development goals. Somalia therefore relied on Italian and British subsidies, which funded about 31 percent of the nation’s current budget in the first three years of independence. In the pastoral sector, the Livestock Development Agency, formed in 1965-66, emphasised veterinary services, the provision of water and holding grounds while cattle were undergoing inoculation and transportation. Pastoralists responded with enthusiasm by entering the international livestock market. In the early 1960s, the value and number of exported animals nearly doubled, and livestock surpassed bananas as Somalia’s leading export.

Military regime (1969-90)
President Barre quickly brought a large proportion of the modern economy under state control. The government nationalised banks, insurance companies, petroleum-distribution firms and the sugar-refining plant, creating national agencies for building materials and foodstuffs. In 1973, the government issued a decree that laid the foundation for cooperative development. In this period, the government reorganised the sole milk-processing plant; established tomatocanning, wheat flour, pasta, cigarette and match factories; opened a plant that manufactured cardboard boxes and polyethylene bags; and established several grain mills and a petroleum refinery. The state expanded sugar operations in Giohar (Jowhar) and built a new sugar-processing facility in Mareerey. In three

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of the four leading light industries – canned meats, milk and textiles – output increased from 1969-75. There were two watershed events for Somalia’s economy. The 1974 drought, dubbed dabadheer (‘the long-lasting one) devastated the pastoral economy and weakened the cooperative-based economy. The other was the Ogaden war, which transformed Somalia’s political landscape.7 The war also turned Somalia’s socialist allies into foes and after the Ethiopian revolution in the same year, the Soviet bloc switched its support to Ethiopia. As a result, Somalia allied itself with the US and the West. Following the loss of Soviet support, Somalia abandoned the socialist exercise and the IMF came in to restructure the economy. By the 1980s, the military government had lost its grip on the country’s affairs. Corruption and nepotism became rampant, and the underground economy flourished. Senior officials exercised their power to partner with businessmen and the public lost confidence in government institutions. Trust-based networks of money handling, albeit illegal, replaced the existing financial institutions (see below). The end of the Cold War was a critical factor in the collapse of the state. Somalia’s geo-strategic importance ensured it received extensive foreign assistance, first from the Soviet Union and later the United States. This enabled Siad Barre to support a bloated bureaucracy and military, one of the largest in Africa, which could not be sustained without external support.8 Limited demographic and socio-economic data exist due to the lack of a Somalia national authority since 1991, and Somalia has not been ranked in the UNDP Human Development Index (HDI) since 1997. The World Bank/UNDP Somali Socio-Economic Survey 2002, published in January 2004, provides key macro-economic and socio-economic data, supplemented by the UNICEF ‘EndDecade Multiple Indicator Cluster Survey’ and the 2001 UNDP Human Development Report. Based on this data, Somalia ranks among the poorest countries in the world, with a per capita income of $226 ($291 in urban areas, $195 in rural Somalia).

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Table 1 – Somali economic data, 2001-05
Indicator 1. Proportion of population below $1/day 2. Under-five mortality rate 3. Gross enrolment ratio in primary education 4. Ratio of girls to boys in primary education 5. Maternal mortality ratio, per 100,000 live births 6. Proportion of one-year-old children immunised against measles 7. HIV/AIDS (adults 15-49 years) 8. Proportion of population reporting they have access to safe water 2001 2002 43% 224 15.7% 36% 1,600 2003 2004 2005

224 12% 35.2% 1,600 15.6%