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Josephine Hart, acclaimed author, once said “Damaged people are dangerous. They know they can
survive.” Given the peculiar circumstance in Somalia,
the Somali people perfectly fit the above description. The collapse of any vestiges of a
central government in 1991 disrupted all sides of the state apparatus and resulted a
prolonged civil war which killed a quarter of a million people and forced many Somalis
– almost one million - to seek refuge in different parts of the world. The civil war
has debilitated the country, suffocated the economy, incapacitated the public and private
sectors, and caused distress and hardship on the society at large. Despite all these, Somalia
is now a stateless capitalism and the Somali people are running businesses in a unique way
in order to survive under a collapsed economy.
Words are not enough to reflect the chaos,
hunger and difficulties that Somalis have endured ever since the civil war broke out;
however, they have shown an incredible resiliency to survive which even challenges
conventional ideas about any economy. It is generally believed, to enhance or maintain the
economic health of a nation there must be a functioning central authority otherwise,
reasonable economic activities cannot take place. Since Somalia does not have the
necessary institutions that are necessary for a modern state system to operate, it is
forced to resort its own devices and develop an informal economy based on informal
finances.
Soon after the violent removal of Siad Barre in 1991, Somalis understood that
the world was not coming to their rescue and they had to forge an economic system in order
to survive. They also recognised the importance of restoring the trust needed for the
economy to operate. When it comes to trust, Somalia has been suffering from a shortage of
trust on many fronts, particularly the political one. The country’s record speaks for
itself - 15 national reconciliation conferences within the last 15 years. Strangely,
Somalis have managed to adopt an unconventional economy on the basis of upstanding
business ethic. This means economic transactions can actually go on without a regulator so
long as they are embedded in a pre-existing web of social networks. Joshua Kleymeyer, Euro-Atlantic Action
Commission, Center for Strategic and International Studies, described this “One
mistake or abuse, and you loose the honor offered to you by your clientele”.
Trust is indeed the first of all the instrumentalities that facilitate
exchange and the first beneficiary of this unique trust is the Somali shilling. Somalis
have shown unwavering loyalty to their currency long after the country lost its Central
Bank. Even when The Cairo Times said in 2001 “With no government to issue banknotes, every Somali
that can afford it prints his own”. Peter Little explained this
extraordinary devotion in his book Somalia: Economy Without State “There are some
practical factors that help explain the persistency of Somali shilling, even in the
absence of a central bank or treasury. These include, for example, the SoSh is: [1] needed
to facilitate transactions in the absence of another widely available currency; [2] in
limited supply and therefore its demand is high; and [3] well known to local consumers and
businessmen.
The trust in the shilling would have been short-lived if the currency could
not be moved around. In order to satisfy the money transfer demand, Somalis chose an
ancient and efficient system of exchange called Hawala. Wire services, or hawala, fill the
role of financial institutions in Somalia, Ahmed Mohamed, a Somali business expert, said, “Currently, there are no banking and regulatory
financial institutions to provide the services required by individuals and businesses in
Somalia. Furthermore, internal and external investment is exceptionally reduced due to
multiple risk factors. However, all is not lost; an expansion of the traditional
‘hawala’ services enables the remittance organisations to act, not only as
money-transfer agents, but also as conduits for trade and as quasi-banks. These remittance
organisations currently are the lifeline for a significant portion of Somalis and form the
backbone of the economy, bringing close to US $1 billion annually from over one million
Somali migrants living abroad.”
Earlier, Hawala service providers used to arrange for a trusted individual to
deliver the money by hand. In order Hawala to be competitive and cheap, Somalis realised
the limitation of the delivery process and sought other ways to overcome. Anna Lindley,
University of Oxford, wrote “After the government collapsed, there was no longer
control of the radio system and by using high-frequency (HF) radios; it became possible to
communicate cheaply with many places in Somalia.” Since the
Somali society has essentially been globalised, HF is not a useful tool for a global
remittance system. Once again Somalis chose Hawala to run on modern gadgets like computers
and satellite phones. The growth in information and communication technology enables
Hawala to become a quick, competitive and cheap way to transfer funds.
The aim of the above discussion is not to present the Somali economy and
society with an overly rosy picture. On the contrary, Somalia is the poorest country in
the world. A report published by the UNDP in 2002 depicted the poignant realities in the
country, “In Somalia, life expectancy is 47 years, almost one out four children dies
before the age of five, and less than a third of Somalis have access to health services.
Only one out of every five Somalis can write and read, and only 14 percent of children are
enrolled in primary schools. More than three-quarters of the Somali population has no
access to clean water, and almost half of them have no access to sanitation.”
Whatever the circumstances, there is one undeniable fact about this unique
nation. Somalia is a nation where survival is
around the clock occupation and Somalis are now masters of survival. They have shown an
incredible capacity to withstand hardship and challenges using their entrepreneurial
skills, and that they can even compete with neighbouring countries that have functioning
governments. Little also noted this “with inconsistent and minimal international
assistance, there were few options but to develop a ‘second economy’ based on
cross-border trade and smuggling, informal finance, and a global system of remittance that
has allowed the territory to maintain a level of economic welfare comparable to some of
its neighbors”.
Mohamed Mukhtar
London
Email: mohamed323@hotmail.com
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Mohamed
Mukhtar Ibrahim