Monday, 26 July 2010

Collateral advantage: the Kenyan connection to Somali pirates.

Investigations by the Kenyan newspaper ‘The Daily Nation’ show that many Kenyan outfits are raking in the moolah doing business with Somali pirates. “Piracy and the big money being made out of it is seeping into Kenya’s economic fabric, presenting a serious threat to the economy as well as law and order,” it quotes experts as saying.

This news comes after an earlier US State Department report that pointed at Kenya as the money-laundering hub in Africa, saying that the hawala system was routinely used to whitewash ransoms. This, claims an International Narcotics Control Strategy Report, is a US $ 100 million a year business, parts of which have percolated into the Kenyan financial system. Kenyan observers are concerned that huge sums of money are distorting the economic and social fabric of that country. The director of research, projects and programmes of Tax Watch Africa, a development and integrity watchdog, Dr Bani Orwa, said piracy money is creating “economic elitism” in the country as only a few individuals control the earnings. Money is laundered through transactions in real estate, the stock market, foreign exchange market and imports. The Kenyan Planning Minister has expressed concerns that that this money laundering could hurt the country’s economy.

In an independent report, the World Peace Foundation accuses Kenya of being one of the countries “whose firms play a key role in driving piracy along the Somali coast”. The Foundation says that piracy in Somalia is run by the bosses of seven syndicates with around 1500 pirates. These ‘businesses’ are all connected to Kenya, Dubai, Lebanon, Somalia and some European countries, it claims.

Analysts are concerned that Kenyan law firms, security, aviation and shipping companies routinely deal with pirate gangs, who are flush with ransoms of about $80 million annually. However, the true cost of piracy, according to International Maritime Bureau estimates, is USD 18 billion a year. Kenya attracts a bit of this, as some companies there act as a go between shipowners and pirates, facilitating negotiations and payment.

Andrew Mwangura of the Seafarers Assistance Programme agrees, saying that millions of dollars exchange hands between pirates and ship owners. “It is true that owners of hijacked ships are paying pirates to secure the release of their ships and crew members held hostage with most of the money passing through Kenya,” he says.

Another Kenyan maritime official spoke to the Nation on condition of anonymity. “Law and security firms facilitate negotiations and preparation of agreements, while aviation and shipping companies deliver ransom payments to the pirates in Somalia,” he said, adding that ransoms were taken from Mombasa or Nairobi to be handed over to pirates, sometimes from private airfields. “The money is either delivered to private airstrips around Nairobi from where it is flown and dropped to pirates on hijacked ships or is loaded on ships that go to Somalia from Mombasa port to deliver,” he said.

Pirates then pay off the agencies involved through their agents in Kenya through the infamous hawala system.

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