Issue No. 642

The Imminent Collapse of Somalia’s Khaki Economy 

The mandate of the African Union Transition Mission in Somalia (ATMIS) is set to expire in December 2024. At that time, the long-serving African Union forces are expected to transfer their responsibilities to Somali security forces – encompassing the Somali National Army, the Somali Federal Police, and Federal Member State (FMS) police forces. Despite a staggered reduction and repeated delays, serious doubts remain about the SNA's capacity to assume sole responsibility for military duties across southern Somalia. A dangerous security vacuum in which the FGS will cede territory to Al-Shabaab is highly likely. This is just part of the picture, however. With the looming withdrawal of thousands of ATMIS forces, a concomitant reduction of mission support service and financial resources will inevitably follow. Billions of dollars later, Somalia's 'khaki' security economy now faces the prospect of imminent collapse.
 
The statistics concerning Somalia's khaki economy are perplexingly opaque. In 2017, a Security and Justice Expenditure Review (SJPER) jointly prepared by UNSOM and the World Bank estimated that "USD 1.5 billion per year is spent by international partners on peacekeeping, counterinsurgency and support to the Somali security sector." Subsequent reporting on aid flows by the FGS Ministry of Planning and International Co-operation (MoPIC) offers far lower figures. To them, certain categories of security assistance, such as military aid and the "enforcement aspects of peacekeeping," do not qualify as overseas development assistance (ODA) and are therefore not included in official government figures. In 2021, for example, ODA for the Somali security sector and rule of law was calculated at USD 351.2 million.
 
Adding to this budgetary jigsaw is the fact that AU military operations are underpinned by the UN Support Office in Somalia (UNSOS). UNSOS provides a range of mission-critical services in support of ATMIS and the SNA, including logistical, financial, and administrative support to pre-draw-down 19,626 ATMIS personnel, as well as 13,900 members of the Somali security forces. The mission is also a crucial backbone for civilian operations within the protected international compound centred on the Aden Adde International Airport, including supplying water, fuel, sanitation, communications, and more. The UNSOS budget for the period from 1 July 2022 to 30 June 2023 amounted to USD 526,933,600.
 
These figures account for roughly USD 1 billion in foreign security assistance, out of the USD 1.5 billion estimate in the 2017 SJPER. But if the SJPER estimate is correct, Somalia's khaki economy represents over 5 times the Somali federal government's revenues in 2024, and 50% more than the entire FGS operating budget for the current financial year – two-thirds of which is financed by foreign donors. In other words, absent massive infusions of direct security assistance, Somalia has no realistic prospect of funding its national security post-ATMIS.
 
The likelihood of a security vacuum is only part of the equation. The ATMIS draw-down will also have an incontrovertible, but poorly understood, economic impact. UNSOS support for ATMIS will also necessarily contract, producing immediate, follow-on economic shocks-- especially in Mogadishu, where the vast majority of UNSOS assets and services are located. Many of the capital's leading entrepreneurs enjoy lucrative contracts with UNSOS, providing water, sanitation, accommodation, and life support to the vast international campus at Halane. Although there is little transparency concerning the ownership of Somali private enterprises, nor the contracting processes within Halane, it is safe to assume that much of Mogadishu's glitzy new skyline has been underwritten by foreign aid contracts. And with African Union forces securing Halane for several years, the possibility of its destabilisation should also ring alarm bells. If, say, two years from now, international aircraft can no longer land in Aden Adde, much of the capital's political economy could be upended.
 
The indirect economic effects of the ATMIS draw-down are even harder to predict. Any depreciation of security across southern Somalia will surely negatively impact aid agencies' operations and donor investments' scale. With the Halane compound likely to become even more siloed, international agencies face the unpalatable choice of sustaining aid levels with fewer checks and balances or withdrawing funding. Entire value chains of project contracts, employment opportunities, and public services – mainly in the capital – would be adversely affected. A large number of high-paying jobs for Somalis who serve in niche roles as project managers and advisers in aid programmes would likely be subject to review – threatening, in turn, a thriving hospitality sector that caters to their needs.
 
Most of the Somali population is unlikely to suffer the same degree of turbulence. The economic benefits associated with forward-deployed ATMIS bases and Forward Operating Bases are modest and highly localised. But the erosion of security across southern Somalia is certain to be felt beyond their compound walls. As SNA and ATMIS forces have retreated, so Al-Shabaab has sought to increase its 'taxtortion' practices, including in major urban centres under nominal state control.
 
This will impose real constraints on government efforts to expand its income through legitimate federal and state taxation. Plans to expand its taxation capacity were key for Somalia's reaching the Heavily Indebted Poor Country (HIPC) Initiative that forgave USD billions of the nation's debt. Internally, negotiations between the FGS and FMS over fiscal federalism will become more difficult and acrimonious as the millions dry up. Macro-economic projections of FGS revenue growth in the near term, including Somalia's ability to service new debts and continue its HIPC reforms, will need to be adjusted accordingly.
 
Expectations that Somali security forces will be capable of assuming ATMIS responsibilities may also have to be adjusted downward, with much of the SNA heavily dependent on the UNSOS administrative and logistical platform. But even if UNSOS continues its support to Somali security forces at current – or even higher – levels, there exist serious and legitimate concerns about the SNA's ability to maintain the military initiative, given deficiencies in command, control, cohesion, and combat capabilities. More prosaically, a gulf of several thousand experienced personnel appears to be unavoidable.
 
In December 2023, proposals to replace ATMIS with a more limited international 'guard force' in parts of Mogadishu and major urban centres were touted at a security conference on Somalia in New York. Details are scarce, but this may help to forestall physical encroachment by Al-Shabaab on government-held areas and provide a kind of security "bandaid" in lieu of more wide-ranging and durable security solutions. But with the FGS embroiled in an ugly and ill-judged tussle over attempts to rewrite the Provisional Constitution, and federal elections scheduled for May 2025, the political climate is hardly conducive to complex and effective security sector reform. The imminent collapse of Somalia's khaki economy renders prospects of a smooth security transition even bleaker.

By the Somali Wire team