Issue No. 840

The jihadist protection racket and the conflict economy

Somalia's Al-Shabaab jihadist armed insurrection has entered its 18th year with no let-up in violence or any sign the conflict is close to a resolution. Indeed, Al-Shabaab is resurgent and remains as lethal as ever, having displayed its continued prowess after sweeping across much of central Somalia in its Ramadan offensive-- and beyond-- earlier this year. But what allows Al-Shabaab to thrive is not solely the ability to project military power or deploy intimidatory violence, but also the often under-reported, extensive and insidious rent-seeking and control of local economies as well. 

Al-Shabaab is widely considered the wealthiest insurgency in Africa, estimated to rake in USD 200 million annually —a figure comparable to the administrations of Mogadishu, Jubaland, or Puntland. The principal manner in which it funds its operations remains zakat (taxes) that it extracts from wealthy urbanites in Mogadishu and impoverished communities in rural Somalia alike. And unlike the federal government, whose financial scope is nearly entirely constrained to Mogadishu, Al-Shabaab's tendrils extend across the entire country. There are few who do not pay Al-Shabaab's 'taxtortion' - including cabinet ministers and government officials - that always comes before any formal administration attempts to impose levies. Also, unlike the haphazard, ad hoc manner of government taxation, Al-Shabaab's 'zakat' is usually standardised, with the jihadists routinely offering receipts. This is particularly useful in the isbaaro (checkpoint) economy of south-central Somalia, where traders can pass through Al-Shabaab-held territory without having to pay multiple bribes.

Measuring the strengths and weaknesses of armed groups based on territorial control alone is insufficient in providing an accurate picture of their influence over a political economy. As evidenced by the major offensive launched in late February across Middle and Lower Shabelle, Al-Shabaab no doubt covets territorial expansion, particularly over urban settlements and farmlands with large livestock concentrations, but its taxation capacity is not constrained by the fact it does not control Mogadishu. Indeed, Al-Shabaab has managed to adapt to the loss of land and subsequent territorial fluidity and today has access to every vessel's manifest that docks at the Port of Mogadishu to extract the necessary rents, for instance. The jihadists may only control around 30% of the country, but this includes swathes of the Juba and Shabelle Valleys, the southern Bay region and most of Gedo. These areas encompass the most fertile and densely populated regions of the country, and thus, Al-Shabaab is closely tied to the heart of Somalia's agriculturally dominated economy.

Due to the clan-based nature of Somali society, land has always played a pre-eminent role in the country's political economy, even as the pastoralist lifestyle is increasingly devastated by the climate crisis. Here, too, is Al-Shabaab inserting itself, wielding its courts in perennial inter-clan land disputes as a supposedly neutral arbiter. Their courts that dispense a mixture of Sharia and xeer-based rulings are ubiquitous, including in the Ali Mahdi and Basra districts near Mogadishu that specialise in providing tahkim (reconciliation) and sulh (resolution) to settle land disputes. As part of a final settlement, parties routinely agree to pay land rates and zakat to Al-Shabaab. Their arbitration is widely regarded as more efficient and less corrupt than the anaemic legal and judicial interventions by the Somali state.

Such is the scale of Al-Shabaab's finances that it not only launders money through illicit means but also through licit companies and major industries as well. Perhaps best-known is the jihadists' involvement in the real estate and construction booms ongoing in Mogadishu and Nairobi, but the militant group also ploughs proceeds back into profitable companies. This ranges from transportation, including the ubiquitous bajaj (three-wheeled motorbikes) in Mogadishu, to pharmaceuticals to networks of Islamic charities that are registered with the Somali federal government. Highly sophisticated facilitators are used to negotiate the extremist group's money through legitimate banks and financial service companies, made far easier by the scale of corruption in Somalia as well as Kenya.

Al-Shabaab's interactions with Somalia's largely informal economy are underwritten by an implicit--or explicit-- threat of violence. Reliable figures are unsurprisingly hard to come by, but vast sums are believed to be drawn from telecoms, hawala, and hotel companies, which pay 'secret' taxes to the jihadists as well as the government. In turn, some have posited that the hotels in the capital that Al-Shabaab has attacked have been targeted over failure to pay protection money. Telecom companies pay regular, undeclared sums to the militant group to 'keep an eye' on their infrastructure, such as generators, and to operate in areas under the militants' control. A 'fall-out' between Hormuud, Somalia's largest telecoms company and tied to the shadowy Salafist Al-I'tisaam movement, and Al-Shabaab in late 2023 resulted in the jihadists bombing their offices, communication towers, and employees. 

Al-Shabaab's rent-seeking is pragmatic and opportunistic, and does not lay an exclusive claim to being the only legitimate tax authority. As long as it gets its dues from businesses, it cares little about who else they pay-- even though Al-Shabaab would technically classify any monetary payment to the federal administration as support for an 'apostate government.' Here is a concrete example of Al-Shabaab modifying its ideology to the dictates of protection racket pragmatism, even if such funds are subsequently used to advance its jihadist agenda. In contrast, the federal government has passed a raft of legislation criminalising businesses from paying Al-Shabaab's taxes but has no power to enforce such laws. Though much is made about shuttering the occasional jihadist-connected bank account, Al-Shabaab's finances are as healthy as ever. In the wake of several bombings on markets that have installed government-mandated CCTV systems, it is little wonder that the rhetoric of 'don't pay the khawarij' has little traction for traders. But neither does Al-Shabaab always manage the balance between extracting rents and triggering resistance, famously triggering the ma'awiisley uprising in Hiiraan in mid-2022 amidst the savage drought after imposing high levels of zakat on suffering communities.

The porousness of the Somali state and the corruption within its political economy have enabled the evolution of Al-Shabaab from a jihadist group into a more complex entity, incorporating elements of a proto-mafia and rural criminal syndicate. Demanding protection money and threatening those who do not pay, Al-Shabaab also offers security and social services that the federal government has only been able to deliver fitfully. Simultaneously, the group directly deals with transnational criminal groups in Puntland, where it sources weapons and armaments from particularly Yemen, including increasingly the Houthi militant group. But within Somalia, the extremist group's control and penetration through the country's political economy is one of its most powerful tools in its enduring fight against the federal government and its international allies. 

With the immediate threat of Al-Shabaab seizing Mogadishu having eased, some have suggested that one of the reasons the jihadists declined to attempt to capture the capital was due to the rents that it extracts from international largesse. After all, Al-Shabaab is one of the beneficiaries of the billions of USD that have been poured into Somalia over the years, taking a cut of government revenues and contracts. But a more likely explanation is that the jihadists are simply waiting to see whether the African Union Support and Stabilisation Mission in Somalia (AUSSOM) will collapse for lack of funding, and they can seize power in Mogadishu without a fight. In the meantime, one can only contrast Villa Somalia, whose acquisitive behaviour and corruption only benefit individuals, with Al-Shabaab, whose careful amassing of wealth and control of the political economy is focused with laser-like intensity on seizing power.

The Somali Wire Team