How the trade flourished before Kenya Army launched Operation Linda Nchi

In January and February last year the Kenya Police seized 450 bags of sugar and 129 cartons of powdered milk smuggled from the port of Kismayu.

The goods were part of a multi-billion shilling trade which used to flourish between Kenya and Somalia before the onslaught against Al-Shabaab was launched.

The latest United Nations Monitoring Report on Somalia and Eritrea details how the militants earned billions of shillings in port fees, smuggling of sugar and other commodities to Kenya, and charcoal exports.

The 417-page report released last July says the group generated between $35 million and $50 million per year from port revenues, of which at least $15 million was based on trade in charcoal and sugar.

The illegal trade, centring on Kismayu and two nearby secondary ports, was carried out through a coordinated trade cycle built on charcoal exports, which in turn financed the import of sugar, much of it subsequently smuggled into neighbouring countries, particularly Kenya.

“Shipping companies deliver sugar to Kismayu and collect charcoal for the return journeys. Bank accounts in the Gulf States where the profits of this trade are deposited can be used to launder voluntary contributions to Al-Shabaab through fraudulent invoicing, overvaluing of import proceeds and undervaluing of exports,” the report reads.

This trade cycle is dominated by networks of prominent Somali businessmen operating mainly between Somalia and Gulf Cooperation Council (GCC) countries, notably Dubai in the United Arab Emirates.

The viability of the Kismayu trade corridor depends in large part on its proximity to Kenya, the remote and porous 682 km border and the profitability of the contraband trade.

Furthermore, the Monitoring Group believes that well-organised criminal networks with links to Al-Shabaab are taking advantage of the porous border to smuggle people, goods and weapons.

Al-Shabaab not only attracts their business by imposing lower taxes in Kismayu than at ports controlled by the Transitional Federal Government but also actively promotes large-scale imports of sugar and exports of charcoal by offering preferential access and tax breaks to Al-Shabaab affiliated businesses.

“Consequently, many Somali traders avoid Mogadishu, preferring to discharge their cargoes at Kismayu or other ports where taxes are lower. For example, Mogadishu port authorities charge import duty (of) $1,300 on a mid-size vehicle,” reads the report. At Kismayu, Al-Shabaab charges only $200.

“Even if the transporter then wishes to deliver the vehicle to Mogadishu, it costs another $200, including driver fees, fuel and miscellaneous expenses,” the report reads.

“The vast majority of imports via Kismayu are not intended to serve the local population, but are destined for other parts of southern Somalia that could be equally or better served by Mogadishu or be smuggled into neighbouring countries,” it says.

By April 2011, Kenyan sugar sold at between Sh4,800 and Sh4,900 per 50kg bag (approximately $58-$60), while the same amount of sugar smuggled from Kismayu sold in Garissa at between Sh4,350 and Sh4,450 (approximately $53-$55), even after a mark-up of roughly 20 per cent.

According to a senior Kenyan customs official in North Eastern Province, about 10,000 bags of contraband sugar could have been entering Kenya from Somalia on a daily basis at the peak of the trade.

The report also quotes Kenyan authorities as having discovered light weapons and ammunition concealed in the sugar.

“In addition to those taxes on businesses, Al-Shabaab operates a comprehensive web of mobile military checkpoints where transport operators and passengers are all obliged to pay taxes for free passage,” says the report.

It names two prominent figures in the network who are businessmen with historical links to militant Islamist groups in Somalia — Abukar Omar Adaani and Ahmed Nur Jim’aale.