By ICG (Report)

Al-Shabaab has given the impression of being financially competent and less corrupt than the central and local authorities it opposes.82 But above all, and unlike its armed Somali adversaries including the SFG, it pays its soldiers and operatives well and regularly and provides for its veterans and the families of its “martyrs”.83 For much of the last five years, its operations in south-central Somalia resembled a “fiscalmilitary state”.

The precise mechanisms of its fiscal management are deliberately opaque. Inevitably some transactions flow through Somalia’s ubiquitous hawala system.85 Greater international scrutiny has discouraged direct transactions; instead, trustworthy people are given the money to invest in personal businesses and return the capital later.

However, the rise of mobile money transfer companies inside Somalia, subject to much less scrutiny, is likely to facilitate Al-Shabaab cash flows within the country. There are also anecdotal reports that the group copes with the uncertain financial environment and fluctuating cash flow by investing in gold.

Against most predictions and despite UN sanctions, Al-Shabaab has weathered the loss of exclusive control over important revenue streams such as Mogadishu (especially Bakara market) in August 2011, and Kismayo, (especially the port) in September 2012, and still imposes covert levies on trade.89 Territorial losses are also somewhat offset against reduced administration costs. The group continues to tax commercial activities wherever it can.90 Other revenue is opportunistic and irregular,  some of it allowed by Sharia (such as qhanimah,  aluables seized during battle), much of it illegal, including under Sharia. Though it denies involvement, Al-Shabaab takes an interest in the brisk kidnapping business, buying victims, charging higher ransoms.91 There have long been reports of it ‘‘taxing” profits from piracy in Haradheere,  Galgaduud.92 Most recently, there are allegations that it profits from the illegal ivory trade.

Read more: Somalia Al Shabaab – It Will be a Long War

ICG Report