Without a stable central government, Somalia’s telecommunications network has been unregulated for decades. This has allowed for tremendous growth and fairly low prices for phone and Internet access in Somalia compared to neighboring countries.
However, this has also created a Wild West atmosphere of clan elders and businessmen in Mogadishu cutting deals with international—often Saudi-backed—telecommunications providers like Arabsat. Arabsat is based in Saudi Arabia and is owned by the Arab League. In addition to providing phone coverage, Arabsat’s satellites host television broadcasts by well-known hate channels Al Manar and Al-Aqsa.
The government of Somalia has made attempts recently to begin taxing and regulating the telecommunications industry, but the bigger factors at play are the taxes you don’t see. Some evidence suggests that informal licenses are granted by warlords or businessmen in exchange for bribes paid behind the scenes.
Reporting from the Gulf News earlier this year went even farther, suggesting that the warlords allow the telecoms to over-charge customers so they can pocket the difference or pay off al-Shabaab too:
…By persuading other telcos worldwide to clip the ticket for them, these [Somali telecommunications providers] groups has [sic] become wealthy enough to avoid attempts by government and the regulatory International Telecommunication Union (ITU) to rein them in.
Not only do these groups exploit vulnerable customers charging them often beyond their means and disproportionate to costs, there are also suspicions that some sponsor the terrorist scourge, Al Shabaab.
By negotiating with foreign companies to charge above the usual rates and to put money collected into overseas funds, these “companies” avoid tax — and have sufficient clout to offer deals to favoured factions, or fund groups they believe will deliver a government suited to their economic or ideological aims…
There are also rumors of relationships between, or at least pressure exerted by, al-Shabaab on several specific Somali telecommunications companies including Hormuud Telecom. RBC Radio reported this year that, “Al Shabab has closed down Hormuud Telecom Company’s branch in Jilib town, Middle Jubba region after the company failed to pay $50,000 which Al Shabab demanded from local companies,” and added that, “Extorting money from private business companies and aid agencies operating in Somalia is seen as the biggest source of investment for Al Shabab’s war with the government.” Some sources have gone further, describing Hormuud as “al-Shabaab’s messenger” or “the phone of death” taking its cues from al-Shabaab.
In October 2011, Hormuud was allowed to remain in operation while two rival companies were closed by al-Shabaab. One of those rivals, Nationlink Telecom, eventually reopened after allegedly paying $30,000 to al-Shabaab to resume operations. An al-Shabaab member told the Somalia Report that non-cooperative companies would be forced to close “until their managers agree to pay taxation for the war against the infidels as well as the crusaders.”
While it is possible that some of the claims about the telecommunications business in Somalia have been exaggerated due to clan or business rivalries, former al-Shabaab commander Mohamed Farah Al-Ansari confirmed the role of extortion against Somali telecommunications companies in funding al-Shabaab in an interview with Voice of America last year.
There are enough grounds for concern that international investors and corporations would do well to examine any business deals with Somali telecommunications companies with the utmost caution. Similar to the risks of doing business with the money transfer company Dahabshiil, the taint of al-Shabaab is simply too strong to ignore.