Ethiopia and Kenya help dismember Somalia

A new deal has recognised Jubaland, a strip of land in southern Somalia and bordering on Kenya and Ethiopia, as yet another quasi-independent entity in the region.

After nine days of late night meetings and plenty of arm-twisting, the fragile government of Somalia was finally forced to accept that a further slice of its territory had slipped beyond its control. The deal, signed in Addis Ababa, recognised Jubaland as yet another quasi-independent entity. This strip of land in southern Somalia and bordering on Kenya and Ethiopia, it is the illegitimate heir of both of these countries.

Jubaland is of critical importance to the whole of southern Somalia. Trade through the port and airport of Kismaayo is a lifeline for the region. In theory Jubaland will be the ‘Interim Juba Administration’ and last for just two years, while Somalia re-forms itself into a Federation. In reality it is now outside Mogadishu’s control – just like those other fragments of Somalia, including Puntland, Galmadug and the self-declared independent state of Somaliland.

President Hassan Sheikh Mohamud, who was only sworn in as Somali president a year ago, was unable to resist the intense pressure of his neighbours and agreed to the deal. The entire sorry saga was witnessed by Nicholas Kay, the UN’s Special Representative in Somalia; welcomed by Catherine Ashton for the European Union and supported by the African Union. Nkosazana Dlamini Zuma, the South African chair of African Union described the agreement as “historic”, declaring that it was “a further illustration of the capacity of the Somalis to triumph over their differences.” 

It is hard to see what there was to welcome. 

The deal officially recognises Ahmed Mohamed Islam (known, like all Somalis by a nickname - ‘Madobe’) as the ‘leader’ of Jubaland. Yet only a month earlier Sheikh Madobe was described in a major UN report as a “spoiler” and one of the chief threats to Somali stability.

The Sheikh was said to be “subverting the efforts of the Federal Government leadership and its partners to extend the reach of Government authority and stabilise the country, particularly in Kismaayo.”

What the Baroness Ashton and her colleagues have done is anoint a man who has been roundly denounced by the Monitoring Group, established by the UN Security Council. Its July report pointed out that the Sheikh had been a member of the short-lived Union of Islamic Courts, which was ousted by Ethiopia during its 2006 invasion of Somalia. What happened next is interesting. As the report puts it: “Madobe’s forces returned to Kismayo in August 2008, when Al-Shabaab and Hizbul Islam recaptured the city following the withdrawal of Ethiopian troops from Somalia.” At this time the Sheikh Madobe was a key player in the al-Qaeda linked network.  But, as is ever the case in Somalia, clan and inter-clan rivalry came into play and the Sheikh fell out with his former allies. He threw in his lot with the African peacekeepers and the Federal Government.  But Sheikh Madobe did not cut his ties with al-Sabaab altogether and the UN report accuses him of continuing the export of charcoal from territory controlled by the Islamists – a trade long since outlawed by the UN because of its catastrophic impact on the Somali environment.

Under the new arrangement the Sheikh retains the port and the airport, although he is required to hand control to the Federal Government within six months. Since this would cut his income and hence his power, there seems little chance of the handover ever taking place.

The outcome has been a triumph for Somalia’s neighbours, even though Kenya and Ethiopia will continue to vie for influence in this critical part of the country.

The Kenyan foreign ministry has long seen the establishment of a buffer state along its northern border as vital to its security interests. Thanks to Wikileaks, we know that Kenya’s Foreign Minister, Moses Wetangula, practically begged the United States for its support when he saw Johnnie Carsons, President Obama’s most senior US Africa official, in January 2010.  The Kenyans were requesting backing for an invasion of Somalia to create Jubaland, but the Americans were far from keen.

As the confidential embassy telex puts it: “Carson tactfully, but categorically refused the Kenyan delegation’s attempts to enlist US Government support for their effort.” It was, said the telex, the third time Wetangula had made the appeal, but Carsons resisted, pointing out – rightly – that “the initiative could backfire.” Critically, Carsons warned that: “if successful, a Lower Juba entity could emerge as a rival to the TFG” (Somalia’s Transitional Federal Government). This is exactly what has now come about.

Brushing these concerns aside, Kenya sent its troops into Somalia in October 2011. As predicted, they found it very heavy going and it was to take almost a year before al-Shabaab were driven from Kismaayo.

For the Ethiopians, the establishment of Jubaland is a further fragmentation of Somalia, its sworn enemy since the Somalis invaded their country in 1977. It was an attack that is imprinted on Ethiopian memories, fuelling a determination to see the end of a powerful, centralised Somali state.

As if the situation was not complicated enough, newly created Jubaland could be sitting on reserves of oil. Several fields have been detected in the waters along the Kenya-Somali border, but, like many African frontiers, the location of the border is a matter of dispute.  The Somali government refuses to recognise oil licenses granted to multinational companies by Kenya, and has persuaded several oil-majors, including Total and the Norwegian state owned Statoil, to withdraw their claims. But, said the UN in July, the Italian firm, ENI, was still pressing ahead with its claims.

As Jonnie Carsons remarked in 2010, Jubaland “raises more questions than it answers.”

Ahmed Mohamed Islam during a meeting in Kismaayo earlier this year. Photo: Getty

Martin Plaut is a fellow at the Institute of Commonwealth Studies, University of London. With Paul Holden, he is the author of Who Rules South Africa?

Ralph Orlowski / Getty
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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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