What you need to know about al-Shabab

How the militant Somalia group behind the deadly attack on a Kenyan shopping centre formed, and why it is attacking foreign targets now.

It didn’t take long for the Somali militant group, al-Shabab, to claim responsibility for this weekend’s deadly attack on the Westgate shopping centre in Nairobi. The group, which has a strangely active social media presence despite repeated attempts to close down its twitter feeds, claimed responsibility via twitter and said they were retaliating against Kenyan troops currently fighting militant groups in southern Somalia.

Al-Shabab, which means “the youth” in Arabic, was originally the militant, youth arm of the Islamist coalition the Islamic Courts Union. When Ethiopia invaded Somalia in 2006, al-Shabab gained prominence as part of the armed resistance movement. It flourished in the lawlessness that followed Ethiopia's withdrawal in 2009, bolstered by funding from Eritrea. In 2011 Somalia and African Union forces forced al-Shabab out of Somalia’s capital, Mogadishu, but large swathes of the country are still under al-Shabab control.

Those under al-Shabab rule are subject to the most draconian interpretation of Sharia law, which is violently enforced. Football and music are banned, women are forced to cover their faces in public, and are lashed if they don’t obey. Al-Shabab officially joined Al Qaeda in February 2012, but has long aligned itself with Al Qaeda’s narrative of global jihad, and was first designated by the US as a terrorist organisation in 2008. In 2010 it carried out its first overseas terrorist attack, when two suicide bombers killed 67 people watching the World Cup Final in Kampala, Uganda. Since 2011 al-Shabab has carried out a number of smaller attacks on bars, tourist resorts, churches and military sites in Kenya.

One puzzling aspect of al-Shabab’s latest attack is that many believed al-Shabab was weakening. In September 2012 it was forced out of the strategic port town of Kismayo. The same year,  Somalia's first formal parliament in more than 20 years was sworn in, a sign of improved security and confidence. On 16 September this year, the Somali government secured ₤1.5bn funding from the EU to rebuild the country.

Al-Shabab has also fallen victim to infighting. Its co-founder Ibrahim al-Afghani was killed earlier this year, and several high profile members fled or turned themselves in to government forces following a coup by Ahmed Abdi Godane. Godane is believed to be a keen advocate of closer association with Al Qaeda, and as early as July this year, analysts predicted that Godane’s leadership would lead to an escalation of violence.

As Simon Tisdall concludes in today’s Guardian: "The terrorists are divided and losing ground. But they seem determined to go down fighting."
 

An image grab taken from AFP TV shows Kenyan troops taking position on 21 September, 2013 inside the Westgate mall in Nairobi. Photo: Getty

Sophie McBain is a freelance writer based in Cairo. She was previously an assistant editor at the New Statesman.

Ralph Orlowski / Getty
Show Hide image

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

0800 7318496