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Eastleigh has been unfairly cast as a villain

FINANCIAL STANDARD
By MOHAMED WEHLIYE | Apr 29th 2014 | 5 min read
By MOHAMED WEHLIYE | April 29th 2014
FINANCIAL STANDARD

By MOHAMED WEHLIYE

In the last two decades, Eastleigh Estate has become East Africa’s commercial centre.

From this eastern Nairobi suburb, businessmen and women of all nationalities direct trade from Cape Town to Cairo, and further afield in the Gulf of Aden and China.

People come to Eastleigh not only from Murang’a and Malaba, but also from neighbouring countries such as Tanzania, Rwanda, Southern Sudan and Uganda.

OFFER CREDIT

Shopping malls that offer a wide range of goods at bargain prices have sprung up all over Eastleigh, which have also attracted hordes of shoppers who support the many box-and-rack businesses and hawkers operating in their shadow.

The small, mostly Somali-run shops in these malls sell all types of products, and sometimes even offer credit to customers. Indeed, Eastleigh is so active that it is virtually a 24-hour economy.

But this commercial hub has of late been painted negatively, sometimes even by its own Government. It is always treated with suspicion both in matters security and trade. There has always been speculation over the source of wealth that fuels its economy.

In fact, the Kibaki administration at one stage mooted the idea of “auditing” who owns what there. Some quarters blamed piracy money that had made its way to Eastleigh for the Central Bank of Kenya’s poor record keeping and data capture that led to the apex bank not being able to explain some Sh164 billion that plugged the balance of payments deficit which it accounted for as “unexplained flows” in the financial year 2010/2011.

The media and general public sentiment drove further the perception that pirates’ money in Eastleigh was responsible for the increased real estate activity in Kenya. This, however, has never been supported by facts.

A 2013 World Bank, UN and Interpol report, for example, showed that pirates who hijacked ships sailing the Indian Ocean were paid around $413 million between 2005 and 2012, an average of approximately $50 million a year. This is a drop in the ocean when compared to the $500 million local bank credit and the $2 billion remittances from abroad that are the major sources of increased activity in the Kenyan property market.

So, all the available data suggests that this perception of proceeds of piracy from Eastleigh fuelling economic activity in Kenya is at best, malarkey.

For one to understand the source of Eastleigh’s wealth, one has to study and understand the intricacies of how Somalis do business and relate with each other. The Somalis run ethnic co-operatives in their own informal socialism set up. Members of these co-operatives live not only in Eastleigh but in almost every corner of the world.

Most business ventures are funded by a consortium of distant relatives; a middle-class of relatives and even friends. The Somalis have perfected the philosophy of pooling resources for a greater venture. The average mall in Eastleigh, for example, is owned by not less than 4,000 “unit trust” holders. It is also a business model based on mutual trust.

Despite being a critical contributor to the country’s economic growth, the recent security operation which has paralysed business operations in Eastleigh is likely to negatively impact on trade.

It could have far-reaching ramifications on the economy in general.

Many Somali-owned businesses in Eastleigh, fearing further State reprisals, may now be sending their money to safer havens and elsewhere in the region.

Rental vacancies, reduction of business activities and its impact on the retail and hotel industries could have longer-term economic repercussions.

Banks and other lenders that provided loans towards the construction of some of these properties could also suffer. Contrary to what many think, these properties are not owned by Somalis. In fact, other than the few malls that were built in the recent past, most properties are owned by Kenyans.

Although outside the interbank markets, a lot of foreign exchange business is carried out in Eastleigh. This is done mostly via forex bureaus, and services the import, oil and transport businesses in the region.

Cedric Barnes, Crisis Group’s Horn of Africa Project Director estimates the Somali-owned businesses in Eastleigh bring in an estimated $780 million per annum in foreign currency to Kenya’s exchequer.

The security crackdown and its negative impact on businesses and higher demand for dollars will therefore not help the already struggling Kenyan shilling, which has also been hit by lower coffee and tea sales and hit a three-and-a-half-month low last week.

Importantly, according to a 2013 Oxfam report, the Somali diaspora worldwide pumps an estimated $1.3 billion to $1.6 billion back into Somalia and Somali refugees who mostly live in Kenya, every year.

Kenya hosts over half a million Somali refugees and at an estimated $165 in remittances for every citizen, Somalis living in Kenya bring in around Sh40 billion in remittances each year.

PIVOTAL ROLE

No doubt, Eastleigh attracts a lot of Somali diaspora tourists who visit refugee family members and stay for months at a time. They also use Nairobi as a transit place before and after travelling to Somalia and elsewhere in the region.

Travel agents and local hotels do good business arranging onward travel to different parts of Somalia. Unlike Kenyan and South Sudanese diasporans, for example, the Somali diasporans prefer accommodation in Eastleigh to the plush hotels of downtown Nairobi.

Eastleigh, as such, plays a pivotal role in the country’s economy, creating employment opportunities for thousands, while attracting foreign investment and finance.

We need to develop a long-term strategy to deal with issues of insecurity and terrorism without negatively impacting on those working hard and contributing to economic growth.

We should avoid anything that will scare away or make genuine investors relocate. It would not make sense if investors ran away but the terrorists remained behind.

Our economy will no doubt forge ahead. Like Mungiki, post-election violence and piracy, the terrorists will be defeated eventually.

The capital generated by the hardworking entrepreneurs of Eastleigh may yet prove to be crucial in supporting our economy. Terrorism must be fought, and fought hard. But we must make sure the fight has no long-term negative impact on our fragile economy.

The writer is senior vice president, financial risk management, Riyad Bank, Saudi Arabia.

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