Despite the collapse of the formal economy and of central government in
Somalia, a remarkably resilient ‘parallel’ economy has emerged. Based on
traditional clan relationships, a lack of bureaucracy and well-established
channels for remittance payments from the diaspora, this model has travelled
with Somali émigrés to Kenya.
However, the success of Somali business has caused tension with other
communities in Kenya, leading to widespread, but overblown, accusations of
links to piracy and criminal activity.
Some businesses that began in the informal sector are making the transition
to formal enterprise. Kenyan authorities should seek to encourage this with
an enabling regulatory environment. Success will bring increased tax revenue
and allow regulation to prevent subversive activities.
The Somali community’s success belies the highly risky nature of the parallel
market. Within the informal sector, there are few safeguards for either
investors or consumers, and many businesses have suffered catastrophic
losses because of this.
Somali trade centred on the Nairobi suburb of Eastleigh has flourished,
providing goods and services to local and regional consumers at prices well
below the market average. Its impact – felt far beyond Kenya and Somalia to
the Gulf states and Central Africa – demonstrates the ability of some
businesses to thrive despite conflict in Somalia