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Africa

Piracy money inflates Kenyan property market

Text by FRANCE 24

Latest update : 2009-04-16

Piracy is a thriving business in spite of the presence of many foreign warships in the Gulf of Aden. Last year, the income from piracy reached a staggering 40 million dollars.

Piracy is a thriving business in spite of the presence of many foreign warships in the Gulf of Aden. Last year, the income from piracy reached a staggering 40 million dollars.

The pirates use the money to buy villas and cars at home in Somalia, but UN experts say the money is also flooding the neighbouring Kenyan property market.

According to Bruno Schiemsky, an independent consultant on piracy, “It might have the consequence that property prices [in Kenya] inflate artificially because of the sheer amount of money the pirates have.”

 

In Nairobi, the Kenyan capital, buildings are going up everywhere. House prices and rents have doubled because of money from foreigners living in Kenya, but especially the Somali diaspora. The issue makes headlines regularly.

Many Somalis do not have access to the formal banking system. Instead, they use hawalas, informal money transfer companies which are rarely registered and therefore operate as legal currency exchange bureaus. In a Nairobi suburb called Eastleigh -- also known as little Mogadishu -- most of the buildings and shops have been taken over by Somalis. The main activity here is business. Mahad Shahafi Garass, a Somali businessman who has been living in Kenya for the past sixteen years, is doing well for himself. But he denounces Kenyan prejudice against Somalis: “Somali people come together. They gather the money. They invest everywhere. That’s why they make more money than Kenyans.”

Kenyans are increasingly suspicious of Somalis, who are ready to pay large amounts of money to rent or buy houses. They now own entire estates where the Kenyan middle class used to live.

According to Margaret Ndegwa, a Kenyan resident in Komarok estates, “We will be forced to go to slums because of foreigners.”

It is difficult to determine the impact of piracy money invested in Kenya, but recent studies show that the hawala system is largely used for money laundering.

Date created : 2009-04-16