I have been working for some time to stop the contract with De La Rue involving the printing of 380 billion Somaliland Shillings.
First, I contacted anyone that I thought could do something about it. However, when I exhausted that venue and couldn’t lead me a solution, I posted my concerns in my social media spaces.
Following my exposure, the Somaliland Central Bank started to speed up the contract and money printing. This led the Sahamiye Foundation to send the below open letter to De La Rue.
The letter sheds light on the magnitude of the economic collapse that can be expected of such action for the country, which will particularly affect the low-income earners.
Since no one is competing for the contract, the price quoted by the company is exorbitant. In Tanzania, contracts for money printing are transparent and competitive among the companies involved in this type of business, and De La Rue has tripled its price in one of the biddings which caused them to lose the contract.
It is worth noting, as article 35 of the Central Bank Act (Act No. 54/2012), the design and appearance of the new 10,000 shillings note must be submitted to the House of Representatives for approval. At the time of introducing the 5,000 shillings bill, it was brought before the House of Representatives. After they discussed and approved it, then it became the country’s “Legal Tender”.
The current secret contract introducing the new bill of 10,000 shillings is bypassing and in violation of this legal legislative process and even Central Bank is denying that it is being printed.
Finally, it is clear that this company is robbing the nation. Companies that print money are privately owned and independent of governments. Therefore, there is no reason to award this contract to this company which has been known for corruption and bad reputation.
SAHAMIYE FOUNDATION
5 October 2023
De La Rue House,
Jays Close, Basingstoke, Hampshire, RG22 4BS
Re: Urgent appeal to reconsider the contract in relation to printing of SL Shilling
Dear Mr. Clive Vacher,
I write to you to raise significant concerns regarding the contract between the Central Bank of Somaliland and De La Rue, involving the printing of 380 billion SL shillings. This contract poses serious economic, ethical and legal issues, and risks plunging millions of children and adults into deeper poverty. Those from low-income and disadvantaged groups of society will be hardest hit, further entrenching the socio-economic divide that inhibits progress and development.
I therefore call on you to take a principled stand. I urge you to cancel the contract and return the $9.6 million that the Central Bank of Somaliland sent you to fund the transaction.
The concerns I have about this contract are:
1. Economic Repercussions: The 380 billion Somaliland shillings you plan to print and ship to Somaliland would double the local currency in circulation and could potentially destabilize Somaliland’s already fragile economy. Somaliland’s economy is largely dollarized.
However, while affluent groups and those receiving international remittances transact in dollars, low-income groups—including nomads, farmers, civil servants, and small traders—primarily earn in Somaliland shillings. Increasing the local currency in circulation disproportionately affects these demographics, devaluing their savings and acting as a concealed tax on the most vulnerable. The highly unusual decision to print money, especially at a time when the country is preparing for presidential elections, is predicted to cause the value of the Somaliland shilling to drop from 8,750 to over 20,000 per dollar.
2. Pricing out the Poorest: Since the introduction of the Somaliland shilling in the mid-1990s, excessive and reckless money printing has caused the Somaliland shilling’s value to plummet from 50 to 8,759 Somaliland shillings per US dollar. While these transactions proved highly profitable for De La Rue, they impoverished millions in Somaliland. This rapid deterioration of the Somaliland shilling’s value contributed to the de facto dollarization of the economy. The local currency became so devalued that it required a wheelbarrow to carry the equivalent of $100.
Before the launch of mobile money services, the primary role of the local currency was to provide small change, required because there was a shortage of small dollar notes and coins. The digitalization of money has reduced the need for physical cash, making it convenient to transact in small dollar amounts. The mobile money accounts in dollars helped the poor to keep some of their money in dollars to hedge against the risks associated with the local currency.
However, in the wake of the last money printing in 2017, when the currency lost 50% of its value, the government mandated mobile money operators to offer Somaliland shilling accounts. They also imposed a rule forcing all transactions under $100 to be conducted in the local currency. This restriction robbed the poorer segments of the population of the opportunity to save in dollars, trapping them in a relentless cycle of devaluation. While affluent groups have devised strategies to bypass the $100 limit to avoid transacting in the local currency, it’s the voiceless majority that will bear the brunt of this insidious tax, which will disproportionately affect the poorest.
3. Improper Contract Rationale: The plan to print 380 billion SL shillings will exacerbate the existing currency oversupply, and is therefore, in effect, pointless and of no benefit to the people of Somaliland. Given that most of the currency is held in mobile money accounts in a predominantly cashless economy, nearly all physical notes are stored at the Central Bank. The primary reason for this contract appears, then, to be rooted in corruption and De La Rue’s desire for profit.
4. Questionable Procurement Process: De La Rue was awarded this contract through a process that bypassed the standard procurement rules and regulations. There was no competitive bidding to ensure value for money, nor was there approval from the parliament for the introduction of the new 10,000 legal tender as required by law. This behavior appears consistent with De La Rue’s involvement in corruption scandals and investigations by the Serious Fraud Office in the past and is disappointing. If the reckless printing process continues unchecked, it could push millions more into poverty.
This is particularly alarming considering existing vulnerabilities caused by local events, such as the Hargeisa market fire and global crises like the Covid pandemic and the Ukraine war. The number of food-insecure individuals could more than double because of the combined effect. Moreover, many children would be forced out of school as dollar-based fees become unaffordable for their families. In light of the above concerns, and the broader implications for Somaliland’s economic and social fabric, I appeal to you to cancel the contract with the Central Bank of Somaliland and return the $9.6 million intended to fund the printing. By doing so, De La Rue will publicly demonstrate responsible corporate citizenship, align with the principles of ethical business conduct and avoid the responsibility for harming the welfare of millions of people.
Yours sincerely,
Ismail Ahmed
Founder and Director, Sahamiye Foundation
Somaliland, a self-declared independent state located in the Horn of Africa, has been striving for stability and democratic governance since its separation from Somalia in 1991. With its own government, military, currency, and legal system, Somaliland has emerged as a unique entity in the region. One of its notable achievements has been the successful organization of free and fair elections, setting an example for other African nations. However, the recent decision to postpone political elections in Somaliland, due to a disagreement between major political parties regarding the sequence of elections, has raised concerns about the potential consequences for democracy, political stability, and socio-economic development. This essay aims to analyze the impact of postponing political elections in Somaliland, exploring the reasons behind the decision, its potential consequences, and the importance of open and transparent communication in addressing public concerns.
Somaliland, situated in the northwest of Somalia, has a population of approximately 4.5 million people. Since its declaration of independence, Somaliland has made significant strides in establishing democratic institutions and holding regular elections. These elections have been widely regarded as free and fair by international observers, showcasing Somaliland’s commitment to democratic principles and transparent electoral processes. In a region often plagued by political instability and electoral irregularities, Somaliland stands as a beacon of democracy, setting an example for other African nations.
However, the recent disagreement between the major political parties in Somaliland regarding the sequence of elections has resulted in the postponement of political elections. The ruling party and the opposition have divergent views on whether the presidential election should take place first or be followed by the party elections that determine the three major political parties participating in formal politics for the next decade. This disagreement has created a contentious political environment, jeopardizing the stability that Somaliland has worked hard to achieve.
To fully understand the impact of postponing political elections, it is crucial to delve into the specific positions of the ruling party and the opposition. The ruling party believes that holding the party elections first is essential for maintaining stability within the political landscape, while the opposition argues that the presidential election should take precedence to ensure a legitimate mandate for the elected government. This disagreement not only highlights differing visions for the future of Somaliland but also exposes potential power struggles and political maneuvering that can undermine the democratic process.
The consequences of postponing political elections in Somaliland extend beyond the immediate concerns of democracy. Political stability is closely linked to the timely organization of elections, as they provide a legitimate framework for governance and a peaceful transition of power. The disagreement between political parties has created uncertainty and a power vacuum, increasing the potential for political tensions and instability. This volatile situation can lead to protests, violence, and a loss of public trust in the democratic process.
The violent clashes in August, as well as the opposition’s threat to no longer recognize the government led by President Muse Bihi, highlight the potential consequences of the current political impasse. Increased political tensions can further escalate into social unrest, jeopardizing the hard-earned stability of Somaliland. It is essential to recognize that the consequences of postponing elections extend far beyond the political realm. The overall socio-economic development of Somaliland is at stake, as political instability hampers progress and discourages investment and international partnerships.
Moreover, the postponement of elections raises questions about the government’s commitment to upholding democratic principles and respecting the will of the people. Open and transparent communication becomes crucial in addressing public concerns and ensuring public trust. The government must take responsibility for effectively communicating the reasons behind the decision and engaging in dialogue with all stakeholders. Clear explanations should be provided to regain public confidence in the electoral process and demonstrate a commitment to democratic values.
In addition to the government’s responsibility, civil society organizations and the international community play crucial roles in supporting transparent communication efforts. Civil society organizations can act as intermediaries, fostering dialogue between the ruling party and the opposition, and amplifying the voices of the people. The international community, as a trusted partner of Somaliland, should encourage political elites to find a consensus path forward and offer to mediate if necessary. By volunteering to serve as guarantors for any resolution that emerges, the international community can reinforce public confidence in the electoral process and support the stability of Somaliland.
Somaliland’s hard-earned stability and international recognition are at risk. The postponement of elections and the ongoing political dispute threaten to undermine the region’s democratic trajectory. To mitigate these challenges, it is essential for Somaliland’s political elites to prioritize the interests of the nation above their individual party agendas. A consensus must be reached on the sequencing of elections, ensuring a fair and inclusive process that upholds democratic values.
In conclusion, the postponement of political elections in Somaliland due to a disagreement between major political parties presents significant challenges to democracy, political stability, and socio-economic development. To fully understand the impact, it is necessary to explore the specific positions of the ruling party and the opposition. The consequences extend beyond the immediate concerns and raise questions about the government’s commitment to democratic principles.
Open and transparent communication, along with mediation efforts by the international community, can help address public concerns and foster a path forward. By finding a consensus and rescheduling the elections, Somaliland can safeguard its hard-earned stability, preserve its democratic reputation, and continue its progress toward international recognition.
“Guest article first published on Somaliland Chronicle under different title”
ABOUT THE AUTHOR
Sayid cali Ismail Ahmed is a MasterCard Foundation scholar currently studying at Westminster College (USA), double majoring in Political Science and Global and Transnational Studies. He works for the senate of the Student Government Association and as a treasurer of the Global Development and Progress Club. Ahmed also serves as a resident advisor and Math tutor. In addition, Ahmed is a fellow of The Public Policy & International Affairs Program at Princeton University. After graduating from Westminster College, Ahmed plans to pursue a career in public policy, especially in Education Policy and Analysis (EPA), to participate in policy development, research, analysis, and organizational leadership in developing countries and worldwide.
I recently joined stakeholders from around the world at the UN-led Global Forum for Remittances, Investment and Development (GFRID) held here in Nairobi.
The three-day summit was a precursor to the International Day of Family Remittance (IDFR), which was adopted by the UN General Assembly in 2018 and celebrated on 16th June every year.
During a panel discussion, I engaged with stakeholders on the adoption of digital remittances and measures that would remove the barriers limiting its uptake, and what changes are needed in the money transfer ecosystem.
Remittance inflows to Kenya have been steadily rising in the past 10 to 15 years. They are the country’s leading source of foreign exchange and rival export earnings from key economic sectors such as tourism, tea, and horticulture.
According to data from the World Bank, Kenya’s annual formal remittances amount to almost the same value as all its five neighbours put together — $4 billion compared to $4.9 billion.
The latest figures from the Central Bank of Kenya show that diaspora remittances rose by 8.34 percent to $4.027 billion in 2022. This has largely been due to a supportive environment and conducive policies.
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On average, 60 percent of remittances to Kenya are done through digital channels. However, to fully realise the potential of formal remittances across the continent, there are several key policies and interventions that need to be considered.
Firstly, there is a need to embrace partnerships and foster greater collaboration between different players to achieve a wider reach.
In 2009, we launched our first remittance solution in partnership with Western Union. It enabled Kenyans living abroad to easily send money home through M-Pesa.
One of the greatest impacts M-Pesa has had is significantly lowering the cost of receiving remittances from more than 10 percent of the transaction value to about 3.0 percent currently.
As a result, we have achieved the SDG goal of bringing remittance costs down to 3.0 percent more than seven years ahead of the 2030 target.
Partnerships are critical also to expanding access and use of remittances as they leverage each player’s strength in the value chain.
As an example, M-Pesa partnered with Visa to make out international payments, which is an area Visa is strong in.
Additionally, we have increased the number of remittance partners to more than 25 including other large international players such as Western Union, PayPal, and Google Pay.
Increasing the frequency of inter-governmental engagements to promote cross-border remittances through harmonised policies and regional regulations will drive penetration and access to remittances.
Thirdly, a review of the tax regulations with the aim of lowering remittance costs will drive higher volumes and usage of international remittances.
Governments would then benefit from the increased forex flows and increased revenue collections from higher volumes.
Finally, governments should explore more favourable entry requirements to attract more remittance operators.
More players lead to innovations that address different customer needs therefore reducing the use of informal remittance channels.
Author: ESTHER WAITITU
In February 2008, an important milestone was marked in the relationship between the United States and Somaliland when U.S. Assistant Secretary for African Affairs, Jendayi Frazer, visited Hargeysa. Continue reading “Critical Analysis: Policy Towards Somaliland Under Biden Administration”