SOMALI PIRATES OPEN THEIR OWN WALL STREET

A Fine Batch of Brigands

 

THE PIRACY SERIES

SOMALI STOCK MARKET: BULLS, BEARS AND BUCCANEERS

Often when I am wearing my Special Interest Speaker hat and talking about Maritime Matters I discuss pirates: pirates of the seas we are transiting, pirates as romantic figures or sea-going felons, women pirates, famous pirates of history, pirate hangouts and what’s the difference between pirates and privateers. 

Usually the passengers like the talks but want to hear about pirates today.  Goodness knows, the 24 hour news cycle is hungry enough for content that it never passes up a juicy story about a yacht or tanker or fishing vessel or even a cruise ship attacked at sea by armed men.  Of course, cruise ship management is not interested in having me talk about something that makes the customers nervous. Would they be happy with me if I  gave graphic, illustrated chats about Norovirus or seasickness?  Of course not.

I have to admit though that, depending on the Cruise Director, the Entertainment Manager  and the audience, I do drop in a word or two about piracy today.  One of the least troubling mini-topics I do is about how crafty Somali entrepreneurs have created their own version of Wall Street with Piracy as the major business opportunity for folks who would like to put assets at risk to make big bucks.

Pirate Dhow Used as Mother Ship

For this topic, unlike most of my chats, I do not pretend to have personal knowledge or experience.  I have not shuffled around the tent cities along the shores of Somalia researching the topic.  My wife, insurance broker and residual good sense make that unlikely to have happened in the past or anytime soon.  I have had to rely on media reports for my material. 


We know that piracy has always been with us.  It waxes and wanes just  like any other human endeavor.  Reuters has covered the topic steadily since it became “news” within the past decade.  They covered the story of investing in piracy in late 2009 and continue to follow the topic today. 

Modern Pirate on SS Herol 2006

 Enough of the Back Story, here is the tale.


Haradheere is a grungy port on Somalia’s coast around 250 miles north of the nominal capital, Mogadishu.  For a grungy port it has a remarkable number of flashy new SUV and pickups.  Bling is the thing.  Although most of the people are Muslim, guzzling booze and chewing khat are major pursuits.  Prosperity through piracy is the key to the Wild West atmosphere in this Horn of Africa town.

There is no real Somali government nor has there been one for around twenty years. Somalia is the kind of place that would have to have a big development spurt to qualify as a failed state.  There are no schools, no police, no real institutions.  Nothing but the daily struggle to survive.  Even though that is so it appears that capitalism is some kind of natural instinct that comes to the fore even in the most unlikely settings.

A couple of years ago on a slow day, that is to say a regular Haradheere day, a batch of the lads sat around sheltered from the monsoonal rain and decided to open a stock exchange.  Hey, why not?  Wisely they decided to concentrate on the kind of business they knew, Piracy.  Starting with 15 entities they called ‘Maritime Companies’ they put the word out they were open for business.

In a place where there is little money there is little risk capital.  The founders realized that and right from the start accepted payments in kind in lieu of cash.  Payments in kind?  Wazzat?  You know, things the maritime companies could use in the business.  Things like diesel fuel, a boat, some rope or maybe a spare AK-47 or 9mm you have kicking around the house gathering dust. 

The People's Choice---an AK-47

 The investor usually puts up the capital for a specific voyage and gets paid from whatever bounty or booty the maritime company captures.  With ransoms for ships as high as $3 or 4 million bucks there is a lot of loot to divvy up even after paying off the local town council and any other folks mean enough or strong enough to deserve a share. 

As an aside, just about every society started its maritime industry using the same model. Investors put up the money or cargo for a voyage and participated in whatever profit there was for the venture.  The big difference with the Somali version is the focus on felony as the center of the business. (This is not to say that even nice people, business people, people like Americans or Englishmen or Spaniards or Frenchmen, etc, etc didn’t make money from piracy in the old days.)

From 15 Maritime Companies the exchange grew to over 75 firms in months.  It only took months for some of the first success stories to start the rounds to draw in the next batch of investors. 

One of the first stories was about a 22 year old divorcee who made $75,000 in 38 days from her share of the ransom of a Spanish fishing vessel.  How did a 22 year old woman get the capital to get into the mix?  Easy.  Alimony.  Her husband gave her a RPG, a Rocket Propelled Grenade as part of the marriage settlement.  That was her payment in kind.

Not Just Tools of the Trade, Capital for Investment

You gotta love it.  Capitalism triumphs again.