Three young men of Somali origin sit at a busy restaurant for a mid morning cup of black coffee. Their cell phones ring continuously as they shout back responses, in Somali, over the speaker phone. The conversations get animated while words such as "millions", "dollars", "shillings", "commission" and "stamp duty" are constantly dropped in the conversion.
The men are obviously negotiating for a prime piece of land in the sprawling Eastleigh district and are willing to pay any amount for the piece of land.
"Our client wants to develop an ultra-modern, seven-storey shopping mall," Mohammed, not his real name, tells me when I approach them for an interview.
They have agreed to talk to me on condition that I do not identify them and take pictures.
According to Mohammed, their client makes occasional trips to Nairobi and Dubai where he has vast business interests, but he spends most of his time in Somalia.
I learn from Mohammed that his client has already developed a five-star hotel in another part of Eastleigh and owns a luxury villa in the holiday resort of Mombasa.
"As long as the property is strategically located and can present a good investment option, our client is willing to snap it up at whatever price. Money is not an issue," he says as he refills his cup.
They become uncomfortable when I seek to know the identity of their client. They quickly pay for their cup of coffees and mine and quickly disappear in the back streets of this commercial district of Nairobi.
Where are the millions?
In the last 24 months, the world has been treated to the daring exploits of the Somali pirates as they preyed on shipping vessels like esurient sharks along the busy waters of the Gulf of Aden and the vast Somali Basin in the Red Sea and the Indian Ocean respectively.
We have seen millions of green dollars rain down from the blue skies above to the cheering, gun-totting, skinny pirates, who, after splitting the hard cash amongst themselves, jumped into their dinghies and sailed back to their safe havens in Eyl, the pirate capital on mainland Somalia.
For many, the interest ends here.
Question is, where do they take all the millions of dollars they are paid each year in ransom? In the last 24 months that has seen a drastic rise in piracy; the pirates have been paid more than $100 million. Where is all this money going to?
Considering that Somalia is a lawless country with no central government and no functional systems and institutions, the money can be safely stashed in various hideouts across the country without any questions, but the allure to venture out of a lawless state where security is not guaranteed, has created a number of "briefcase" investors who are willing to invest their loot in places where they can see their money grow.
Some pirates, especially the young ones between the ages of 18 and 30, are keen on bailing out once they have had their share.
For many a Somali pirate, they have turned west. The long, dangerous and porous border that the lawless state shares with Kenya has presented many of these pirates a golden opportunity to sneak their ill-gotten wealth across the border and safely invest the cash without ever getting caught.
Immediately after the overthrow of Mohammed Siad Barre, the last President of Somalia, this horn of Africa nation quickly degenerated into chaos and turmoil. Kenya has hosted thousands of Somali refugees since then. Some have moved on to become Kenyan citizens, while some have invested money sent from their families and friends in the Diaspora.
Faceless "investors" distort Nairobi property market
Nairobi, the administrative and commercial capital of Kenya, is regionally known as the African city of lights where opportunities abound. The city has transformed over the years to be the commercial, banking and manufacturing hub of the entire East and Central Africa region.
Over the last few years, Kenya's economy has expanded and created a large middle class with disposable incomes. This has resulted in an appetite for home ownership. Real estate companies in the Kenyan capital have been making a healthy profit thanks to this. However, the industry has been rocked by the inflow of the millions of dollars flooding the market from Somalia so much so that the property market in Nairobi and Mombasa has reached a boiling point.
This has caused a massive distortion of the property market so much so that it is becoming increasingly difficult for middle income families in Kenya to buy a decent house. They simply cannot afford it.
"A few years ago, it was difficult selling a house for between US$500,000 and US$1 million," notes Anthony Kamande, a real estate broker in Nairobi. "Today, they sell like hot cakes."
According to Mr Kamande, it would take about ten years for real estate prices in the city to double, but they have tripled, instead, in the last five years. This, he notes, could only be a pointer to something else, outside of the economy, which is influencing the prices on an upward adjustment.
Eastleigh, a commercial district in Nairobi, is the port of call for illegal immigrants, especially those from Somalia. The district operates on a 24-hour cycle where business and shops are never closed. It is where dreams are born and made.
Millions are exchanged everyday and billions every week. The allure of fortune has caught the attention of pirates seeking discreet avenues through which they can invest their ill-gotten wealth and Eastleigh offers them that vital combination.
The inflow of pirates' dollars in Eastleigh has instantly turned one of Nairobi's largest districts into a big construction site. This, according to real estate analysts, has spread into the neighbouring neighbourhoods such as Ngara, Pumwani, Parklands, Juja Road and parts of the Nairobi CBD.
"Luxury hotels, multi-storey shopping complexes and arcades and apartment blocks are sprouting from the ground almost everyday. What is amusing is the fact that you cannot tell the real owners of these properties. They are faceless and use lawyers and middlemen to buy property on their behalf," notes Mr Kamande.
"This has pushed the price of real estate in Eastleigh to an all time high and there are no signs of relenting. Less than three years ago, a prime plot within the district sold for between Kes. 10 million (US$ 133,000) and Kes. 15 million (US$ 200,000), today that figure has climbed to between Kes. 30 million (US$ 400,000) and Kes. 45 million (US$ 600,000)," he adds.
The appetite for prime land in Eastleigh was underlined by the recent sale of a church compound in the area after the senior pastor went behind the back of the church and sold the piece of land for an undisclosed amount of money.
The church faithful were dumbfounded when they went to church on Sunday morning, as is customary, only to find bulldozers tearing down the church building to give way for a new shopping complex.
Government admittance
The Kenyan Government has been quick to admit that there could be possibilities that the proceeds from piracy could have entered the Kenyan economy and could be behind the distortion of the property market in the country.
Kenyan Prime Minister Raila Odinga recently told parliament during debate on an anti-money laundering bill that the upward trajectory in the Kenyan property market could be as a results of ransom proceeds paid out to Somali pirates.
Government spokesman Dr Alfred Mutua said in a recent press briefing that it was possible that some of the more than $80 million believed to have been paid out in ransom to the Somali pirates in the past one year could be laundered through property purchase and development in several countries, including Kenya.
"It is therefore prudent that we know who owns what in the country to discourage the injection of dirty money into the Kenyan economy," he said.
According to Dr Mutua, Kenya offers an attractive investment option for the Somali pirates. This is mainly because of the more than 500-mile (804km) border it shares with the lawless state and the already large Somali community that is resident in Kenya, believed to be over 300,000 and more than 250,000 refugees at the Daadab refugee camp in North Eastern Kenya, close to the Kenya-Somali border.
Hawallahs channel ransom cash across the world
Eastleigh, has over the years welcomed many of these refugees, some of whom have Kenyan ties, some have gone on and acquired Kenyan citizenship while many more are believed to be illegal immigrants.
This has transformed the face of the densely populated district so much so that it has been christened "Little Mogadishu" because of the huge Somali population resident in the district. With the large population, the district has metamorphosised into a self-contained mini city whose economy is retail and wholesale driven amid claims that it is a hub for tax evaders who cheat the government out of billions in unpaid taxes.
Its streets are abuzz with shopping bazaars and colonnades and wholesale markets that come in all shapes and sizes selling everything from electronic to motor spare parts to garments and new shoes imported from China, Turkey and Dubai. Most of these items are very cheap to buy.
This has in turn attracted Kenyan businessmen to the area. According to a Kenya Revenue Authority (KRA) official, who did not want to be mentioned as he is not authorised to speak to the media, the wares traded in Eastleigh are cheap because they have evaded paying tax.
Within the back streets and narrow alleyways of this vibrant district, are hawallahs. These are illegal forex bureaus that operate on word of mouth and trust alone. There are no papers or documents to sign and the transactions are done in hard currency alone. This, according to anti-fraud banking experts at the Central Bank of Kenya, makes it extremely difficult to put a finger on illegal money entering the system. The hawallahs, which are unregulated in Somalia and operate below the radar in other countries such as Kenya and the Arabian Gulf states, could be the channels used by the Somali pirates to move the money from Somalia to other countries across the world.
According to recent media reports, one hawallah in Eastleigh is said to have received in excess of $40 million in a single day. The money was sent in four tranches of $10 million each and was stashed in briefcases by a young Somali man who immediately disappeared in the backstreets and alleyways of Eastleigh.
Pirates seek early retirement
Andrew Mwangura, the Executive Officer of the East African Seafarers Assistance Programme, says that piracy money has been laundered into Kenya and through Kenya into other regions across the world.
"The big lords who control the business and benefit from piracy are scattered across the world. Some reside in Somalia, others have havens in Nairobi, Mombasa, the Gulf region, especially Dubai and even in London," he notes.
"The pirates who venture into the ocean to capture shipping vessels are only the small fish. The big sharks are in safe and secure locations across the world."
According to Mr Mwangura, the tell-tale signs are there, especially at the port city of Mombasa where some of the suspected pirates have invested their ill-gotten wealth in new luxury villas and prime beach houses in Kenya's second largest city.
"Some residents, especially those in the Mombasa Old Town, have been approached by some of the middle men wishing to buy their houses at even double the asking price," he says.
Those who have struck it rich, says Mwangura, are seeking an early retirement from piracy and hoping to settle down in a safe and secure location such as Mombasa where they can live in luxury and start a family.
Adam Waithaka, a real estate agent in the coastal city says the property sector in Mombasa has been excited over the last twelve months by factors outside the economy. This could be so, he explains, because the tourism industry which is a major foreign exchange earner and employer for the coastal city and the country as a whole has been battered after the global economic meltdown.
"This is in spite of the fact that the sector had not fully recovered from the effects of the post election violence that ensued after a disputed Presidential election in December 2007," he notes.
According to Mr Waithaka, the posh suburb of Nyali, just north of Mombasa, has attracted new investments. Holiday homes and luxury apartments and villas, he notes, have sprung up over the last twelve months faster than at any other time. The price for these properties, Waithaka explains, has more than doubled.
While not all the ransom cash lands into the pockets of a single pirate, a recent United Nations report, that gathered intelligence from some of these pirates, reveals how the ransom money is shared out. According to the report, the maritime militia – who are involved in the actual hijacking – receive 30 percent of the total ransom paid.
The ground militia – those who control and protect the pirate havens on mainland Somalia get ten percent while the sponsors and financiers, who more often than not are perched away in countries in the region and in Europe, get the lions' share. They pocket up to 50 percent of the total amount with the remaining ten percent going to the local village elders of the pirate havens in Somalia.
A recently released report from the US State Department's Bureau of International Narcotics and Law Enforcement Affairs reveals that Kenya is a fertile money laundering destination, thanks to its weak laws and overstretched law enforcement agencies. This is in spite of a new anti-money laundering law that was recently passed by the Kenyan Parliament.
It however remains to be seen if East and Central Africa's largest economy can shed its negative image with the passing of the new legislation by the Kenyan Parliament. Kenya has been known to be a major destination and transit corridor for human and drug trafficking and money laundering. Will the new legislation deter this? Only time will tell.
Denis Gathanju
