In April 2020, a cargo container was taxed and cleared out of Berbera Customs only to be intercepted outside of Hargeisa city limits by government officials.
According to sources familiar with the incident, Berbera Customs officials taxed the container as sugar instead of its actual content – cellphones and a lot of them. Sugar and all other basic food staples such as rice and flour are assessed a lower tax than most other imports, including electronics.
How this happened and the exact revenue loss caused by this type of corruption at the country’s most important source of revenue remains to be a mystery as officials from the Ministry of Finance Development, including the Minister Hon. Saad Ali Shire did not respond to our questions to try to understand how the system failed to prevent corruption of this scale.
Here is the Director-General of the Ministry of Finance Development, Mr. Mohamed Ali Gurhan explaining Berbera Customs’ critical role to the functioning Somaliland government by being the single most significant source of revenue.
Mr. Gurhan was the Berbera Customs Manager as recently as February 2018, and in the above clip he explains that Berbera Customs generates 50 – 60% of the entire government budget. He has run Berbera Customs from 2013 until February 2018.
According to current and former officials at Berbera Customs who spoke on strict condition of anonymity for fear for reprisal and possible imprisonment, it is not usual to have a product taxed as something entirely different to assess a substantially lower tax than owed.
“This practice is as common as the air we breathe and it’s not just Berbera customs, it is everywhere and requires the complicity of many moving parts of a complex system, including the officers who give the final ok for cargo to leave the customs,” said one official who did not want to be identified.
Sources add that it is a standard practice to tax almost half of the imported clothes as fabric or “unstitched clothes” to give a substantial and possibly illegal tax break. This specific allegation is supported by the Ministry’s latest Economic Performance Bulletin Report for 2020 Q1, which shows more garment fabric being imported and taxed than ready-made clothes.
Besides small tailor shops, there are currently no garment factories in Somaliland to justify such quantities of “unstitched clothes”.
Sources add that the most corrupting influence comes from businessmen seeking the slightest advantage over their competitors and pay tens of thousands of dollars to a customs official whose monthly salary may be a mere few hundred dollars to ensure their cargo is never assessed the correct tariff.
For those that do not want to pay bribes, sources who have dealt with Berbera Customs as customers have described a culture of entrenched impunity that can ruin a business with a stroke of a pen and leave little choice for clients but to comply with the demand of corrupt customs officials.
Total System Failure
Arcane and purposefully convoluted
According to multiple sources familiar with customs operations, there are overlapping layers of checks at all customs, and especially Berbera Customs that ensure a cargo leaving the terminal has been properly taxed and has all of its paperwork in order.
Complicity from large parts or the entirety of the system is a prerequisite for the corruption of this magnitude to take place at Somaliland’s largest source of tax revenue.
Although Somaliland government has awarded a no-bid contract for the deployment of a cargo scanner over a year ago to Universal Matrix, a company owned with business tycoon Mohamed Aw Saeed currently cargo inspection remains to be human capital intensive.
In his latest supervisory visit to Berbera Customs in early February 2020, Minister Shire admitted the need to streamline customs processes.
Although the Ministry of Financial Development has not given an official reason the entire leadership of Berbera Customs including the manager Mr. Abdirahman Cirro, his deputy, the cargo inspection team and the customs police commander has been replaced.
There is no indication if any oversight entities such as the Auditor General were activated to look into this matter or if any procedures changes were put in place to prevent future occurrences of such incidents.
The outcomes of recent investigations by Somaliland Auditor General in Hargeisa Municipality, Ministry of Education and Science, the Civil Service Commission among others are unknown and have not been publicly released.
Below are the specific questions sent to the Minister of Finance Development Dr. Saad Ali Shire that were unanswered.
- There has been changes made to the Berbera Customs leadership, has anybody been fired, prosecuted for this issue or has there only been reassignments?
- To your knowledge has this sort of thing happened in the past, if so how many times and is there an active investigation to get to the bottom of it?
- For corruption of this magnitude to take place was there a systemic issue that enabled perpetrators to subvert existing procedures, checks and balances?
- Aside from the customs were there others from the ministry who were disciplined for this event?
It is unclear if President Muse Bihi Abdi who has run on an anti-corruption platform is aware of this incident. No one has been persecuted for corruption since President Bihi has taken the helm on November 2017.
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