Nairobi: The bustling Eastleigh suburb in Kenya’s capital Nairobi has been the hub of business for Kenyan-Somalis and thousands of refugees escaping civil war in neighbouring Somalia for decades.

In the district east of downtown Nairobi, shops and houses built soon after independence from Britain have been razed and shopping malls have been built by businessmen from the Horn of Africa country.

But as people flee the continuing conflict in Somalia, the population is outgrowing Eastleigh’s ‘Little Mogadishu’ and Somalis are venturing into other parts of the city.

This has caused friction with some Nairobi residents who suspect the expansion of Somali business is financed by piracy, and accuse them of causing hikes in property prices in the areas they have moved to since the first big influx in 1991 after Somalia plunged into war.

“In the areas where they dominate, you can say they have contributed to the spike in property prices, in fact in such areas, prices have tripled, such as Eastleigh, and the entire landscape has changed,” property manager William Kimani said.

“But in cases where one wants to buy land in an upmarket area of Nairobi, they will offer a premium price,” he added.

This distorts the market as new prices are pegged on the premium price.

Last month, Kenyan traders were beaten and teargassed by police after they refused to heed a government notice to leave a market that had been sold to Somali businessmen.

The displaced traders blamed foreigners, rich with the proceeds of buccaneering, of taking over their livelihoods. “A substantial part of the money is local, and the rest of this money is from the Somali diaspora who are not confident investing in Somalia because of the instability there,” Adan Issack, a Kenyan-Somali hotel manager told Reuters.

One of the displaced traders, Rashid Ngugi, is now rebuilding his shop in a less lucrative location between two sewage canals.

“Somalis are well known for piracy and this cash influx is destroying our small business. We are Kenyan citizens but … Somalis are extremely rich and the government needs the money.”

For many Somalis, investing at home is not an option. An insurgent group known as Al Shabaab now controls most of south Somalia and all but a few blocks of the capital Mogadishu. Robert Yawe, an investor and consultant at the Kenyan Property Investors’ Forum said he was doubtful piracy plays a major role in Somali investments in Nairobi.

Such rumours were passed on by people who regard the success of the Somali businesses as a threat, he said.

“The Somali trade is substantially larger than the ransoms paid in the last five years, and I do not think that any person can prove that this money comes from piracy,” Yawe said.

Many Somalis in Eastleigh say their capital is often from family living in the west.

Awil, a 28-year-old pirate in Hobyo said he did not make enough money from hijacking to invest abroad.

“We do not have business in Kenya. But there are investors, these men have a say on attacks, they offer mother ships, boats and supplies before hijacks,” he said. “They get a cut of the ransom and these businessmen may have properties in many cities like Nairobi.”

Analysts say it is easy for such people to make money legal by investing it in Kenya, which has no anti-laundering laws.

Kenyan government spokesman Alfred Mutua told reporters: “We are trying to ensure that Kenya is not used to launder money, some of that could be piracy money. We are monitoring such activities very closely and we will take action.”

But most Eastleigh residents are hesitant to use banks that have set up shop there and prefer to use informal money transfer.

“People are very scared to deal with banks, and everyone holds their cash in hand,” said Bare Shaikh, a shop owner.

“They are afraid the government may freeze their accounts, suspecting their money is from piracy, which is a false accusation.”

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