PwC, the world’s biggest accountancy firm, is making a move into the world’s worst failed state. Somalia’s interim government has asked PwC to bring bookkeeping discipline to a country where lawlessness has reigned for nearly two decades.

At the demand of international donors, the besieged government has asked PwC to set up money tracking systems to ensure that aid sent to Somalia, including $67m (€48m, £41m) pledged in April, is spent as intended and not stolen by corrupt officials.

Somalia is in the latest phase of an 18-year civil war as Islamist insurgents, including some allegedly linked to al-Qaeda, seek to topple the western-backed government. Shoot outs, mortar attacks and suicide bombings have become so intense that aid agencies and the United Nations no longer base foreign staff in the country.

Abdulrahman Adan Ibrahim, Somalia’s first deputy prime minister, said his government’s efforts to tackle the Islamists and piracy had been constrained by the slow delivery of funds from donors nervous about their money going astray in the absence of a formal banking system.

“We want to be different from other African countries. We want to show the world that the money given to us will be going to where they want it, to be used in a transparent way,” he said.

PwC has undertaken similar work monitoring donor payments in Afghanistan and Sudan. It declined to discuss details of the Somalia project, citing client confidentiality and security issues.

Abdusalam Omer, a senior adviser at Somalia’s finance ministry, said PwC would set up and act as the trustee of an account in Mogadishu, the capital, for donor funds, most of which are intended for security, health and education.

He said the mechanism to be set up by PwC should speed up the arrival of the $67m pledged by donors, including the US and the European Union, to strengthen security forces. It was part of a broader $213m package that included funds for a 4,300-strong African Union peacekeeping force. A little less than half has been disbursed, partly because the alternative disbursement mechanisms – via a UN trust fund or the central bank of Djibouti – are considered by some donors as too slow or too leaky.

Mr Omer said he expected PwC to send staff to Mogadishu from Nairobi, capital of neighbouring Kenya. But it is likely that the only people on the project to be based permanently in Somalia will be local agents who deliver small cash payments and record them in electronic ledgers.

The process will begin with PwC informing the relevant ministries when funds arrive. It will verify that their spending plans match donor objectives, release funds and ensure they get into the hands of intended recipients.

“If the money is for salaries it will be transferred to the Somali employees and PwC will get receipts and signatures to show they got it,” Mr Omer said. The money flows will be recorded in a new computer system and reports sent back to donors every 15 days. “The bottom line has to add up,” he said.

PwC is not being paid a retainer but will receive a commission of between 2 per cent and 4 per cent on all funds that reach their intended destination, Mr Omer said.

In common with most accountancy firms, PwC is renowned for its extreme aversion to litigation risk in developed markets. In Somalia it will face physical risk. Many non-Somali diplomats and aid workers who go to the country restrict their visits to a day or two and travel in armoured vehicles with Somali guards carrying machineguns.

“We need to make people confident the money will not be used to buy a house in the UK,” said Ahmedou Ould Abdullah, UN envoy to Somalia, alluding to the UK connections of many senior Somali officials.

Somalia has not had an effective central government since 1991. The interim administration controls only a few blocks of the capital, which are defended by AU peacekeepers. Islamist insurgents ­surround it led by a group called al-Shabaab, which the US says has ties to al-Qaeda.

The US has admitted to supporting the interim government by supplying it with 40 tonnes of arms and munitions in the past two months.

Pirate-hunting coastguard planned

Somalia’s interim government plans to use a portion of funds pledged by foreign donors to launch a pirate-hunting coastguard service off the country’s coast, the deputy prime minister has said, writes Robert Wright.

Abdulrahim Adan Ibrahim, fisheries and marine resources minister, insisted that, even though the government controlled only parts of Mogadishu, the capital, it could have the service running by the end of the Indian Ocean monsoon next month. Pirate activity is expected to surge after the monsoon.

But it will need foreign funding, Prof Ibrahim said on a visit to London.

“Starting from July 26, if we have the kind of support we want from the international community, we will patrol the whole coastline of Somalia,” he said.

It will also require the co-operation of the semi-autonomous governments of Puntland and Somaliland in central and northern Somalia. Some senior politicians in Puntland have financial links to the pirates.

There were 61 attacks on merchant ships off the country’s coast in the first three months of this year. Unlike the foreign navies now patrolling off Somalia, the coastguard would also seek out pirates on land, Prof Ibrahim said.

“The problem is not coming from the sea. It’s coming from land,” he said.

He added that a coastguard would tackle the illegal fishing by foreign fleets widely blamed for driving Somali fishermen out of work and into piracy.

Hundreds of young men were already training as coastguards, the minister said.

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