Introduction

At some point in our childhood, we all had this fantasy of becoming a pirate, going on an adventurous sea voyage, and looting resources and money from commercial ships coming from different places.

It would be surprising to know that it actually happens in one of the African countries and what’s more surprising is that they even have a pirate stock exchange.

Yes, you heard it right! A pirate stock exchange. Somalia, a country with a GDP of only $4.7B and the longest coastline on the African mainland is home to the world’s one and only pirate stock exchange.

Let’s dive deeper into this and understand how this pirate stock exchange works and what’s the need for it in the first place.

A brief background on Somalia 

Somalia being among the poorest countries in the world had very limited financial opportunities for the locals. On top of that, the civil war between the Somalian government and the Ismalic rebel groups put the country under tremendous fear and violence.

With no other option left to support themselves financially, a small coastal town in Somalia called  Harardhere created its own pirate stock exchange for financing criminal activities.

It all began in 2005 when a Somalian pirate Mohamed Abdi Hassan, nicknamed “Afweyne” founded his own piracy network in his hometown Harardhere.

Many young folks started joining private pirate gangs to escape poverty. 

These pirates have been terrorizing shipping lanes around Africa and the Indian ocean. Despite the increased anti-piracy operations by the nations, tens of millions of dollars from ransoms are made by these pirate gangs by hijacking ships and vessels.

Starting the pirate stock exchange

The pirates opened their first “Pirate stock exchange” in 2009 where local investors can invest their money, weapons, and other resources or directly take part in the hijacking missions and share the profit resulting from pirate’s ransoms.

The pirate stock exchange which is open for 24 hours has become so famous that it is attracting investors not only from Somalia but from other nations as well. 

Although there are no accurate statistics, according to the Wall Street Journal, there are over 72 maritime operations listed on the  Harardhere pirate stock exchange. 

During the peak of 2011, the town of Harardhere was filled with luxury cars and other high-priced goods. A part of the ransom was also used to develop infrastructures like building schools and hospitals. 

How does it work?

The pirate groups are always surveying trade routes to find prospects that they believe will pay off. When they find any worthy cargo ship to attack, they turn to the pirate stock exchange to fund their expedition. Anybody can invest in the expedition in the form of food, weapons, or hard cash.

These cargo ships or vessels are then attacked by the pirates and then taken to a nearby port. The main motive of the pirates is not to rob the goods on the ship but to hold the crew members hostage. 

By doing so, they ask for ransom from the ship owners or the insurance company that insures the expedition. The average ransom has gone up to $4 million per ship. Once the ransom is received, the hostages are then left unscathed. 

The ransom is then distributed among everyone. The investors who had invested in the form of cash or weapons receive their share of profit, the port where the ship was held hostage also receives its cut, and finally the enterprising individuals who actually undertake the risky endeavor get their share. 

Conclusion

The biggest irony of these piracy activities is that the Somali pirates are not the biggest winners despite receiving ransom in millions. Insurance companies are the ones that make the most money. The money made by these companies is almost 10 times more than the pirates.

In 2010, insurance companies received $1.85 billion in premium hijackings and $1.4 billion for security equipment whereas pirates received only $148 million in ransom money.

The hijacking of ships by Somalians has become a serious obstacle to the smooth functioning of international trade.

The only way to overcome this problem in the long term is to provide alternative sources of income to the people of Somalia. This can be done by nations coming together and offering their contribution to the development of Somalia.