Deploying Diaspora-led Investments for Africa’s Development
Representatives of the African Development Bank Group recently participated in a seminar on "Promoting Diaspora-led Investments and Leveraging Remittances as a Source of Financing for Enhanced Growth and Development in Africa" held in Cape Town, South Africa. Organized by the Joint Africa Institute, the 3-day seminar, which ran from February 6-8, 2008, brought together experts in the domain, including the AfDB Executive Director, Peter Sinon; the World Bank‘s Chief Economist for Africa, John Page; the Multilateral Investment Fund Manager, Donald Terry, and the chief executive officer of the Development Bank of Southern Africa (DBSA), Paul Baloyi.
As the reality of globalization reaches more and more people, the role and impact of the Diaspora and their remittances as well as their potential positive contribution to development is becoming increasingly critical for policy and strategic considerations. The scarcity of development finance is being further hampered by escalating costs of inputs for infrastructure development such as cement, bitumen and fuel, and this makes Diaspora remittances all the more important.
The Bank Group has always considered the African Diaspora as a key factor in development efforts on the continent. Though the departure of highly skilled workers from the continent constitutes a major constraint on development efforts, remittances by Africans living abroad are boosting development initiatives on the continent. As stated in a report by an Independent High Level Panel set up by the Bank Group, "Remittances to the continent, more stable than ODA as a source of external flows, have also been growing rapidly – a boost for the continent, but also a sign that skilled workers are not finding good employment opportunities at home and are going abroad. Remittances rose from US$58 billion in 1995 to US$160 billion in 2004 (an increase of US$102 billion). ODA flows during the same period only increased (by US$20 billion) from US$59 billion to US$79 billion."
The main reasons for this dramatic surge in remittance flows is 'globalization', reduced travel costs and related increased movements and settlements; increasing competition between banks and money transfer operators such as Money Gram and Western Union, leading to cost reductions of average transmission. In certain places such as Asia and Latin America - the extension of remittance networks and related secured financial services have boosted recipients and migrants disposable incomes and incentives to remit.
The Cape Town seminar was part of a process initiated by the African Union, the World Bank and other development partners, based on their realization of the potential and ability of the African Diaspora to help the continent's development efforts and it included presentations which resulted in many agreements.
Participants agreed that it was necessary to develop financial intermediaries especially rural facilities and improve the formalization of receipts and access to finance through the promotion of financial literacy within those institutions and individual bank accounts through which remittances would flow and lead to a more accurate and reliable collection of data. They suggested that it would be possible to explore possibilities of issuing Diaspora Bonds as a means to raise further Development Financing based on the increasing, consistent and reliable remittance transfers from the global capital markets.
They noted that it would be necessary to develop and strengthen partnerships and the capacities of the African Union, African Central Banks and related financial institutions, the diaspora, remittance agencies and recipients to work together on and develop remittance credit schemes and registries. It was important, they emphasized, to put in place various incentives and exchange programmes to tap into Diaspora’s knowledge base and experience.
They underscored that it was necessary to change the mindset to see the Diaspora as an asset and think of brains gone overseas as ‘brain banks’ to be tapped into with the right incentives and ICT infrastructure in place rather than to always yield to the negative and passive conclusion that ‘brains gone abroad’ are a loss to Africa countries.
Through its Chief Economist’s office, the AfDB Group is closely collaborating with the World Bank on the issue of Diaspora remittances. The Bank has recently released a report on Diaspora remittance on Comoros, Mali, Morocco and Senegal that aims at supplying detailed information on the issue of migration, the Diaspora and the dynamics of remittances.
The Joint Africa Institute is a joint World Bank, IMF and AfDB venture designed to establish a joint training institute in Africa with the long term objective of setting up a world class knowledge-based institution with an African identity. Its primary goal is to deliver quality training in drawing on the best expertise from the three institutions.