[dehai-news] (Business Day - South Africa) Remittances from African diaspora dry up in global recession

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From: Biniam Tekle (biniamt@dehai.org)
Date: Mon Mar 16 2009 - 12:29:58 EST

Posted to the web on: 16 March 2009
Remittances from African diaspora dry up in global recession
Dianna Games
REPORTS are starting to creep into the African media about how thousands of
families may no longer be able to feed themselves, pay school fees or build
houses because of a dwindling flow of money from western countries that has
been helping to keep Africa afloat.

No, it is not aid we are talking about here but money generated by Africans
for Africans. Remittances, worth billions of dollars a year to the
continent, are starting to decline as Africans working in western markets
start to feel the pinch of the global financial crisis.

A recent World Bank report said remittance inflows to developing countries
could fall by anything between 1% and 6% this year from last year , which
would have a marked effect on communities in Africa. The report suggests
that shrinking economies will also lead to anti- immigrant hostility,
further affecting the employment of foreigners in western countries.

The figures of what developing countries gain from remittances are
staggering. The Bank says that in 2005 remittances to developing countries,
dominated by flows to China, India and Mexico, totalled $188bn — twice the
amount of aid to these countries.

The figures for Africa are relatively small but rising rapidly, reaching
anything from $20bn to $40bn in 2007, depending on whose figures you
believe. In sub-Saharan Africa, Nigeria has traditionally been the biggest
recipient (officially $3,3bn in 2007), followed by Kenya ($1,3bn) and
Senegal ($900m). It is generally accepted that the real amounts are at least
double official figures because so much of the money moves through informal
channels .

The money has given poor economies a boost, providing funds for food and
services, start-up business capital, education and other essentials
governments have failed to provide. It has created the impression, in some
cases, that governments are doing a better job than they actually are.

Zimbabwe is a classic example. Remittances last year were estimated at
anything up to US$1bn, supporting more than half of all households. While
the government claimed credit for the economy’s survival, remittance money
was key to keeping Zimbabweans going and feeding critical foreign exchange
into the moribund economy.

A familiar pattern is evident in many other countries, such as Somalia,
Eritrea and Liberia . Even African success stories, such as Ghana, are still
benefiting from remittances, as their nationals continue to live abroad
despite improvements back home.

A recent trend has Africans in the diaspora investing their money back home
in property and businesses, with a view to returning one day, rather than
just providing a cushion for extended families. In Senegal , officials
maintain that the current housing boom is funded to the tune of 30% by
diaspora money.

However, many of the countries high on Africa’s remittances recipient list
rate poorly on the United Nations Human Development Index, suggesting that
remittance inflows have not generally promoted sustainable economic growth.
Most remittance money is used for consumption spending and has, in some
instances, discouraged recipients from getting jobs or creating businesses.
For every success story, there are other stories of families exploiting
their remittances to live a lifestyle they could not otherwise afford. Large
numbers of people in Africa surviving on one person’s contribution from
abroad also suggest the money is too widely dispersed to be of real
long-term value.

 Governments are looking for ways to capture these dispersed funds for
development. Kenya, for example, is putting together a policy in this
regard, while diaspora bonds have also been mooted. However, the mistrust of
the state by many Africans, particularly those who have left because of
their governments, means they are reluctant to let officialdom tap into
their hard-earned money.

Despite the potential, remittance money tends to keep economies ticking over
rather than helping them to move them to the next level. It is often said
that African countries do not need more money, they just need to use what
they have more efficiently. Never has it been more urgent for this to

 Games is director of Africa @ Work, a research and consulting company.

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