Leveraging the Diaspora for the Benefit of Households and National Economies in the Countries of Origin and Destination
Organized by UNECA and African Diaspora Network
Thursday, September 23, 7:00 AM PST, 2:00 PM GMT
Context
The African diaspora has a critical role towards the development of the continent. The diaspora must position itself robustly to devise innovative ways of utilising its resources toward improving livelihoods of households and national economies in the countries of origin and destination. From 2015 to 2019, African migrants increased surpassing global migrant percentage increases. Between 2015 and 2019, migrant numbers in Africa increased from 23.5 million in 2015 to 26.5 million in 2019 representing a 13 percent increase. Migrants in Africa accounted for 9.8 percent of the global number of migrants in 2019. These trends are partially due to regional integration through Regional Economic Communities (RECs).
Enhancing the socioeconomic and political relations between the diaspora and countries of origin is critical. This is because most African countries with economic resources and opportunities equally lack modern technical resources, skills and experience to support productivity. Strengthening the mutual economic relations between diaspora and these countries would lead to opening new markets to the surplus of African laborers (unemployment). The African Continental Free Trade Area (AfCFTA), already being implemented and the Protocol on Free Movement of Persons, offer opportunities for regular pathways for people to move and are key pillars of regional trade and economic integration, as they facilitate trade in goods and services and industrialization, thereby contributing to socioeconomic development and poverty reduction.
Remittances to African countries in 2018 were about 84.3 billion US dollars constituting 12.1 percent of global remittances. Remittances to African countries had risen to about 85.9 billion US dollars in 2019 which was 12.0 percent of global remittances. Although the COVID-19 pandemic was expected to lead to a decrease in remittances to Africa in 2020 by October 2020, remittances to Africa had reached 78.4 billion US dollars constituting 11.7 percent of global remittances. Remittances act as a form of insurance against macroeconomic shock for receiving countries and improve sovereign credit worthiness by increasing the level and stability of foreign exchange receipts. However, the major challenge is how to translate these into developmental dividends.
Remittances have both direct and indirect effects on the welfare of the population in the migrant sending countries. Evidence from some studies show that remittances reduce the depth and severity of poverty. Remittances have been found to have an income stabilizing effect at the household level. Remittances have been noted to cushion households in times of economic downturns, financial crises, and natural disasters because migrants living abroad send more money to help their families back home. Migration contributes to human capital formation as remittances are spent on education and health. However, there is also contradictory evidence that migration has shown to raise inequality among households, as only the relatively well-off have the resources to send workers abroad and therefore receive remittances. Recently, there have been observations that households need technical advice on how to use the remittances of migrants in their countries of origin. Also, there is a need to assess the sustainability of remittances in the context of changing circumstances of migrants in host countries.
Remittances are just the start of how diaspora communities are key enablers in the landscape of developmental finance. The sheer volume of remittances outstripping Official Development Assistance and other key international development players, such as philanthropy, means that the great shifts of developmental capital are now private funds. Historically, public funds were the key determinant of international development, however, the economic reality of the pandemic indicates a retreat in international aid budgets from major governments. This presents a significant opportunity for diaspora engagement to step into a leadership role and fill the void.
Beyond volume, remittances have an added key value of reaching individuals and communities, directly impacting a number of Sustainable Development Goals, such as poverty reduction, hunger alleviation, and promoting education and healthy communities. According to the International Day of Family Remittances, “the SDGs provide a unique opportunity to create a convergence between the goals of remittance families, government development objectives, private sector strategies to tap underserved markets, and the traditional role of civil society to promote positive change” (UN IDFR). Shifting away from a consumption-based dependency on remittances to a broader agenda of supporting civil society, private sector, and government development objectives is a core pillar of African Diaspora Network (ADN).
While remittances may seem to only benefit recipient families, they are capable of impacting the surrounding communities and government if applied strategically. ADN recognizes a need for an intra-African voice for collaboration and has been exploring new ground to untap the potential of financial inclusion, including elevating diaspora investments beyond remittances that can change the developmental landscape of local communities. Mechanisms such as literacy for remittance recipient families can increase opportunities for formal savings and investment, and in turn, build the human capital of remittance families and communities to improve their living standards through education, health and housing. Diaspora resources abound in a time of global migration, and the critical step is to strategically harness and activate the involvement of the diaspora for the development of the continent.
