Tuesday, March 4, 2014

Diaspora remittances better than aid

A man counts US dollar bank notes. Between 1960

A man counts US dollar bank notes. Between 1960 and 2003 total foreign aid to Africa was only $600 billion but remittances from Diaspora Africans during that period were double the foreign aid amount. PHOTO | FILE 

By Adams Bodomo

The African Diaspora has grown to become such an important source of foreign exchange for Africa to the extent that the African Union (AU) has designated it as a sixth development “zone”, the other zones being West Africa, East Africa, Central Africa, Southern Africa, and North Africa.

Indeed the AU frames the definition of who is a Diaspora African very much in terms of contributions from them towards African development:

“The African Diaspora consists of peoples of African origin living outside the continent, irrespective of their citizenship and nationality and who are willing to contribute to the development of the continent and the building of the African Union.”

This article addresses important questions such as: what exactly is the volume of this important source of income to Africa, how do we compare remittances from Africans in the Diaspora to development aid from non-Africans, and what steps can African governments take to sustain and enhance this most reliable African development agency that is the African Diaspora.

Some of these issues are analysed based on empirical research on Africa’s newest Diaspora: Africans in China. We conclude with the idea that Diaspora African contributions are better than foreign aid funds from mostly western donors who may exert negative external influences on Africa’s sovereignty and future development.

To answer the first two questions, what is the volume of this remittance and how does it compare to the volume of development aid from non-African donors, let us sift systematically through some statistics over a number of years. No one really knows the exact amount of remittances Africans send back home, particularly since not all of this goes through official banking and remittance channels.

But the figure is believed to have gradually increased over the years. Historical figures from the IMF indicate that remittances have increased gradually from US$15 billion from 1998 to about US$20 billion in 2003.

Solome Lemma in her blog article indicates that Africans send home 40 billion each year, which is far more than the 7.7 billion that the US sent to Africa as development aid in 2010. Indeed Lemma confirms that between 1960 and 2003 total foreign aid to Africa was only 600 billion dollars but remittances from Diaspora Africans during that period were double the foreign aid amounts.

Already in 2007 according to Lemma, remittance to Africa by Diaspora Africans was 200 billion US dollars, which is far more than foreign aid to Africa in that year by non-Africans.

 The latest figures about Diaspora African remittance show that in 2012, despite paying far more remittance fees than most other areas in the world, Africans still sent back home to Africa a whopping 60 billion dollars.

What all this demonstrates is that the more than 30 million Africans outside are remitting far more money to Africa than the development aid funds that are accorded the continent from international donors.

The figure is bound to continue increasing because of the formation of new Diasporas in economically fast developing areas of the world like China, Russia, India and Brazil. Figures obtained from Africans in China during fieldwork for writing my book,

Africans in China indicate that Africans send home anywhere from 10,000 to 100,000 yuan or more per person annually. More specifically, the chairman of the Guinean Association of Guangzhou writes in an email response to my request for remittance figures:

“Hi Professor, the amount sent home is often a function of many factors: - how much the person is getting here on average, - how the person’s family is organized back home, etc... In general, an adult [male] Guinean in GZ has a wife (or wives) and kids back home in Conakry, the capital (or another big town), and his parents and other relatives (his and his wife/wives’ relatives) staying in the villages.

It is normal for all these people to be supported by the adult living in GZ. Moreover, it is the ambition of each Guinean in the diaspora to build a house (where he can return) and start a business (shop or plantation, etc...) while still abroad. So, a guessetimate for average remittances between 25,000Rmb and 150,000Rmb per year is in place.

If all the half a million Africans plying their business in China were doing this, Africans in China would be sending anywhere between 5 and 50 billion yuan a year or more and this doesn’t even include the value of all the merchandise that they buy from China and send back to Africa for sale, which even if not countered as remittance, still constitutes a good contribution from Diaspora Africans in terms of trade, another area Diaspora Africans could be performing far better than foreign actors.

The above section has shown that even just staying with official remittance channels, which is only part of the remittance story, the figures we get indicate that African Diaspora remittance far exceed the foreign aid that comes from non-Africans, especially traditional donors in the West. Next we argue that not only is this Diaspora remittance more substantial, it is indeed better than foreign aid.

The greatest advantage that foreign remittance funding has over foreign aid funding is that these remittance funds go directly to the remittance targets, the recipients most of the time.

Family members know the financial situations of their families all too well and often remit appropriately and on a timely manner. Of course, there have been cases in which family remittance monies have been wasted or misappropriated. But this is nothing compared to the legendary inefficiencies in the foreign aid industry.

Overseas Development Assistance (ODA) and other types of foreign aid funds have been known to be misappropriated at all levels, including governmental and non-governmental levels.

Dambisa Moyo in her book Dead Aid has already listed myriad inefficiencies related to foreign aid and even pointed to the magnitude of official corruption that can be involved in foreign aid funds management.

There are estimates showing that in some cases less than 10 per cent of ODA funds actually get to benefit the most vulnerable populations, the 90 per cent or so entering the pockets of government officials and even foreign aid workers who are sometimes paid huge sums to make them live like kings in the midst of the poverty they are supposed to eradicate.

A second advantage of remittance funds over foreign aid funds is that they are devoid of conditionalities for the most part. Diaspora African remittances are gifts of love to family members meant to bring about the development of the family and hence the nation in a way that these grassroots citizens of the nation want.

These include paying school fees, building houses and structures of all kinds and growing businesses.

Foreign aid funds, on the other hand, are not free gifts. In most cases they attract an interest even if low. But more importantly a lot of conditionalities are imposed by donors, such as the need for structural adjustment programmes, public sector deregulation, privatization, and even demands for overhaul of the country’s political system before further funds can be disbursed.

Professor Bodomo is Director of the African Studies Programme, University of Hong Kong