Diaspora cash as capital for socioeconomic development

Thursday December 6 2018



Professor Zulfiqarali Premji

Professor Zulfiqarali Premji 

Remittances from the Diaspora can have a positive impact on economic growth, as they are used to finance basic needs like housing, health-care and children’s education. The moneys can also be used as capital for small entrepreneurial activities.

Although the actual sums remitted – taken individually – are relatively small, taken collectively, they are considerable enough to have tangible impact.

Besides, Diaspora remittances tend to be more stable than other capital inflows – and banks in some countries use them to securitize loans from international capital markets, thus raising overseas financing using future remittances as collateral. This also lowers borrowing costs.

In 2006, Diaspora remittances to Africa were estimated to total $20 billion – higher than the foreign direct investments (FDIs) that year – with Nigeria topping the recipients’ list, followed by South Africa and Angola.

Remittances to sub-Saharan Africa grew to $37.8 billion in 2017, according to the World Bank – and are forecast to reach $39.2 billion this year, and $40 billion in 2019.

A 2008 World Bank report titled Beyond Aid: New Sources and Innovative Mechanisms for Financing Development in sub-Saharan Africa estimated that sub-Sahara African countries have the potential to raise as much as $1 billion to $3 billion by just reducing international migrant remittance costs.

Any country can raise funds through Diaspora bonds, by securitizing future remittances. India and Israel have raised as much as $11 billion and $25 billion respectively from their Diasporic kith and kin.

Tanzanians in the Diaspora are steadily increasing in numbers, and are almost invariably keen to send money back home.

However, I recently met a Tanzanian at London’s Heathrow Airport who bluntly said “why should I send money home when the government treats its Diaspora as unpatriotic? Staying abroad for whatever reason is not accepted kindly at home.”

I’m a retired civil servant, and I agree with this observation. Whenever I return to Tanzania from travelling abroad, I am viewed as a, unpatriotic runaway. This mentally must change soonest – and the government should be involved in bringing about the change needed.

Commenting on this, the Constitutional and Legal Affairs minister, Prof Palamagamba Kabudi, reportedly said we should not set timelines for the government on such matters. While I agree with him on this, it is also true that time in not infinite – and like the ocean-tide, time waits for no man, or any government, for that matter.

The dual citizenship/nationality issue for Tanzania has taken over a decade to resolve. Meanwhile, some Tanzanians in the Diaspora hesitate to send remittances which could go into socio-economic development activities.

Who is the loser here, pray?

Sometimes it is a matter of being indifferent, or intransigent, when it comes to sorting out such issues.

I will give an example: if you were born in Zanzibar, then you are a Zanzibar citizen, period.

But, the same is not true for Mainlanders. If you were born in Mainland Tanzania, you are not automatically considered a Tanzanian. Why? There are many people like me who can prove that they were born in Mainland-Tanzania; but when we apply for a digital passport, all sorts of hurdles spring up.

Questions like ‘why did you not apply for citizenship at the time of independence’ arise. Some of us were toddlers then – or were born post-Independence.

Birth certificates of father and mother…? Some of our parents died 30 or 40 years ago; but their places of birth linger as a curse in present-day Mainland Tanzania.

All this is created mainly for two reasons. First: there are some political leaders who think they are more patriotic than other Tanzanians – and, thus make it difficult for the latter to live in their very motherland. Secondly: they calculatingly create a fertile ground for corruption.

The Tanzanian Diaspora is significant, and can contribute enormously to socioeconomic development back home. But there are man-made hurdles in the way. Pragmatism on the part of the relevant authorities is gravely lacking, with outdated dogma dominating, invoked without intellectual thinking and inputs.

This article is based on a number of research papers, whose findings confirm that stable, private money transfers have direct poverty-mitigating effects, and promote financial development. Also, the article posits that formalizing such flows can serve as an effective access point for ‘unbanked’ individuals and households –and is a new way to create capital.

Meanwhile – as the Tanzanian Diaspora is waiting – I humbly request the Constitutional and Legal Affairs minister to reconsider issues of Tanzanians in the Diaspora for the good of the nation.