Africa

Billions in African diaspora savings could bolster growth

IRIN News

African diaspora savings, at US$53-billion every year, exceed annual remittances to the continent and could aid development, if tapped into.

Many Africans living abroad feel a strong sense of connection and want to contribute to development at home. (Reuters)

The African diaspora and migrants have for years been instrumental in helping family and friends at home get by, as huge annual remittance flows illustrate, but their contributions beyond remittances could have a significant impact on development, if tapped into.

According to the World Bank, African diaspora savings, at US$53-billion every year, exceed annual remittances to the continent and are mostly invested abroad.

"If one in every 10 members of the diaspora could be persuaded to invest $1 000 in his or her country of origin, Africa could raise $3-billion a year for development financing," Dilip Ratha and Sonia Plaza write in the World Bank's 2011 report, "Diaspora for Development in Africa".

Many Africans living abroad feel a strong sense of connection and want to contribute to development at home. Dr Girma Tefera, chair of the US-based Ethiopian-American Doctors Group (EADG), says among professionals in the diaspora there is a real desire to use their expertise and skills to make a difference in home countries.

"A lot of my colleagues' primary motivation is to give back to the society at large back home," Tefera says of the 171 Ethiopian physicians in the US who have pledged money and time to the EADG's project to build a state of the art hospital in Addis Ababa.

Gaetan Gatete, president of the Rwandan Diaspora network USA, says they are looking at what they can give, but also at what they can get in return. "We are thinking about how we can invest our money, how we can be the business link between here and our homeland," Gatete told Irin.

Through entrepreneurship, skills and technology exchange, increased trade links, philanthropic foundations, investment, and heritage and tourism links, diaspora groups, individuals and networks are giving back in various ways.

Governments not doing enough
Even so, few African governments have managed to engage expatriates successfully in poverty reduction efforts and development. A recent policy brief from the Migration Policy Institute (MPI), a US-based think-tank studying the movement of people globally, says governments need to be much more proactive if they are to reap concrete benefits from their diaspora.

Kathleen Newland, MPI's migration and development specialist, says African governments need to find out more about their diaspora populations, and to build solid relationships with them to implement coherent engagement policies, rather than treating them as either foreigners or locals. 

"Social marketing is not something that many countries have done well, and few have developed good communications with [their] diaspora on a regular basis," Newland says.

At least 32 African countries have now set up specialised units or ministries to engage with the diaspora, but these are often understaffed and underfinanced. As a result, "There is not a wide knowledge among diaspora [members] of government initiatives," Newland said.

Chukwu-Emeka Chikezie, Director of Up!-Africa Limited, a consultancy firm working with diaspora members in the private sector, says home-country governments cannot rely solely on emotional bonds to get people in the diaspora involved in homeland development. "The Office of Diaspora Affairs is there, but have they been able to really integrate it within their development agenda? That's where there has been a failing," said Chikezie.

Ethiopia, Rwanda
A few countries are making progress, notably Ethiopia and Rwanda, which are reaching out to their expatriates through targeted campaigns seeking investment in development projects in the home country, formal diaspora policies, dual citizenship for diaspora members, and supporting global diaspora networks to forge strong connections with their foreign-born populations. 

The Ethiopian Diaspora Directorate, established in 2002, now has a web portal with information for their diaspora on investment and trade opportunities in Ethiopia, development projects, the government's diaspora policy, and which support services are available in Ethiopia. 

Foreign-born Ethiopians can apply for a "yellow card", allowing them similar rights and privileges to a homeland citizen. Yellow card holders can enter the country without a visa, work without a permit, and are eligible for state pension schemes. 

Ethiopia's ministry of health has set up a diaspora unit to work with closely with Tefera's EADG hospital project. The ministry has also been active in skills exchanges, bringing home expatriate medical professionals to work in the health sector, which has led to the country's first emergency response residency programme.

In August 2012, Rwanda's government set up the Agaciro fund, a "solidarity fund" aiming to get Rwanda off foreign aid and to self-finance development. The fund, managed by the ministry of finance, will close at the end of 2013. According to its website, contributions have reached RwF20.4-billion ($30.3-million). 

Fidelis Mironko, focal point for the diaspora at the Rwandan Embassy in Washington, says people in the diaspora are eager to contribute but the government has not yet decided how the funds will be used.

Diaspora bonds
Bonds targeting expatriates have worked for other developing nations, including India. Some African countries – Ethiopia, Rwanda and Kenya – have issued such bonds to fund particular infrastructure and development projects, but without much success.

A bond is a government-issued IOU, or acknowledgment of debt, to support government spending. It promises to pay the purchaser periodic interest and the face value at the maturity date. Diaspora bonds target members of a country's community abroad, presuming that their emotional, cultural and familial ties will attract them to invest where the average foreign investor might not. 

Diaspora bonds typically offer small denominations and are marketed to expatriate communities, whose long-term and emotional connection to their homelands often make them open to smaller returns or riskier propositions than the average foreign investor. 

Dele Meiji Fatunla, a Nigerian-British writer working at the Royal African Society in Britain, says the limited success of African diaspora bonds lies in misgivings about the ability of governments to deliver, and poor marketing. "As an African in the diaspora I haven't really seen any targeted information that would compel me to… invest in diaspora bonds. There has to be a lot more focused marketing and encouragement to invest."

If African governments were to offer their diaspora voting rights, this would be an added inducement. "You would certainly have more of an investment if you are able to vote. And you will be more likely to invest once you are part of choosing a government and being involved in the political process," Fatunla notes.

MPI's Newland says offering voting rights to people in the diaspora is complicated because they will form a significant part of the electorate but do not necessarily have to live with the consequences of their vote.

Donors and diaspora
Many diaspora groups looking to contribute to development at home are led by volunteers with full-time jobs, which often results in a lack of organisation and oversight, and less strategic and sustainable interventions.

For these reasons Western donors have been wary of engaging with diaspora groups in the past, though they are increasingly interested in capitalising on the unique position of diaspora members to help in achieving development objectives.

Romi Bhatia, an advisor for Diaspora Partnerships at USAids's Office of Innovation and Development Alliances, says one of the biggest challenges to making use of diaspora resources is capacity. "Often, diaspora [organisations] want to work with USAid but there is a capacity gap. We need them to be a registered NGO, and more capable in what they are doing so we can partner with them," Bhatia told IRIN.

USAid is working with a management consulting firm, Accenture, to provide skills training for US-based diaspora non-profits looking to work in their countries of origin.

Chikezie, who also co-founded the African Foundation for Development (AFFORD), a non-profit drawing on diaspora expertise for philanthropic and investment projects in Africa, says the key is creating partnerships that mix diaspora and local knowledge. "The examples I've seen of success are where you have that mix of the diaspora 'can-do-ism', thinking outside of the box, mixed with solid local context and understanding."

But he also warns against thinking the diaspora will be a panacea for Africa's ills, and urges governments to incorporate their expatriates into sound development policies.

Most of the African diaspora and migrant workers are living and working elsewhere on the continent. According to the World Bank's Migration and Remittances Factbook 2011, Africans living abroad in Africa account for over 14-million people, nearly half of all those in the African diaspora. Ivory Coast and South Africa both received over 2.3-million migrant workers in 2013.

While much research, policy work and media focuses on the African diaspora in the West, Chikezie says more efforts are needed to quantify the contributions of the African diaspora within Africa. – IRIN

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