There is a silver lining to the large-scale emigration of Ghanaian professionals and skilled workers: remittances back home are soaring, reaching $1,6-billion last year. Research indicates that in some African economies, remittances have become so significant that they have overtaken levels of foreign direct investment.
The downside to emigration in Ghana is the loss of skilled, trained professionals, says Ishmael Yamson, chairperson of the Ghanaian subsidiaries of Unilever and Standard Bank Chartered, speaking at the Africa Investment Forum this week.
More Ghanaian doctors now reside in the state of New York in the United States than in Ghana, he said. But as more skilled workers move overseas, remittances have tripled from $50-million 10 years ago to $1,6-billion in 2005.
”Ghana now receives more in remittances than it does in foreign aid, export earnings from cocoa and gold or total foreign direct investment,” Ghanaian Minister of the Interior Papa Owusu-Ankomah said earlier this year. Remittances amount to an estimated 15% of the country’s GDP.
The significance of remittances in Ghana is typical of several African economies. A United Nations report shows that during the period 2000 to 2003, remittances from Africans working abroad totalled $17-billion per annum, overtaking foreign direct investment (FDI) flows, which stood at $15-billion per annum.
The report argues that the growing importance of remittances partially reflects a decline in FDI to Africa. Average FDI to the continent has increased from about $2,2-billion in the 1980s to $15-billion more recently, but Africa’s share of FDI to developing countries has declined from 10% in the 1980s to 7% in recent years.
According to a 2003 World Bank paper on migrant labour remittances, about 15% of the $80-billion in remittances received by all developing countries went to Africa.
The global average amount that is remitted is $200 and the average cost of sending money home is 13% of its value.
According to the paper, Morocco is the continent’s largest recipient of remittances. In sub-Saharan Africa, the single largest receiver was Nigeria, which receives 30% to 60%, followed by Lesotho, Sudan, Senegal and Mauritius.
The continent’s top five remittance- sending countries in the 1990s to 2001 were South Africa, Côte d’Ivoire, Angola, Egypt and Botswana.
Remittances make up almost a third of Lesotho’s GDP. During the past decade, they were four times the value of international aid in Cape Verde. There are more Cape Verdeans in the diaspora than in the country itself.
In Nigeria, two-thirds of all households are estimated to have had family members emigrate, and about a tenth of all Nigerians live abroad, according to the World Bank.
According to the World Bank paper most remittances are used for consumption or investment in human capital, such as education and health. Secondary to this use is investment in land, livestock and home improvement.
These uses reflect the fact that many people emigrate to raise living standards at home, argue the authors. One study shows that remittances reduce the poverty in rural households by about 7% and in urban households by about 3%.
Research tends to understate the volume of cash and non-cash remittances because emigrants often use non-official channels to send resources home, said research manager at the Centre for Policy Studies Omano Edigheji.
”Without remittances, levels of poverty and inequality would be higher,” he said, pointing to Egypt as an example of a country that has relatively low inequality because workers emigrated to the Middle East during the oil boom and sent money home.
Edigheji advised governments and banking sectors to ensure that remittances went through official channels so that economic data could be more accurate. This would also strengthen the formal banking sector and boost the pool of available resources for investment in productive activities.