African diaspora could chart new economic growth path

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According to the African Union (AU), the African diaspora comprises people of African origin living outside the continent, regardless of nationality or citizenship, ready to contribute to the continent’s economic growth.

  • The African diaspora is so extensive and influential that the AU officially designated it as the continent’s sixth region.
  • The diaspora retains ties with their original home country through financial remittances or potential returns, mainly by involvement in scientific, political, and commercial networks.
  • The African diaspora has the most evident effect on Africa’s economic growth from the remittances they send to the continent. 

Understanding the African diaspora

According to the African Union (AU), the African diaspora comprises people of African origin living outside the continent, regardless of nationality or citizenship, ready to contribute to the continent’s development. The AU’s acknowledgement of the diaspora lies in the realisation of the potential of Africans living outside Africa to contribute to their continent’s social and economic progress.

The African diaspora is so extensive and influential that the AU officially designated it as the continent’s sixth region. This is in addition to East, West, North, South and Central Africa. Economic analysts opine the diaspora wields a mixed influence on African economies. However, with better governance and enhanced stability, Africans striving abroad could steer an economic growth path with exceptional possibilities.

It is estimated that about 70,000 trained professionals migrate from Africa annually. These professionals span various sectors. Consequently, this stretches weak employment systems. The migration drives employers into a draining pattern of recurrent recruitment and deteriorating services.

For instance, the sub-Saharan African immigrant community in the United States (US) has grown significantly over the previous four decades and is expected to expand further. In 2019, around 2.1 million Sub-Saharan African immigrants lived in the United States. This number accounts for 5 per cent of the total foreign-born population of 44.9 million.

This diversified group comprises people from 51 nations with various ethnic, linguistic, and educational backgrounds. Sub-Saharan Africans have more significant labour-force participation than the general immigrant population in the US.

Notably, these migrations are not anticipated to stop anytime soon, with soaring inflation and weakened African currencies affecting professional earnings in Kenya, and Nigeria, among others, as well as insecurity, inadequate education and healthcare, and discontent with the political class.

The brain drain controversy

The effect of brain drain on developing countries remains a controversial issue. Some people argue that brain drain is destructive to the economic growth of the sending nations. The idea is that the migration of a person with a higher income and education lowers the average income and education level.

As a result, GDP per capita diminishes, as is the average human capital required for future development. Furthermore, it results in a tax loss for sending nations and a loss of externalities associated with the individual’s education.

The more recent and sensible argument is that brain drain could benefit sending nations. In an incentive effect of brain drain, families invest in educating their children in view of future emigration. Since not all skilled individuals migrate, the human capital stock rises with this incentive effect.

Furthermore, the diaspora retains ties with their original home country through financial remittances, potential returns, and involvement in scientific, political, and commercial networks.

Such networks have the potential to facilitate trade, cash flows, and technology transfers. The connections also help spread development-friendly institutional and social norms, with the African diaspora contributing to economic growth.

While the diaspora may contribute to the economic progress of the countries of origin, the low degree of economic growth in African nations is often an impetus for migration.

Remittances from the African diaspora

The African diaspora has the most evident effect on Africa’s economic growth from the remittances they send to the continent. Remittances sent by migrant workers to and within Africa were over US$95 billion in 2021, benefiting over 200 million family members of African migrant workers. Most of them live in rural areas (55 per cent of the population).

Millions of families rely on these handouts for financial support. This is why low-income and more vulnerable economies rely so heavily on them. According to World Bank figures, The Gambia, Lesotho, and South Sudan are Africa’s top remittance beneficiaries in terms of GDP, with 15, 21 and 35 per cent of GDP coming from remittances, respectively. As a percentage of Ghana’s GDP, remittances grew from 1 per cent to 7.5 per cent between 2004 and 2017.

Remittances complement agricultural revenues in Sub-Saharan Africa, where farming provides at least 50 per cent of livelihoods. They diversify African households’ sources of income and enable them to invest in education and health, reducing their vulnerability to poverty and food security challenges.

When sending remittances to the continent, the African diaspora’s primary emphasis is on consumption. However, a greater focus on the continent’s production potential is critical. This is primarily because growing manufacturing inside the continent would substantially aid nations in building robust economies.

The African diaspora has the most evident effect on Africa’s economic growth from the remittances they send to the continent. [Photo/Inc42]
READ MORE: Impact of Covid-19 on diaspora remittances

The increasingly important role of the diaspora

African governments have recognised the economic potential of the diaspora. As such, these governments continually articulate clear policy directives for the efficient utilisation, engagement and support of the African diaspora for economic growth.

For instance, Kenya has allowed the diaspora to participate in the last two presidential elections. Moreover, the current government under President William Ruto has elevated the diaspora to ministerial status by appointing Dr Alfred Mutua to serve as the Cabinet Secretary (CS) of Foreign and Diaspora affairs.

According to President Ruto, this move will help address issues affecting Kenyans in the diaspora in reciprocation for their crucial role in improving Kenyan society.

In Kenya, diaspora remittances rose to $2.336 billion or 13 per cent from $2.063 billion from January to July 2022. The US is the primary source of remittances to Kenya, accounting for 59 per cent of the total funds sent into the country in 2022.

African governments are implementing effective economic policies to encourage investment within their nations. Moreover, they have set up policies and programs to encourage the African diaspora to invest in their home countries.

One such idea rests in Ghana’s Year of Return campaign. The Ghanaian government initiated this strategy to boost tourism within their territory, which the initiative achieved. The number of foreigners touring the nation surged, and the initiative brought a lot of media publicity to the West African country.

The role of the diaspora in African investment

The African diaspora supports the continent in a variety of ways. AFFORD’s Onyekachi Wambu notes that the diaspora provides Africa with financial, intellectual, political, social, and cultural capital and time.

Regarding investments, many people lack knowledge of how risk is perceived in Africa. People interested in investing in the continent do not have access to crucial information that could influence their investment decisions. The African diaspora can help change the risk perception on the continent by actively utilising tools such as social media to sell the continent’s outlook.

Entrepreneurship in the diaspora offers a substantial potential for leveraging innovation to expand businesses and multiply the impact on African economies. The entrepreneurial spirit of the African diaspora can serve as a tool for the continent’s growth. Moreover, entrepreneurship has the potential to bring numerous benefits to the continent.

For example, it creates more jobs, which is crucial for the continent’s young population, which requires tens of millions of new jobs to maintain economic development gains and achieve future growth and development goals. Investments from the diaspora within Africa can also contribute to the much-needed growth on the continent.

Investing in social entrepreneurship and creating corresponding companies on the continent is another way for the diaspora to participate in the structural transformation of African economies. Social entrepreneurship offers goods that governments on the continent should ordinarily provide but do not.

Reforms to boost the role of the diaspora in economic growth

Analysts assert that government reforms are necessary if the African diaspora and remittances promote African nations’ development potential. Reducing the cost of transferring money to Africa would be an excellent point of departure.

Sub-Saharan Africa had the highest average remittance expenses in the world in 2020, at around 9 per cent. This is roughly three times the Sustainable Development Goals’ objective.

Reducing the cost by facilitating partnerships between remittance providers, banks, and telecommunications companies would increase payments to families and remittances in the form of development funds. According to experts, the objective should encourage diaspora remittances to invest in critical businesses in Africa.

Until substantial reforms are implemented, and remittance flows channelled towards long-term economic prospects, the diaspora will continue to be a net negative for weak African economies. Africa cannot depend on exporting its brilliant people outside to bring money home forever. Thus, governments must establish vibrant economies that appreciate the continent’s human capital and enable bright individuals to prosper.

READ MORE: Kenya: Absa, Visa launch domestic and cross-border remittance service

I am a writer based in Kenya with vast knowledge in Business, Economics, Blockchain, Law and Environmental Conservation.

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