Wednesday, June 03, 2015

The Bounty of the African Diaspora

The 30 million strong African diaspora fuels the continents’ budget to the tune of 5% of its total GDP. The International Fund for Agriculture Development (IFAD) estimates the African remittance flows to and within the continent reach $40 billion per year. Because about 75% of all transfers are informal and, therefore, impossible to track, diaspora remittances would be up four times bigger bringing the actual figure anywhere between $120 billion and $160 billion.

Breaking down the official numbers indicates that the remittances received on per capita basis equal about $40. Since not every person is lucky enough to have a diaspora friend or relative, the actual average estimated remittance value sent by a migrant equals $1,177 yearly. This is most often shared by a number of relatives.

Morocco tops the chart at over $6 billion. In second place is Algeria with $5.4 billion then Nigeria with $5.39 billion and Egypt with $3.6 billion. However, if one looks at the percentage of a country’s GDP that is supplied through remittance, it is the poorest and relatively smaller countries that show the highest dependence on foreign transfers: Eritrea (38%), Cape Verde (34%), Liberia (26%) and Burundi (23%).

Somalia, which receives approximately $1 billion worth of diaspora transfers every year, is not listed on percentage terms because its GDP is unclear. Using the Central Intelligence Agency (CIA) economic estimates, however, shows that the country’s remittance could be approximately 40% of its total domestic product. Placing Somalia at the top of relative remittance value. In Somalia, a country with diaspora spanning all continents, money is spent less eagerly on health and education simply because these facilities aren’t commonly available and, if they are, reflect poor quality.

In Eritrea, where ¼ of population lives abroad, about one in three households depends on remittance income, while 75% of all survey respondents receive at least one form of remittance. A study by Temesgen Kifle from the University of Queensland noted, “it is evident that remittances receiving households in Eritrea spend part of the remittances on child education …’. Kifle’s regression analysis shows that a 1% increase in household income (including both formal earning and remittance) increases the education ratio by around 0.04 percentage points.

A World Bank paper titled: “Remittances, Consumption and Investment in Ghana” concludes that remittances do affect marginal spending behaviour of households. Most significant findings show that households receiving remittance spend less at the margin on food by as much as 14%, and more at the margin on education by as much as 33%.

Another study focusing on Nigeria and Kenya published by the World Bank in 2011, revealed that more than half of total remittance spending is invested in home-building, land purchases and farm improvements.

Donna Clifton, in an article in the Population Reference Bureau, concludes that countries’ economic growth can be directly affected by remittance levels through consumption and investment patterns. Clifton points to an important fact related to migration: As the overwhelming majority of workers living abroad are male, a significantly higher number of female-headed households emerge in the country of origin. In Ghana, for example, 52% of households with migrant workers were female headed, compared with only 25% for households with no migrant workers. It has been empirically proven, many times over, that female-headed households have a considerably higher inclination to invest in health care and education – the core sectors of human capital – as well as having a higher propensity to saving.

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