Low fundraising should stimulate diversification
Harare – Indications that diaspora remittances to Africa will decrease by 5.4% this year due to the COVID-19 pandemic gives credence to calls on the continent to find ways to attract foreign exchange earnings foreigners.
Findings from the Continental Migration Report 2021 show that remittances to Africa will increase from US $ 44 billion in 2020 to US $ 41 billion projected in 2021. Africa is already reeling from the pandemic. , with the IMF saying the continent needs US $ 425 billion between 2021 and 2025 to cover losses due to the economic impact of COVID-19.
The Continental Migration Report 2021 (“African Regional Review of the Implementation of the Global Compact for Safe, Orderly and Regular Migration”) was produced by the Economic Commission for Africa in partnership with the Commission of the Union African.
“Although the COVID-19 pandemic was expected to lead to a decrease in remittances to Africa in 2020, the findings of the reports show that by October 2020, remittances to Africa had reached an estimated 78.4 billion. of US dollars, or 11.7% of global remittances, “one reads in part. of the report.
“He recommends that governments around the world take effective action to facilitate and increase remittances to support the fight against COVID-19 and ultimately build a more sustainable post-pandemic world. “
Diaspora remittances have been a more reliable source of capital in Africa than FDI, according to a Foresight Africa 2021 report, which states that “Flows to low and middle income countries reached $ 550 billion in 2019 , going beyond direct foreign investment and official development assistance ”. .
The report further indicates that the number of remittances may be higher, as many people send money home through informal channels.
This echoes the Continental Migration Report which highlights the high costs associated with sending money to Africa through formal channels.
“According to the report, the costs associated with sending remittances to Africa are among the highest in the world. Until recently, average transaction costs were equivalent to 8.9% of the amount sent for a payment of $ 200, ”says the Continental Migration Report.
“When it comes to the cost of sending money, the report says Africa is still a long way from meeting the three percent target set in Sustainable Development Goal 10. It is estimated that remittances funds make up about 65% of some host country revenues and which senders spend. about 15 percent of their income from remittances.
“For 25 African countries, all of which have large diaspora populations, remittances are the main source of national income. “
Such statistics lend weight to the imperative of diversifying economies and unlocking new sources of income in a continent heavily dependent on raw material exports from the extractive sector.
African economies can be classified into four categories:
Diversified – Such as Côte d’Ivoire, Ghana, Kenya, Senegal, South Africa, Tanzania and Uganda.
Oil and Minerals – Like much of SADC, Nigeria and North Africa.
Tourism dependent – Like much of Mauritius, Morocco, Tunisia and the Seychelles.
“The crisis (COVID-19) confirmed the differences between diversified countries and exporters of industrial raw materials but also impacted North African countries which had rebounded in growth thanks to tourism since 2016”, noted Clément. Gillet, economist at Société Générale. .