Business
Policy makers looking to tap into diaspora remittances to power Africa’s industrialization and growth
Remittances from Africans in the diaspora are now estimated at around US$60 billion annually and are said to have surpassed traditional western aid. While these help millions of Africans in their day-to-day needs, a proper harnessing of this resource could well see the continent on its next development stage – industrialization.
As the world wakes up to the idea of Africa as a center for economic growth, it is considered, in many ways, the final frontier for investment opportunities. Industrialization is widely seen as the next phasebof Africa’s development, an imperative on the path towards sustained wealth creation.Successful industrialization requires ambitious entrepreneurs that are willing to take up the challenge. It is therefore important not only to have favorable regulatory and business environments, but also a stable political landscape.
The African continent has increased its competitiveness in the global marketplace in recent years, primarily as a result of nation states decreasing country risk. Business and investment is driven by confidence. As investors feel more comfortable with stability across the region it has, and will continue to, increase prospects for sustained investment – as we have already seen with Chinese and Middle Eastern interests.
Africa’s diaspora communities sit in a very promising position, having played such a crucial role in the continent’s development, thus far.
The diaspora are not only well informed about the opportunities existing in their communities of origin, they are willing to invest in fragile markets when others will not. Diaspora finance has been one of the main drivers of Africa’s surge over the past 20 years helping sustain not only families but, within many countries, trade and industry as well.
Remittances to Africa have exceeded official development aid by approximately 50 percent, while for most African countries the amount sent home by migrants surpasses foreign direct investment (FDI).
With limited official data, such figures are only estimates, however, what is certain is that remittance flows to Africa have grown remarkably over the last two decades. Indeed, there is a broad consensus that they have more than quadrupled in that time to account for approximately 3 percent of Africa’s overall gross domestic product (GDP).
Policy makers on the continent are looking at ways to harness the development potential of diaspora remittances. A paper released in March following a conference in Abidjan of the Economic Commission for African (EAC) and the African Union Commission (AUC) highlighted the growing importance of remittances as a source of external financing, and drew special attention to their potential in driving Africa’s industrialization and helping to fill its persistent infrastructure gap.
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