Remittances, amounting to £60 billion in 2012, are the first step in harnessing the potential of the diaspora for African development. Individuals and organisations in the diaspora are ideally suited to drive key projects, as they have better local understanding and a clear commitment to seeking sustainable change
Ever since The Economist declared that Africa was 'rising' in 2011 there has been a great amount of attention given to this new conversation about the continent. While in some ways the 'Africa rising' concept is a welcome reappraisal of Africa, it has been criticised for its vagueness and focus on tired cliché rather than detailed evidence. Financial growth in African countries has been strong for the last ten years. As a McKinsey report stated, ‘real GDP rose by 4.9 percent a year from 2000 through 2008, more than twice its pace in the 1980s and 1990s.’ This strong growth has continued while recession hit much of the rest of the globe and is even more impressive given the context of conflict in selected states lowering the overall average.
African countries are still dependent on various forms of external income. Foreign direct investment in 2011 amounted to $42.7 billion according to the UN. Aid programmes contribute $44 billion to African countries according to a UN policy brief from 2010. The importance of diaspora contributions is often overlooked.
Diaspora remittances to Africa represent an enormous sum - around £60 billion in 2012 from 30 million migrants - which represents enormous potential and the overwhelming willingness of the diaspora to contribute. It is a large pot currently focused on short-term change but which would be better targeted at commercial opportunities, partnerships and structured investments aimed at promoting growth and sustaining change. It is clear that the intentions of African migrants are excellent; it is also clear that such intentions could be better channelled. Remittances are the first step in harnessing the potential of the diaspora.
A long-standing critique of traditional aid is that it fails to properly target the most useful areas of development because it does not always hold the best interests of the recipients at heart and that it does not possess the understanding of the unique, local conditions in which programmes are operating. The power of diaspora-backed projects is that they can exist on an intra-familial or intra-community basis so it is clear what the motives behind them are and they are able to overcome the information gap which can exist between local communities and multinational organisations. The difficulty of such schemes is that at present they are not tracked or analysed to a professional standard, so while they may have the best interests of the right stakeholders at heart, they may lack the professionalism to deliver a project most effectively. The lack of formality in this sector, then, is both a strength and a weakness.
Several schemes have been established to amplify the impact of diaspora cash-flows such as the improved structures of African financial sectors and the increased money lending capacities in such areas. Of course, there is still a huge amount of potential to be unlocked.
There are some clear areas that policymakers in both the developed and developing worlds can help to improve the effectiveness of diaspora contributions. Domestic bank charges account for around 12% of remittances to Africa currently, which clearly limits the scope for contributions of any sort. The complex and off-putting visa demands of, for example, countries in the European Union represent an enormous stumbling block for well-functioning diaspora schemes. Policymakers have recognised these issues but change will not occur overnight. It is crucial that the diaspora and related diaspora organisations seek to improve relevant structural issues themselves. If the diaspora improves organically, those policymakers seeking to complement this growth will have a stronger case to make.
In 2004, a paper by the Migration Policy Institute called for organisations to focus on combating the information deficit surrounding diaspora funds to help nascent development and investment projects to be more effective and transparent. Developed Africa believes that opening up the commercial potential of Africa is also best served by combating this deficit. There are millions of opportunities in the continent for investment and other support; the main issue for those on the outside is a lack of knowledge about what is available and, crucially, what returns they can expect. If members of the Africa’s diasporas know everything they need to know about where these opportunities are, what they are seeking to achieve and what support they are seeking, they will be empowered to become involved in development. Diaspora organisations are ideally suited to drive such projects forward as they have better local understanding and have a clear commitment to seeking sustainable change. Developed Africa, an online resource allowing access to information about commercial development opportunities, offers a platform for this.
The diaspora is an excellent resource for more than simply capital. The design and planning of projects or new business ventures can greatly benefit from diaspora input and Developed Africa is actively seeking more opportunities for potential investors. The diaspora is an amazing pool of exactly the talent and drive that Africa’s rise requires.