Diaspora remittances are a key source of financing for Africa’s development

Whether formal or informal, remittances from the diaspora have long been undervalued. However, they characterize a large part of Africa’s financial life. These financial flows between individuals contribute significantly to the economic growth of African countries: between 10% and 20% of the GDP of some countries, from Senegal to Lesotho, thanks to remittances that are sent through formal channels. According to the World Bank, money transfers to Sub-Saharan Africa represent $46 billion for the continent as a whole in 2018. These transfers have become more important than official development assistance.

Donors have been slow to realize the importance of remittances. The first report was published only in 2010 by the World Bank and the AfDB. It estimated that some 30 million African nationals from the diaspora, including North Africa, made “formal” transfers through traditional banking networks. 

Another category of less documented flow, that is crucial in daily life, is the funds that flow between African countries, such as Nigerian operators who source agricultural inputs in Côte d’Ivoire, Somali expatriates who support their families from South Africa or Malian manufacturers who source cement in Senegal, for example. These exchanges do not necessarily involve direct transfers. They are based above all on a form of “relational” economy specific to our continent and is based on trust. (see below the main amounts of remittances in Africa).

We can also note that a significant proportion of money transfers are made through informal means. In reality, this money circulates through ingenious channels, aimed at circumventing exchange control regulations or fees charged on international transfers. A simple call between New York and Dakar is all it takes, through banks managed by the “Modou-Modou”, small traders belonging to the Muslim community of the Mourides. These dematerialized money transfers are based on trusted networks and intermediaries charging small commissions: for example, an informal operator in Morocco will take the money of a Senegalese in Morocco who would like to transfer it home, but keep the cash for a different transaction made by another Senegalese customer in Morocco. 

Commissions are half the amount of the 10% or so charged by some remittance companies that are deeply involved in Africa and are located in every cities from which migrants leave, such as Louga in Senegal or Kayes in Mali. The market is huge, since 80% of African migration takes place within the continent, according to the African Union.

These agencies share a rapidly expanding sector, with 61% of the market share of a $4 billion per year market according to the World Bank. This is a trend coveted by banks (32% market share), post offices (5%) and, increasingly, by mobile phone operators. Some operators, particularly in Kenya, have changed the situation, such as the M-Pesa electronic wallet. This approach has been adopted across the continent.

Two countries are leading by example. Ethiopia launched in 2002, a website, the Ethiopian Diaspora Directorate, which identifies investment opportunities in the country for the diaspora members. They are very involved in their home countries, the Ethiopian diaspora the Ethiopian diaspora has invested more than $56 million in the project to build one of Africa’s largest hydroelectric dams, the Great Renaissance. Rwanda launched the Agaciro sovereign solidarity fund in 2012, which has raised €51.5 million in four years.

In fact, African financial success stories are countless. The Dahabshiil remittance network, founded in 1970 in Dubai by Somali businessman Abdirashid Duale, has grown to the size of a multinational… It has more than 2,000 employees in 144 countries. They have the advantage of receiving declared salaries, with pay slips. A good way out of the informal sector, while taking advantage of the huge contribution of migrants, whether on the continent or elsewhere.

 

 

 

 

 

 

 

 

 

Source : The Global Knowledge Partnership on Migration and Development, 2019

Africa Day: Towards durable solutions to forced displacement in Africa

The commemoration of Africa day allows us as Africans to celebrate the founding of the Organisation of African Unity (OAU) on 25 May 1963. Indeed this date marks a clear point in the history of our continent, a point at which our founding leaders signalled to the world that Africans were ready to work in solidarity with one another. This is key to our future.

One of the most prominent leaders behind the founding of the OAU, Kwame Nkrumah, is quoted as saying, “The forces that unite us are intrinsic and greater than the superimposed influences that keep us apart”. This still applies now under the Africa Union, where the focus is on addressing not just political but also development and economic challenges, as well as creating current and future opportunities for Africa’s young population.

This year, the AU has decided to strengthen its action towards refugees and displaced persons in order to develop durable solutions for them, focusing on autonomy and resilience. The AU theme for 2019 is “Refugees, Returnees and Internally Displaced Persons: Towards durable Solutions to Forced Displacement in Africa’’.

Figures show that sub-Saharan Africa is home to nearly half of the 11.8 million new people displaced worldwide by conflict in 2017 alone, according to the International Displacement Monitoring Center (IDMC). The most affected country is the Democratic Republic of the Congo, with 2.2 million new displacements in 2017, out of a total of 4.5 million displaced people. Then come South Sudan, Ethiopia and the Central African Republic.

From the Lake Chad Basin to Somalia, conflicts are most often a primary cause, as are drought and natural disasters. It is too often forgotten that these natural phenomena represent a substantial part (2.6 million in 2017) of the influx of new displaced people on the continent.

The complex issue is of primary concern to the countries that signed the Kampala Convention on the Protection of Internally Displaced Persons in 2009, ten years ago. Africa has committed itself to providing responses, since displaced persons are in principle under the responsibility of their country’s authorities. In practice, the UNHCR is also concerned about rescuing them, but faces funding difficulties.

Long-term solutions can be summed up in a few words: conflict prevention, poverty alleviation and anticipation of natural disasters, which are always easier said than done in broad concrete action plans. Nevertheless, good practices were discussed in New York, for instance what has been done in Niger, the first African country to adopt a national law on the protection and assistance of displaced persons in 2018.

It is a good thing that the celebration of Africa Day allows us to continue to reflect on the best way for Africa and its partners to assume their responsibilities. And so as the African Union Development Agency-NEPAD, we would like to convey the best wishes to all Africans across all corners of the world. Together we will win this fight and achieve ‘The Africa We Want.’

Putting Africa’s Secondary Cities First

With Africa urbanizing faster than any other world region, governments there urgently need to craft national development strategies for harnessing the economic benefits that cities can provide. The key will be to focus not just on rapidly expanding megacities, but also on the intermediary cities needed to achieve inclusive growth.

In the latest Mercer Quality of Living City Rankings, the highest-ranked African city, Port Louis, Mauritius, comes in at 83rd out of 231. That appears to be in keeping with a broader pattern: in terms of the quality of life in its cities, Africa lags behind most other world regions.

African cities’ poor showing is a worrying indictment of urban planning on the continent, particularly given that urbanization there is barreling ahead, regardless of whether its leaders have plans in place to manage the process. According to the OECD, because “Africa is projected to have the fastest urban growth rate in the world,” its “cities will be home to an additional 950 million people” by 2050. Given these trends, African policymakers urgently need to make the region’s cities more attractive to international investors, business people, and tourists, while also ensuring that urbanization remains inclusive.

But there is another key trend that has been neglected: the growing importance of Africa’s secondary cities. Urbanization in Africa is not just about emerging megacities like Johannesburg, Kinshasa, Nairobi, Khartoum, Casablanca, and Greater Cairo, which alone will be home to an estimated 38 million people by 2050. Population is also booming in Africa’s “intermediary cities,” which link remote and rural areas to larger urban centers.

Read full article here

Statistics, industrialisation and agricultural revolution, three challenges for the continent: my thoughts on Carlos Lopes’ Africa in Transformation

Africa and the statistical challenge
Africa must invest in the production of better quality data, because the lack of reliable and independent statistical systems can compromise diagnosis and forecasting. Many analyses are distorted by the lack of reliable statistics. Thus, in many countries, the Gross Domestic Product is underestimated, says Carlos Lopes. But if wealth is poorly measured, how can appropriate tax policies be developed? Africa’s ability to pay is undoubtedly diminished. An additional 1% tax effort, which may seem marginal, would nevertheless bring in more than all the public development assistance from industrialized countries! Let’s repeat it because this point is essential: strengthening Africa’s statistical capacity must be a priority, both for individual countries and for the African Union and its related bodies. This was one of the key points of Carlos Lopes’ strategy when he was head of the UN Economic Commission for Africa (Uneca).

Africa and the industrialisation challenge
Carlos Lopes’ book also provides a reflection on the development model that Africa must adopt to create the conditions for a structural transformation of its economy. Indeed, despite remarkable resilience since the 2008 financial crisis, despite some of the highest average growth rates in the world in the past decade, the continent has not succeeded in creating enough jobs or curbing extreme poverty. The dynamism of its domestic markets, the good performance of its exports and the significant increase in investment flows do not compensate for the lack of genuine industrial policies.

The examples of Brazil from the 1950-1980 period, China, which, after its agricultural revolution, became the world’s factory, and, more recently, Malaysia or the United Arab Emirates show that emergence is inseparable from the industrialization process. Carlos Lopes’ observation is worrying: Africa’s share of world industrial production fell by a quarter between 1980 and 2010, from 1.9% to 1.5%. The author calls for smart protectionism, inspired by the policies implemented in emerging countries, and for a proactive approach by public authorities on this subject. The failure of the industrialisation attempts of the 1960s and 1970s should no longer be used as an excuse for inertia, as contexts and objectives have changed radically.

Africa and the agricultural productivity challenge
It is urgent to change our view of agriculture and recognize that “the farmer is an entrepreneur like any other”, the expression I used in my book Africa’s Critical Choices. It is also the idea forcefully hammered out by Carlos Lopes, which underlines that the challenges of industrialization and the modernization of the agricultural sector are closely linked. While most countries on the continent doubled their average transformation rate after the CAADP was launched in 2003 and agricultural productivity increased by an average of 67%, this rate hides huge disparities. Progress remains insufficient, although Egypt, Ivory Coast, Nigeria or Ghana have performed remarkably well. The average yield of cereal crops in Africa represents only 40% of the average world yield.

Subsistence agriculture on small plots, characterized by very low productivity, remains the dominant mode of production (80%). It does not generate surpluses. Marginalized farmers have limited access to finance and are unable to integrate into the value chain.

However, a paradigm shift is required. African agriculture will have to support the continent’s exponential population growth and rapid urbanization: by 2020, 50% of Africans will live in cities. The agribusiness revolution cannot be postponed any longer and the leaders of this revolution must be those who are today called “smallholder farmers”. 

Africa needs to achieve its infrastructure “big push”

In Africa, we often talk about the opportunities offered by “leapfrog”, these technological leaps that will allow the continent to develop more rapidly by learning from the experiences of other countries and by adopting new technologies more quickly. But if there is one step that Africa will not be able to skip, it is infrastructure. Because, despite its openness to the outside world, with a coastline oriented towards the export of raw materials to industrialized countries, the continent remains the most marginal region in world trade… and the least integrated within its own borders, with inter-African trade barely exceeding 13% of sub-Saharan Africa’s total foreign trade.

It is estimated that the “gap” in terms of infrastructure investment in Africa stands between $130 billion and $170 billion per year. Filling it would allow an annual increase of 2.6% in average per capita income, according to the World Bank – a very rapid jump in growth. Access to electricity, that only 43% of households have access to, is at the top of the list, along with access to drinking water and transport infrastructure. Connecting cities and regions by road, rail and air is no longer just a matter of necessity. Amplified by rapid urbanization, these needs also represent enormous opportunities, which contribute to making Africa one of the last frontiers of growth in the world.

A global awareness happened in the 2000s. Responses commensurate with the challenges were sought. The Infrastructure Project Preparation Facility (NEPAD-IPPF) was launched in 2005 to support regional projects. Fueled by several donor countries, this fund has made it possible to complete the financing of 30 projects, totalling $24 billion. Building on this success, Africa decided to go further in 2012 with its Programme for Infrastructure Development in Africa (PIDA), launched at the initiative of the African Union Commission (AU), NEPAD, the African Development Bank (AfDB), the Economic Commission for Africa (ECA) and the regional economic communities. In view of the diversity of national, regional and international initiatives, synergy between the AU Commission and the regional economic communities is central.

Today, through the “5% Agenda”, we want to mobilize a gigantic and almost “natural” source of financing: African pension funds and sovereign wealth funds. We estimate that African institutional investors hold more than $1.1 trillion. For the time being, these funds are invested in ultra-secure assets such as US government bonds or, ironically enough, European roads and airports.

How can we expect foreign investors to come to invest in us if we do not invest ourselves in our future? We suggest that these African pension funds and sovereign wealth funds invest at least 5% of their assets under management to close the infrastructure financing gap in Africa. That would be about $55 billion. Today, with the establishment in the United States of the Development Finance Corporation – whose objective is to de-risk the financing of institutional investors, particularly towards Africa – Africa must seize the opportunity to lead the way. This is why an African Infrastructure Guarantee Facility (AIGM) is being developed with the African Development Bank (AfDB). As far as infrastructure is concerned, we are not advocating for a leapfrog, but for a “big push”!

To succeed, pan-Africanism must switch from ideal to pragmatism

Former Prime Minister of Niger, Ibrahim Assane Mayaki, is the Executive Secretary of NEPAD, the African Union’s Development Agency. He tells Marie Hourtoule from The Parliament Magazine that there is an inextricable link between the quality and robustness of Africa’s institutions and its prosperity. This interview was first published in The Parliament Magazine March 2019 issue.

Marie Hourtoule: NEPAD is set to become the AU’s Development Agency. What changes will this involve?

Ibrahim Assane Mayaki: The pan-African idea is not a new one. It was supported by the founding fathers of the Organisation of African Unity (OAU), at the forefront of whom was Kwame Nkrumah of Ghana. The original version of pan-Africanism had a single aim: the decolonisation of the continent. The emancipation of the last Portuguese colonies in 1975, the accession of Namibia to international sovereignty in March 1990 and the abolition of the Apartheid Regime in June 1991 signalled the triumph of the pan-African idea as an ideology of liberation.

Yet in a sense, this achievement deprived the OAU of its raison d’être; it then had to redirect its attention elsewhere and overcome internal disagreements. At the turn of the millennium, the idea of an “African Renaissance” emerged, under the impetus of personalities such as South Africa’s Thabo Mbeki, Nigeria’s Olusegun Obasanjo, Algeria’s Abdelaziz Bouteflika and Senegal’s Abdoulaye Wade. The transformation of the OAU into the African Union (AU), launched at the 2002 Durban Summit, laid the foundations for “pragmatic pan-Africanism”.

During the same period, NEPAD was set up to achieve economic, alongside Africa’s political, independence, by adopting an innovative approach and reconciling public sector planning and private sector investment. Today, 17 years later, the transformation of NEPAD into the African Union’s Development Agency, a technical organisation with its own articles of association and its own legal identity, marks a significant strengthening of this pragmatic ambition. Prompted by a special recommendation in the report by President Paul Kagamé, this change will take effect in 2019 at the next AU summit. We look forward to this transformation, as it will enable us to implement more effectively our development programmes for our continent.

MH: Do you think the Comprehensive Africa Agriculture Development Programme can succeed?

IAM: Development in Africa will not be possible until its agriculture has undergone significant change. Don’t forget that agriculture provides 60 percent of Africa’s jobs and 25 percent of its GDP.The Comprehensive Africa

Agriculture Development Programme is an important part of NEPAD and one of its pillars. NEPAD provides AU member states with support for its implementation, through close collaboration with the AU Commission and the various Regional Economic Communities. This programme aims to achieve at least a 10 percent increase in public investment in agriculture and at least a 6 percent increase in farming productivity. We are still some way off this goal, as over half the member states have not achieved these targets.

NEPAD recently launched the African partnership platform for the environment in Nairobi, with the aim of producing a road-map for the development of sustainable agriculture. We need to work together, to mobilise our resources, develop agricultural technology and increase productivity, without losing sight of food security. Inclusivity must be our watchword.

MH: In your latest book, you write that there are not enough countries with institutions able to confront the challenges facing Africa. Can you expand on this?

IAM: Our continent is faced with enormous challenges, starting with population growth and climate change. The African workforce is set to rise to 880 million people by 2050. This figure alone gives some insight into what we are facing. As the former Prime Minister of Ethiopia, Mélès Zenawi – one of the most remarkable personalities I have met – used to say, “analyse your problems in your own terms”. This lack of an appropriate analytical approach has been the basic reason for the failure of development policies attempted in various African countries. It is the failure to take ownership. The same applies to our institutions. It is not enough to replicate foreign institutions; they have to be adapted to the conditions in Africa, to our resources, both human and material. The outcome is not inevitable. Botswana and the Central African Republic, two states similar in many ways, were in similar positions forty years ago. However, both have followed very different paths. The institutions play a decisive role. It will take Africa about ten years to establish sound institutions that will provide a basis for its future progress.

It is one of the tragedies of our continent is that our best minds eschew politics and the public realm. It is not my place to point the finger at particular countries or situations. I ask for a clear-sighted examination and consideration of how we can make up for the shortcomings of our institutions. The World Bank’s latest assessment of public policy and institutions in Africa showed a drop in the quality of policies and institutions in sub-Saharan Africa. This was particularly marked in those countries exporting raw materials and in fragile states. By contrast, the countries that have sound institutions are those demonstrating the greatest economic resilience. This supports my belief that there is an inextricable link between the quality and robustness of the institutions and prosperity.

High-speed trains no longer wait in Africa

High-speed rail has made significant inroads across the continent. A 300 km line between Tangier and Casablanca was inaugurated in Morocco in November 2018 and the journey now takes two hours instead of six, with only a moderate increase in ticket price. Since 2016, the 200 km journey from Abuja to Kaduna in Northern Nigeria can be completed in one hour. Other routes are now being planned for example between Kaduna and Kano or Kano and Lagos. While economic gains are expected, social and political impact will also be visible. Via these infrastructure developments, inequalities between northern regions that have historically been perceived as neglected and oil-rich southern areas will be reduced.

 The Gautrain, which was launched in 2010 between Johannesburg International Airport and Pretoria is another example of dynamism in that sector. This high-speed line, which raised some controversy at its announcement now carries 100 000 passengers a day. It has strongly reduced daily traffic jams in Gauteng province, the industrial heart of South Africa.

 Africa’s economic integration depends first and foremost on its transport infrastructure, which is still influenced by the planning policies of the colonial era. There are too few highways between countries and too few trains, out of Africa’s 90,000 km of rail network, to cross borders. The network linking Uganda to Tanzania, Ethiopia to Djibouti or South Africa to Zimbabwe remains the exception rather than the rule. Entering the 21st century, railway use remains focused on the transport of goods and raw materials between the coast and the hinterland as was the case decades ago. This situation must change, so that Africa can finally trade internally on a larger scale.

 The African Integrated High Speed Railway Network (AIHSRN), one of the flagship projects of the African Union’s Agenda 2063, is one step in the right direction. The modernisation and extension of rail networks will not be possible without the use of technologies, a key element of modern “intelligent” transport. Africa has already demonstrated a spectacular ability to “leapfrog” in the digital sector as proven by the number of mobile phone users and mobile banking customers. It could be the same in railways, where the continent would directly move on to the use of advanced technologies in transportation.

This week’s first African Digital Rail Summit in Cape Town, organized by NEPAD and the International Union of Railways (IUC), identified major projects, suggested a few steps for a way forward and revitalized the dynamic in the African Union of Railways (UAC).

From now to 2063: four major transitions African governments should pay attention to

A new report defining the way forward for a real transformation of Africa has just been published. “Africa’s path to 2063: choice in the face of great transformations”, developed by the Frederick S. Pardee Center, is distinguished by its long-term deadline and methodology using an analysis system encrypted using the “International Futures” tool (IF). We were particularly proud to work with outstanding international researchers to have a better understanding of the trends of our development and the way forward to achieve the goals of Agenda 2063, the strategic framework for the socio-economic transformation of the continent over the next 50 years.

This report is based on a quantitative forecasting software that is macro-integrated and reveals the key transitions that Africa will face towards 2063. There are four main transition topics: the demographic transition, the transformation of human development and inequality, technological transformation and environmental transformation.

The document focuses on these foreseeable transitions that should be discussed, planned and operated to increase development opportunities and in order to address the current and future challenges of Africa. For instance, according to the study, the African population will grow from 1.3 billion to 3 billion by 2063. The rapid pace of urban growth contrasts with the slow pace of structural transformation that accompanies it. A controlled urbanization will bring economic, social and human development.

In addition, the economic growth in a majority of African countries has reduced the gap in per capita income compared to developed countries but it has been found that, by 2063, inequality will widen further between the rich and poor inside countries. This is an urgent call to quickly create redistribution mechanisms organized by states.

The report concludes that technological development will positively impact economic growth in Africa. Although lower than in other regions, progress has been recorded on the continent including telecommunications which constitute a high potential market. Rwanda has significantly improved its agricultural yields of 5.6 tons per hectare in 2007 to 9.6 in 2013. The technology can be linked with effective public policies.

One of the major concerns is that our continent seems to be one of the most vulnerable to climate change. This should encourage African states to adopt climate-smart agriculture and take measures to promote green technology. The evolution of forms of governance will go some way to face these transformations and the multiple challenges they entail. Countries need more than ever to adapt their model for more flexibility and civil society participation.

To this end, the report highlights four major transitions as a framework for African governments. This requires an understanding of the ongoing changes and policy choices that can be made to promote Africa’s long-awaited development. African states, associated with regional and continental organizations have the means, but also the duty, to heed these transitions and include them in their strategic planning.

The presidency of the World Bank must be entrusted to an African

While the announcement of the resignation of American Jim Yong Kim from the World Bank presidency on Monday, January 7, took everyone by surprise, the resulting debate remained unsurprising. Very quickly, rumours began to circulate about his potential successor, with the usual share of hypotheses, sometimes serious, often extravagant. However, these hypotheses all had one thing in common: the American nationality of the candidates. Indeed, it is a well-known unwritten rule that the President of the World Bank must be an American. A tradition that reflected the world of the 20th century but is a distorting mirror of the realities of the 21st century.

When the World Bank was founded in 1944, the West dominated economic globalization, with the United States as architects of the new world order. In 1991, the fall of the USSR seemed to confirm the irrevocable victory of political and economic liberalism, enshrining the American hyperpower. At the dawn of the 21st century, Western donors and the Bretton Woods institutions were still dictating the way forward for the development of countries in Africa, the Middle East and Asia. Some observers have gone so far as to speak of the “end of history”…

How many certainties have been turned upside down in just under two decades! Asia has emerged as a new centre of the world economy, with China as the engine of growth. Beijing has also set itself up as an alternative to a breathless American order, where a certain “complicity diplomacy” – to use the words of French researcher Bertrand Badie – continued to keep the countries of the South out of the world’s management board. For its part, Africa is now the reservoir of global growth and the demographic giant of tomorrow. At the same time, the scourge of populism has proliferated in many countries around the world. With peoples blaming globalization for all evils, international institutions based on international cooperation and multilateralism are now exposed to many criticisms.

This geopolitical restructuring was logically accompanied by a crisis of legitimacy of the World Bank. Once an essential development institution, it is now experiencing a relative decline due to a combination of factors. First, access to financial markets has increased significantly in recent years for developing countries, offering them greater diversity in their sources of financing. During the same period, an increasing rejection of the Washington consensus took hold among elites and populations in developing countries, but also in developed countries, putting pressure on institutions such as the World Bank and the International Monetary Fund (IMF), which had never been so contested before.

In addition, and for the first time, the Americans have elected a president who openly criticizes multilateral institutions, advocating economic nationalism that is out of step with the pace of current globalization. In this context, under what pretext can we still accept that the President of the World Bank must necessarily be an American? Far be it from me to believe that no American has the right profile for the position, but I plead for an open competition where applications from all nationalities must be taken into account. What credibility can an international institution promoting good governance and transparency have with an opaque and unfair recruitment procedure? The World Bank must change the way its President is recruited if it is to maintain its appeal and credibility.

Because beyond the technical dimension of the post, the role of the President of the World Bank – who has the status of a quasi-Head of State – is eminently political. That is why I believe it is time for the World Bank to be led by someone from the African continent. Of all the World Bank’s fields of action, Africa is the one where the stakes are the highest: investment in infrastructure, poverty reduction, agricultural transformation, access to energy, rapid urbanization, human capital development… Not to mention the main challenge of this century, climate change, which is already affecting many African countries.

Investing in these countries and driving bold reforms requires a relationship of trust, which must now be rebuilt to break the image of arrogance that World Bank teams have sometimes sent back to their interlocutors. An African will be in a better position to encourage governments of developing countries to fight corruption or better manage their public debts without being accused of imperialism or neo-colonialism.

Choosing a candidate from a Southern country in a historically Northern institution also sends a strong message for a more balanced globalization, where each country can have a voice that counts on world affairs. Appointing an African to head the World Bank means recognizing the emergence of new powers in globalization and the need to address new missions such as safeguarding global public goods and conserving biodiversity. To fully enter the 21st century, the World Bank actually has no choice but to put an end to 75 years of “America First” and finally inaugurate the era of “World First”!