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Apr 29, 2020 in Analysis

World Regions: Southern Africa

Remittances refer to the international capital flows from migrants’ host states to their home countries. They are amongst the largest financial inflows to developing nations. The remittances play a central role in many countries’ economic development. They positively influence the states’ economic growth and the overall human development index. The World Bank statistics indicate that if to consider all countries of the world as sources of remittances, the United States has been the leader for the last three decades. The reports ranked the USA first as the nation sending the most remittances, amounting to approximately USD 131 billion which equals 22% of the world’s total volume, in 2014. Money sent by migrants offer a lifeline for a considerable number of families in the developing states. The remittances sent by African immigrants to their home countries contribute significantly to the national economic development and improve the human development index. These financial inflows benefit both the households and state governments of the receiving nations. Social remittances influence the attitudes and practices associated with such aspects as health, education, employment, gender, the environment, politics, wealth distribution and human rights.

The history of African colonization and decolonization has perpetually impacted on the dynamics of international and internal migration movements within the continent. However, the emergence of new destinations for African emigrants has gradually weakened the historical influence of the colonial ties. States such as Qatar, Italy, Spain, and the United Arab Emirates (UAE) have surpassed the United States and emerged as the new countries of destination for a significant number of African emigrants. Remittances have led to the socioeconomic development of many African nations. They are a source of co-insurance during a country’s economic crisis. African states including those located in North Africa and Sub-Saharan Africa have over 30 million of international migrants. In the year 2010, migrant remittances to the continent accounted for over 40 billion US dollars, which significantly improved the human development index for many African nations. The amount of this inflows has quadrupled over the last two decades. The potential diaspora contributions to Africa comprise collective remittances that support philanthropic programs, increased trade links, knowledge exchanges, and enhanced foreign capital market accessibility. The benefits of the immigrant communities to their countries of origin include collective remittances, technology transfer, trade, and investments such as diaspora bonds, investment funds, and capital market investments among others. Diasporas, especially African emigrants, have a significant influence on social development and the creation of economic value in their home states. African migrants are a source of market information to foreign investors. Furthermore, they bridge the cultural gap between different nations as well as promote and strengthen bilateral trade relations and investments between their host countries and home countries. The African diaspora also plays a crucial role in attracting foreign investments to their home states through strengthening foreign relations between host and their home nations. The migrants have an important part in overcoming information barriers and market limitations faced by their home countries. The approach facilitates excellent communication and a better understanding of transport documents, regulations, and procedures. Transnational networks enable manufacturers to find the right traders of their products.

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The revolutionary advancements in information and communication technology (ICT), the social media, and mobile communications have facilitated the development of entrepreneurship linkages between the African diaspora societies and their home countries. The novel technologies and the proliferating acceptance and application of the Internet have contributed to an exponential rise in diversified forms of e-business for sales and distribution of products worldwide. ICT has significantly supported the transnational diaspora entrepreneurship through the increased flow of digital knowledge via ICT networks. These diaspora network websites and forums have facilitated the exchange of information and knowledge transfer between African migrants and their counterparts in their country of origin. Some of the ICT systems that the migrants use include the Digital Diaspora Network, Digital Partner, and the South Africa Network of Skill Abroad. These networks have facilitated the involvement of African migrants in the socio-economic development of their home countries. The discussed systems are an online platform for information sharing, promoting businesses and providing education. The mobile and Internet-based services have facilitated the transnational financial services such as electronic money transfer for migrants’ remittances. The mobile banking enables African migrants to send money to their countries of origin. The social media information networks such as Facebook, YouTube, and Blogs have contributed significantly to productivity and knowledge transfers for social-economic value creation in the developing nations. These ICT technological advancements have led to the explosion of a great number of e-businesses worldwide. World market online leaders such as the Amazon, eBay, and Alibaba have facilitated the success of the transnational diaspora entrepreneurship through the sales of private goods and provision of trading platforms for micro and small enterprises. The revolutionary web-based e-commerce has evolved into a social development arena involving a significant number of diverse actors such as the Federal government, charity NGOs, diaspora business professionals, and different organizations as well as financial professionals. The socioeconomic development in the developing countries aims at alleviating poverty through job creation, offering cost-effective financial services to African nations, and funding startups.

Diaspora associations advocate for the transnational diaspora entrepreneurship by providing a platform for African migrants to connect with their counterparts in their home countries. The diaspora networks have made it possible for the developing nations to market their products abroad. These systems have enhanced the participation of small and medium-sized enterprises in the international trade. The migrants manage different diaspora associations including professional associations, alumni associations, charitable associations, and investment groups. These fellowships play a crucial role in linking African migrants with their home countries. The organizations facilitate the cooperation between migrants’ host states and their home nations. The diaspora engagement strategies for development advance the collaboration between the developed and developing countries. These communities promote and strengthen bilateral trade relations between the immigrants’ host states and countries of their origin. The creation of partnerships between these nations involves the development of academic and research settings, which contribute to enhanced economic growth particularly in the developing economies. The skilled migrant professionals manage development projects in their home countries, which boost the nations’ growth. Diasporas also apply their language expertise and cultural background to increase investment profitability in their native states. These highly skilled African emigrants benefit their home countries through transferring there their knowledge and technological expertise. They increase investment flows by providing essential information that facilitates the identification of new investment opportunities as well as compliance with regulatory requirements. The migrants improve the availability of market information necessary for trade. The approach entails the migrants assisting the exporters to find customers, enhance their market knowledge, and adhere to government regulations and market standards. Developing African nations have significant benefits of the migrants in terms of growth, human capital accumulation, and poverty alleviation.

African migrants act as agents for the development of financial and capital markets in their home countries through the diversification of the investor base. The approach involves the members of diaspora introducing new financial products and offering a reliable source of funding. Furthermore, the migrants have the capacity to facilitate the accessibility of technology and expertise to country-of-origin companies through professional associations. Another tool for transferring skills and technology to the home state is through temporarily assigning the skilled expatriates there and returning of the emigrants with enhanced skills. However, African migration is equally beneficial and detrimental to development. Remittances possess both advantages and disadvantages. On the one hand, they improve the living standards of individuals because they increase their incomes. Therefore, they empower the beneficiaries to overcome hardships as well as enhance their quality of life. Remittances improve the credit-worthiness of the nation of origin because of long-term economic growth. The migrant financial inflows enhance the balance of payments and reinforce a state’s foreign exchange reserves. On the other hand, remittances lead to overdependence of the developing nations while increasing pressure on the remitters. The restrictive policies devastate the migrant financial contributions to national development. The foreign banks impose unfavorable interest rates on the savings of African migrants. They accelerate the national loss of competitiveness and corruption. The remittances’ beneficiaries lack motivation for self-development due to overdependence on foreign aid. Money sent to particular individuals create economic disparities, because the financial flows are distributed unequally. Most of the financial transactions related to remittances are carried out through informal channels thus rendering the process costly and inaccessible to many home countries. More so, it is likely that remittances are used to finance illegal practices such as criminal diaspora organizations. Furthermore, migration leads to brain drain. The institutional programs that promote transnational diaspora entrepreneurship for economic development and productivity of the developing nations lack transnational links. Moreover, the poor management of these programs makes them useless to the development of the countries of origin.

The remittances service providers lack transparency and professionalism. That is why African government agencies endeavor to enhance their collaboration with the African migrant community. Their efforts are focused on mobilization of diaspora resources to boost the flow of financial resources, expertise, and technology to the home countries. This strategy is a source of investment opportunities for the home states’ organizations. Moreover, the East African community has recognized the importance of establishing an appropriate mechanism that would advocate for diaspora members channeling remittances to investment projects in partnering nations. A significant number of state agencies in some African nations advocating for diaspora participation in funding investments in their home countries as well as advising on policy matters are being set up. Finances generated through the diaspora issuances are crucial for funding government projects in the countries of origin such as building infrastructure, schools, hospitals, and residential houses. 

In conclusion, migrant remittances have become an important aspect of the global economy. Despite migration has a significant impact on the global economy, it has emerged as a controversial global policy for many states and regional groups. Migration has several disadvantages. It leads to human trafficking, brain drain, cultural conflicts in home countries and economic exploitation of African migrants. Nowadays, the formulation of policies regulating the sphere of international migration is carried out and they are expected to ensure more benefits and minimize the risks associated with migration. International migration stems from various factors such as employment, family reunification, and humanitarian relief. The evolution of globalization and urbanization has led to a rampant rise in capital and labor mobility thus increasing the demand for the production of goods and services worldwide. The improved accessibility to information, cost-effective telecommunications and international transportation and reduced barriers have allowed companies to obtain satisfactory labor force and create employment opportunities across national borders. The future expectations of capital flow decline have made migrant remittances an important source of external funding for a significant number of least developed countries. Approximately 80 percent of remittances that benefit the countries in sub-Saharan Africa originate from advanced nations. The overdependence of the sub-Saharan African nations on remittances for external financing subjects them to increased economic vulnerability. There is a requirement for developing economies to improve their human capital base constantly as well as promote brain gain as opposed to brain drain. The developing nations should advocate for the proper management of migration inflows. There is a need to establish monetary incentives aimed at encouraging migrant workers to return home. The over-reliance on remittances by the developing nations harms their competitiveness. Governments of the migrants’ countries of origin must collaborate with the host country governments and private organizations such as NGOs in supporting cultural exchange.

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