OFFICE OF THE CHIEF ECONOMIST & VICE PRESIDENT, ECON Development Research Department African...

OFFICE OF THE CHIEF ECONOMIST & VICE PRESIDENT, ECON

Development Research Department

African Development Bank Group

Leveraging Migration for Africa: Remittances, Skills, and

Investments

Launch of the Reportat the African Development Bank

April 11, 2011

Africa Migration Project: An Overview

• Joint African Development Bank and World Bank

• Multi-donor trust fundDonors: CIDA, DFID, France Ministry of

Immigration and Integration, AFD, IFAD, SIDA, Danish MFA

• Emphasis on collaboration with local researchers in Africa

Africa migration report

1 Migration patterns and policies in Africa

2 Migrant Remittances in Africa

3 Migration of the highly skilled in Africa

4 Harnessing Diaspora resources

Chapters

Publication: March –April 2011

1. Flagship Report on Migration, Remittances and Development in Africa

2. Edited volume: Remittances Markets in Africa

3. Edited volume: Diaspora and Development

4. Household survey data from 6 countries, catalogue and guidance notes

5. Report of Global Survey of Central Banks on Remittances (already published)

Key messages

• Migration comes in all its complexity in Africa, but it is predominantly intra-regional

• Migration reduces poverty • Remittances are large – much larger than

currently measured – in Africa. They proved to be resilient during the recent crisis.

• Migration of skilled people can generate complex effects, but in the end, labor market solutions have to be found – supply of skill has to be augmented to meet global and local demand

Key messages (contd …)

• Diaspora can be a significant source of wealth and ideas for development.

• Capacity for managing migration is weak in Africa and needs to be strengthened.

• However, in general, migration should not be viewed as a substitute for development at home. Rather it is an integral – and beneficial - aspect of globalization.

Mapping Migration in Africa

South-South migration is larger than migration from developing countries to high-income OECD

countries

Source: Leveraging migration for Africa: remittances, skills and investments 2011

South43%

High-income OECD42%

High-income non-OECD

14%

Destination of migrants from the South

In Sub-Saharan Africa migration is predominantly intra-regional


Africa64%

Other developing9%

High-income OECD25%

High-income non-OECD2%

Destination of migrants from SSA

Emigration from North Africa is mostly to the OECD countries

Destination of migrants from North AfricaAfrica

6%

Other develop-ing14%

High-income OECD56%

High-income non-OECD

23%


Africa’s migration rate appears to be lower than the world average; but Africa has data

gaps

High Skilled Migration from and within Africa

Skilled migration rates are highest among smaller countries

Small Countries

Medium Countries

Large Countries

Small Countries

Medium Countries

Large Countries

Overall Migration rate Migration rate among the skilled

0

5

10

15

20

25

30

35

40

Migration Rates in Africa by Country Size

1990

2000

Migration: policy challenges & options

What should we do?Treat the symptom or cure the

disease?

Take away Passports? Punish the recruiters? Pay higher salaries back at home? Make migrants pay for their education? Make migrants feel guilty?


…or is high level of

skilled migration

a result of wrong

education, healthcare, labor market policies?


• Cost of education of professionals is easily outweighed by remittances

• Supply of skill has to be matched to global and local demand –

• Through labor markets, not quotas• Promising policy interventions: foreign

hospitals open training centers in Africa; improve working conditions; increase R&D spending

Mobilizing Diaspora Resources

African Diaspora

For the Report African Diaspora is classified into:

skilled and unskilledLocated inside and outside AfricaData for population born in country i and living in country j (from census data)

Diaspora contributions

• Provide information about international trade opportunities; match making; referral services

• Diaspora can be an important source of: Research and innovationTechnology transferSkills developmentCapitalPhilanthropyCollective remittances

Diaspora Investment

• Diaspora resources are determined by the net wealth of members.

• TypesDiaspora bonds (India, Israel, Ethiopia,

Zimbabwe)Diaspora funds (Liberia is considering it)

• Several countries show that diasporas do invest (e.g., China, Ethiopia, India, Israel, Ireland)

Policies to maximize the benefits of the Diaspora

• Dual/Multiple citizenship/Voting rights• Conducive business

environment/trade/technology/invest• Measures to quantify their Diaspora• Develop financial instruments to tap to the

Diaspora• Portability of pension funds• Embassies abroad should be encouraged &

equipped (staff and resources) to provide services to their Diaspora

Remittances in Africa

Remittances are a large and stable source of finance for Africa ($ billion, 2008)

Recorded remittances 41.1 ODA 39.4 FDI 55.7 Private debt & portfolio equity

-10.9

Remittances proved to be resilient during recent crisis

• Remittance flows to North Africa approx. $18 billion and Sub-Saharan Africa $21 billion in 2009

• Flows to Africa fell by 12% in North Africa and only 3.6% in Sub-Saharan Africa

• Risks to the outlook include delayed economic recovery, currency movements, and rising protectionism




Improving the developmental impacts of Remittances: the issues

High transfer costs in Africa create incentives to use informal channels

SSAEAP

MENA

South A

sia

LACECA

12.1

10.3 10.0

8.3 7.7 7.2

Average cost of sending $200 to developing re-gions

Perc

en

t of

$2

00

se

nt


High cost and limited access to banks are top factors inhibiting use of formal channels

Exchange controls

Mistrust of formal financial institu-tions

Sender's/recipient's lack of valid ID

Mistrust/lack of information on elec-tronic transfers

Sender's/recipient's lack of access to bank accounts

No bank branch near beneficiary

High cost

0 10 20 30 40 50 60 70

25

36

46

46

61

64

68

SSA countries

% of central banks


Facilitating remittances

• Cost of remittances should be reduced especially in South-South corridors

• Exclusive partnerships are being eliminated in some African countries, but de facto arrangements continue in practice

• Post offices and mobile phone companies can play a significant role

• Mobile phone remittances show promise; but regulations continue to pose obstacle to using these technologies in cross-border remittances

Remittances are now being factored into debt sustainability analysis of low-income

countriesExternal Debt as a percent of exports,

2008

Liberia Guinea Bissau

Gambia Cape Verde

Sudan Sierra Leone

Senegal Lesotho0%

300%

600%

900%

1200%

1500%Including remit-tances*

Excluding remittances

* External debt as % of exports and remittances

Potential for securitization of remittances and other future-receivables in Africa

• Potential: $17 billion in Sub-Saharan Africa alone from future flows of mineral exports, tourism receipts and remittances

• Constraints to remittance securitization in AfricaLack of sovereign ratings in many African

countriesPaucity of highly rated banks and firms High fixed costs (legal, investment banking

fees)

Diaspora Bonds: promising innovative source of development finance

• Migrants more loyal than average investors in times of distress might be interested in financing infrastructure, housing, health and education projects.

• Diaspora bonds would offer higher interest rate than the rate Diaspora savers earn from bank deposits where they reside.

• Preliminary estimates suggest Sub-Saharan African countries can potentially raise $5-10 billion per year by issuing Diaspora bonds.

Potential for Diaspora bondsSub-Saharan Africa

Country Diaspora size(thousands)

Potential savings($ billions, 2007)

South Africa 713 2.9

Nigeria 837 2.8

Ghana 907 1.7

Kenya 427 1.7

Ethiopia 446 1.6

Somalia 441 1.6

Senegal 463 1.3

Zimbabwe 761 1.0

Sudan 587 1.0

Angola 523 1.0

Summary

• Migration comes in all its complexity in Africa, but it is predominantly intra-regional.

• Remittances provide a lifeline to the poor in Africa; these flows can be leveraged for financial access of both households and countries.

• Supply of skill has to be matched to global and local demand through labor markets, not quotas.

Summary

• Diaspora can be a significant source of wealth and ideas. Financing for development can be raised via Diaspora bonds.

• Embassies need to be strengthened and encouraged to mobilize Diaspora resources. Capacity for managing migration needs to be strengthened.

• Migration should not be viewed as a substitute for development at home. But migration is an integral – and beneficial - aspect of globalization.




Report available online athttp

://www.afdb.org/en/news-and-events/article/african-migration-generates-win-win-benefits-says-new-report-7878/

.

www.afdb.orgwww.afdb.org/aecwww.africaneconomicoutlook.org

http://www.afdb.org/en/news-and-events/article/african-migration-generates-win-win-benefits-says-new-report-7878/



http://www.afdb.org/

http://www.afdb.org/aec

http://www.africaneconomicoutlook.org/

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