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Remittance Revolution: To What Extent does the Diaspora Contribute to the Economies of Africa?

Is the Diaspora the financial engine of the continent of Africa?


Remittance: The action of sending money in payment or as a gift

“We need to send money back home. Your Cousins/Aunties/Uncles/Grandparents need it”

Many of us are very familiar with phrases like this. We understand the realities of life in the Diaspora are not the same as in Africa, and many of us know that sending money back home, in the form of remittance, is a necessity of life for those living abroad in the Diaspora. We often see remittance as sums of money going from one relative to another, confined to the wallets of family members. But what impact does remittance from the Diaspora have on African economies?

The value of international remittance to the continent of Africa is astronomical. How much money do you think is contributed to Africa in the form of remittances annually?

Take a wild guess.

In 2019, a total remittance contribution of $48 billion was reported to Sub Saharan Africa. In 2015, the figure sat at $66 billion. This figure is 3 times that of foreign aid, and far surpasses that of international investment. And in terms of the country with the highest remittance contribution, Nigeria takes the crown.

The Cost of Remittance

In some ways, the diaspora acts like the financial engine in many African nations. South Sudan is one nation heavily reliant on international remittance, with 35% of its total GDP coming from the diaspora, with Lesotho and Gambia siting that their remittance contributions translate to 21% and 15% of their GDP, respectively.

Though remittance contributions to Africa is high, Sub-Saharan Africa remains the most expensive area to send remittance in the world. The cost to send remittance is huge: around 10% of the remittance value goes towards the cost of the transaction, making up an annual cost of $1.8 billion. However, digital means of transaction are becoming more popular, and this is thought to decrease the cost of transaction in future.

Remittances serve as a lifeline for many countries. However, the diaspora’s contribution in this issue is bittersweet. It is incredible how the diaspora is able to support their countries financially, however it points to economic fragility and volatility. This situation is highly unstable, especially considering the impact of the COVID-19 pandemic on the local and national economies, both at home and abroad. The value of remittances was reported to have decreased by roughly $10 billion in the years 2020 and 2021, and this reduction is bound to have profound economic consequences.

Who is sending this money?

It has been reported that individuals who have lower levels of education contribute a higher value of remittance than those with higher levels of education.

Coupled with this, the members of the diaspora who exhibit the most consistent sending behaviour are those who were born or who grew up in an African nation. This is largely due to the strong interpersonal and emotional ties these individuals have with their families and their nation as a whole. The younger generation, namely those who were born, or who spent a large part of their childhood in the diaspora, are not predicted to show the same type of sending behaviour as the generation before them. This is thought to be because they lack the same interpersonal connection to relatives in Africa and are less likely to send money to support them. This means that once the older generation passes away, the value of remittance from the diaspora is predicted to decrease, judging by the current sending behaviour of the younger generation.

This is a difficult situation for the future of Africa: If the remittance value is predicted to decrease, the GDP of many nations needs to increase to accommodate the lack of remittance contributions, especially in nations which are heavily reliant on them.

The Remittance Revolution

Africa needs a remittance revolution: the dependence on international remittances must decrease, with a coupled increase in entrepreneurship and industry.

Currently, there is a rapid increase in entrepreneurship on the continent, namely in Egypt, Nigeria, Kenya, South Africa and Ghana. In many countries like these, there is a start-up boom taking place, and this entrepreneurial boom has the potential to spread across the whole continent.

So then, how can the diaspora engage with entrepreneurship on the continent, and aid in the entrepreneurial boom happening in Africa? Where can we start?

There is so much to be done, so much that is beyond scope of this post. But a good place to start is with visibility. Visibility is an amazing tool that helps to guide our thoughts and understanding of the opportunities available to us. There are many who are shedding light on the entrepreneurial ventures and start-ups in Africa. The more we see, the more engaged we can be with the work going on in Africa.

Among those are our friends at ThinkRich Media.

ThinkRich is “the community which brings to you entrepreneurial, business and personal development content to inform, motivate and inspire you!” They post interesting and thought-provoking content, made to inspire and enlighten. They, like us at The Diaspora Project, believe that it is entrepreneurship, and not global pity, that is going to fuel development in Africa.

Check out their YouTube Channel here!

Will you be a part of the remittance revolution?

Tell us what you think about our post! Anything interesting you would like to add? Comment down below!


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