Diaspora dollars

Felicity Thompson writes on how Africans abroad can help reduce poverty by investing back home

Diaspora dollars

Africans abroad can help reduce poverty by investing back home

When El Hadji Sall left Senegal as a young man to study electrical engineering at Howard University in Washington, DC, he planned to return home upon graduation. Thirty years later Mr Sall is still in the United States and now bridges two worlds as an African and an American. Holding dual nationality, he is a religious leader, an engineer and an active figure in encouraging members of Senegal's large diaspora to invest in their homeland.

"The money is here. People like me, there are thousands of them," Mr Sall says of the shared desire among his fellow expatriate countrymen to spur progress in their mother country. "If we could sit down and talk seriously about getting the diaspora involved then I believe that
 Senegal could become a 
developed country very 
soon," he added.

Mr Sall is one star in a wide constellation of Africans scattered abroad who have kept strong ties to their native lands. It is difficult to pin down the number of Africans living abroad, partly because the definitions of the continent's diaspora vary. The World Bank estimates that Africa's "foreign-born population" in 2010 was just over 30m, but this only counts first-generation migrants, thus excluding "children and grandchildren who may have ties to the origin country".

The African Union (AU), however, has a much broader definition: it defines the diaspora as "peoples of African origin living outside the continent, irrespective of their citizenship and nationality". Using the AU's definition, the bank estimates that more than 168m Africans are living in the Americas and Europe.

Under either definition, in 2010 expatriate Africans sent home huge sums: $51.9 billion to help family and friends with the daily cost of living, according to the World Bank. In 2012 the figure reached $60 billion, while the estimate for 2013 is $62.9 billion.

Remittances are not the only way of contributing to development back home. A lot of Ethiopian-Americans live in the US but keep ties to their country through their relatives who still live there, says Melaku Nagussie, an Ethiopian-American engineer. "And they have a need to go back to help their country in some fashion."

Mr Nagussie's Ethiopia is one country that has succeeded in maintaining ties with émigrés through specific policies and dialogue. The east African government established its Diaspora Directorate in 2002 and now has an online portal where Ethiopian expatriates can find information about investing, tax and customs procedures. They can also apply for the "yellow card", which entitles foreign-born Ethiopians to enter the country without a visa, work without a permit and own residential property.

In addition, several Ethiopian ministries house diaspora affairs units. For example, the health ministry partnered with exiled physicians in March 2009 to set up the country's first emergency room training school, which has trained 4,000 first responders, basic trauma providers and technicians. The 170 members of the Ethio-American Doctors Group are working with the government to build, train and staff the country's first internationally-accredited tertiary hospital with services that will include surgery and psychiatry. Construction of the 300-bed hospital is scheduled to start in June and should be completed by the end of 2016.

Open dialogue and a common purpose are behind the training school and future hospital, says Dr Addis Tamire Woldemariam, who works at the health ministry's diaspora unit. "That's the secret behind every success with engaging the diaspora."

Ethiopia is unique in that its well-educated diaspora shares its skills, access to capital and experience with innovations to create strong networks that are "transforming Ethiopia", says Liesl Riddle, a professor at George Washington University in Washington, DC, who has studied diaspora investment for 20 years.

One example is Eleni Gabre-Madhin, an American-educated Ethiopian economist who returned home in 2005 and set up the country's first commodities exchange in 2008. The Ethiopia Commodity Exchange (ECX) now boasts more than 350 members trading coffee, sesame, maize and pea
beans. The exchange settled $20m daily in
2010, according to the ECX website.

Another is Daniel Gad, a former vice-president of AT&T, who set up MetroLux Flowers in 2003, an ambitious venture that boosted Ethiopia's fledgling cut-flower industry into the world's fourth-largest exporter. Mr Gad is now working with PepsiCo on a project to commercialise smallholder production of chickpeas.

"What is most significant about
 Ethiopia is the handful of spectacular 
individuals who are not working in [the] 
same sector competing head to head with one another. The diaspora complement one another, so they become friends and they create a network," Ms Riddle says.

Rwanda is another country that has succeeded in requesting help from its citizens living abroad. In 2012 the government asked its diaspora to help free Rwanda from its dependence on foreign aid and finance its development strategy. It set up the Agaciro Fund and has raised over $30m, according to the fund's website.

Regular dialogue is crucial to successful diaspora contributions, says Gaetan Gatete, head of the US-based Rwandan Diaspora Network. The group holds an annual Rwanda Day meeting with President Paul Kagame and members of his cabinet, Mr Gatete said. "This makes a difference because he is seen to be taking us seriously and the diaspora believe they have a voice," he added. Mr Kagame has attended four such events since 2008 in Canada, the UK and the US, according to Rwanda's embassy in Washington, DC.

At least 32 African nations, in need of revenue, investment and human capital, have created organisations to tap their diaspora's funds and know-how. Sierra Leone, South Africa and Ghana, for example, have organised high-profile homecoming summits to attract diaspora attention and investment.

But many of these groups are poorly funded and understaffed, according to Gerd Junne, a former University of Amsterdam professor who set up Remittances for Community Development, a website which shares research. This has frustrated many Africans abroad who are eager to contribute skills or dollars.

Most Africans living abroad would like to participate in their country's politics, according to analysts, but some African governments may consider them a political threat. Only 21 of Africa's 54 countries allow their citizens to hold dual nationality, according to an International Monetary Fund (IMF) report. And just four countries- Kenya, Nigeria, Rwanda and South Africa-have granted voting rights to citizens living overseas, according to the World Bank.

Of these, few overseas voters are able to vote in reality, according to the bank. In South Africa's 2009 elections only 16,000 of an estimated 1.2m South Africans living abroad were able to register to vote. The government claimed it did not have the resources to register all its expatriates.

Africans in the diaspora save almost as much as they send home-up to $50 billion a year, according to the African Development Bank, which notes that much of this is invested outside of the continent. Sonia Plaza, a World Bank senior economist, believes the diaspora could make an even more significant impact. "If one in every ten members of the diaspora could be persuaded to invest $1,000 in his or her country of origin, Africa could raise $3 billion a year for development financing," Ms Plaza wrote in a September 2011 IMF report.

Diaspora bonds have worked well for India and Israel. Both countries have raised $35 billion-$40 billion since they first issued the bonds (Israel in 1951 and India in 1991), according to the World Bank.

A few African governments have tried floating diaspora bonds to fund large infrastructure projects-notably Kenya and Ethiopia, according to Ms Plaza. But lack of confidence is a hindrance. "A lot has to do with, in some instances, trust in the government's ability to deliver in terms of infrastructure projects," says Dele Meiji Fatunla, a Nigerian-British writer working at the UK's Royal African Society. He has yet to be convinced to invest in diaspora bonds. "There has to be a lot more focused marketing and encouragement of diaspora investment," he says.

The problem is that few governments understand the motivations behind diaspora engagement, says Chukwu-Emeka Chikezie, who co-founded the Africa Foundation for Development, a UK-based diaspora group. "It is a maxim of good marketing that you must know and understand your customers in order to win their business and serve them," Mr Chikezie adds.

Governments are more likely to succeed if they incorporate their expatriates into poverty reduction plans, he says. Economic reforms are also crucial to getting the diaspora involved. "Despite the emotional connection, [people in the] diaspora are making decisions based on rational calculations, so if your economy is dysfunctional and not offering returns, the likelihood the diaspora will be part of any growth story is slim," Mr Chikezie says.

Expatriates may be more willing to take a risk. "A foreign investor will look at a project and see what is the quickest and cheapest way to get this thing built," Ms Riddle says. "A diaspora [investor] is willing to forgo profits initially and invest in the people locally." Diaspora investors want more than the bottom line, she adds. They want to see their homeland developed.

Felicity Thompson is a freelance journalist, producer and writer ho has lived in several African countries over the past decade. Her writing has been published by the Associated Press and in the UN's Integrated Regional Information Network and other UN publications. She lives in Washington, DC.

This article first appeared in the April edition of Africa in Fact, the journal of Good Governance Africa. The magazine can also be downloaded in PDF format here.

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