Diaspora remittances breach US$2bn

Zimbabwe is estimated to receive over US$2 billion in diaspora remittance flows in 2022, making it the fifth largest receiver in Sub-Saharan Africa.

This comes as the UNCTAD’s 2021 World Investment Report, say FDI inflows into Zimbabwe declined significantly to US$194 million in 2020, estimated to be US$166 million in 2021 compared to the pre-crisis period (US$745 million in 2018), while 2022 figures were not yet out.

But the World Bank’s Migration and Development Brief 37 (MBD37) released yesterday, say the southern African country will receive US$2,047 billion in 2022, which is 5,3 percent of its GDP.

Last year the country got US$1,982 billion but the highest flows of inward remittances were in 2012 when a total US$2,114 billion was received according to the World Bank.

The growth in the country’s remittance inflows comes amid calls for diaspora re-engagement or the establishment of a full ministry dedicated to emigration and citizens working abroad.

Through his Twitter handle @baba_nyenyedzi, economist, Tinashe Murapata, said there is potential to double the income from remittances and move it from a welfare programme to investment.

He claimed that remittances as an industry are bigger than the agriculture and manufacturing sectors.

“The dollar earned in mining is encumbered. Meaning while revenue in mining is US$5,5 billion it comes with an equally huge cost of approx US$4 billion — ( inclusive of import costs).

“The value addition in mining in Zim is approx US$1,6 billion,” claimed Murapata adding that the US$1.9 billion that comes to Zimbabwe is unencumbered.

“It spurs consumer consumption. Unfortunately, most of this money is banked in The National Mattress Bank. And eventually goes back outside the country,” tweeted Murapata.

He argued that there is limited use of local banking channels in the handling of remittances.

The Reserve Bank of Zimbabwe has a Diaspora Desk within the Foreign Investment Department that has the responsibility of facilitating investments into the country from the Zimbabweans in the diaspora. This facilitation role is done through provision of relevant investment

information to the diaspora community, provision of investment opportunities available in the country, processing of investment proposals, answering queries as well as taking suggestions from the diaspora community.

The central bank has, however, not shared any tangible information on how this desk is faring.

At Government level, the Ministry of Foreign Affairs and International Trade, is mandated to formally mainstream Zimbabwe’s Diaspora into the national development agenda by creating an enabling environment for effective diaspora integration.

A Diaspora Unit was created within the Ministry and is tasked to enhance the capacity of the Government of Zimbabwe to coordinate diaspora affairs and mobilise the Zimbabwean diaspora.

Various Diaspora Engagement activities are envisaged in targeted destination countries and these include tapping into the Diaspora resources and encouraging the use of formal channels for remittances, as well as encouraging them to undertake investment, trade and tourism projects in Zimbabwe.

The Ministry is also mandated to create a platform for skills and knowledge transfer, leveraging on the presence of diaspora communities in key markets. It is envisaged that through engagement, these initiatives will catalyse enhanced and effective Diaspora participation in the Nation’s cross-sectoral growth and development.

Other analysts believe there is need to build trust and confidence first before people in the diaspora can start making any meaningful investments in the country.

They said diasporans are just like any investor and think about risk when it comes to financial flows back home.

Walter Mandeya, an analyst with Trigrams Investments, said “people who are sending and receiving the remittances do not trust the formal banking systems anymore”.

“If the market was serious about harnessing these remittances, then stronger guide rails are needed to protect senders and receivers and assure them that they will receive back what they have invested with the fair return on top.”

Mandeya said remittances are actually part of our sovereign wealth earned from the hard work of fellow citizens.

“If a guarantee could be given, with both fiscal regulations and monetary policies aligning to ring fence these funds for specific developmental projects, then this will work to catapult the country forward,” said Mandeya.

Meanwhile, the Word Bank says the likelihood of further adverse international developments persisting into 2023 is high, and the pace of remittance flows to Sub-Saharan Africa may ease to 3,9 percent from the stellar 16,4 percent advance of 2021.

It said risk of further adverse developments in the external environment will persist through 2023, and act to lower the pace of remittance flows to Africa to 3,9 percent.

“Remittance outturns will depend on the balancing of the increasing needs for support from the African overseas labor force, and the availability of incomes in host countries to be remitted,” reads part of the MBD37 Report.

It said real wages are now declining in the United States and the euro area indicating the likelihood of softening remittance flows.

In 2021, remittance flows to Sub-Saharan Africa surged 16,4 percent to US$50 billion during 2021, the strongest increase since 2018.

However, in 2022, the region is exposed to the effects of the concurrent crises affecting the global economy in 2022.

“Remittance outturns will depend on the balancing of increasing needs for support from the African overseas labour force, and the availability of incomes in host countries to be remitted.

“The likelihood of further adverse international developments persisting into 2023 is high, and the pace of remittance flows to Sub-Saharan Africa may ease to 3,9 percent from the stellar 16,4 percent advance of 2021.-ebusinessweekly