In 2010, the African diaspora remitted $51.8 billion (Sh4.6 trillion) to the continent. This amount was more than the $43 billion (Sh3.8 trillion) that donors through the Overseas Development Assistance (ODA) gave to Africa.
Analysis of cash flows by Hong Kong-based Ghanaian academic Adams Bodomo arrived at a similar conclusion, showing that worldwide remittances from people from all developing countries totalled $350 billion (Sh31 trillion), which far exceeds ODA at $130 billion (Sh11.5 trillion).
The Central Bank of Kenya says most of the remittances come from North America, which accounts for 45.5 per cent of total inflows or $52.83 million (Sh4.7 billion) in June this year.
Inflows from Europe accounted for 27.7 per cent and amounted to $32.15 million (Sh2.8 billion), while inflows from the rest of the world amounted to $31.08 million (Sh2.8 billion), accounting for 26.8 per cent of total inflows.
There are two messages from this data. The first is that we need constructive engagement with the diaspora and, secondly, we must provide incentives to bring in more remittances for economic development.
A disproportionate amount of these remittances has gone into real estate and domestic consumption. Some of the investments from these resources is what I refer to as dead capital. These are largely investments in rural homes which bring no income.
If we can constructively engage our diaspora, we can move resources into value addition in the agricultural sector and other manufacturing activities.
In essence, we start to use the resources for productive purposes. A comparative analysis between Kenya and Ghana by the Business Daily’s columnist George Bodo on August 29 attributed Ghana’s fiscal indiscipline to nonexistent production, saying “...the country’s exports have significantly declined to the extent the ability to generate foreign exchange has been severely impaired.
And the problem is that the country’s policymakers have been slow to enact policies to attract and encourage domestic production and Ghana now is an import dependent economy.”
To avoid this curse that afflicted Nigeria some time back, we need serious re-thinking on any resources especially with the diaspora. If these resources are ploughed into production for export, we would comfortably stabilise the shilling and lower inflation.
One way of effectively getting diaspora to invest at home with minimal risk is through the Growth Enterprise Market Segment (Gems) at the Nairobi Securities Exchange (NSE) that offers easier entry and exit.
Measures to grow the number of small and medium enterprises investing in this segment must be put in place as well as marketing Gems abroad to the diaspora.
Perhaps we need to open investment offices abroad or effectively convert our embassies into mini-markets. And this can be done electronically by linking the embassies to the NSE.
A stronger Capital Markets Authority will guarantee greater participation by the diaspora at the Exchange.
Ethiopia, for example, has a diaspora policy. The Foreign Affairs and National Security Policy and Strategy document estimates that the Ethiopian diaspora numbers no less than two million around the world and they could play an important role in carrying out research, investing at home, finding friends for Ethiopia and influencing their country of residence to cooperate with Ethiopia.
In addition, the policy document emphasises that the government should take the initiative to create a conducive environment possible for them to play a constructive role, protect their rights and resolve their domestic problems.
Research show that it is only the first generation diaspora that are useful to work with. Second and third generations are effectively citizens of their birth countries.
This is where the incentives can work magic. Ethiopia guarantees dual citizenship to persons of Ethiopian origin , also known as a “Yellow Card”.
The policy says, “this has proved a useful and convenient way of granting Ethiopians that hold foreign citizenship almost all the same rights and privileges as an Ethiopian citizen. It has greatly facilitated the participation of foreign citizens of Ethiopian origin in local activities.
In fact, returning migrants, Ethiopian by birth, although of changed nationality, are considered as domestic investors and have the privilege of being engaged in all areas reserved for domestic investors.”
The number of Kenyans in the diaspora is significant. We must constructively engage with them. As Mother Teresa said, “Love begins at home, and it is not how much we do... but how much love we put in that action.”
Dr Ndemo is a senior lecturer, University of Nairobi and a former permanent secretary, Ministry of Information and Communication.