The Deputy Finance Minister for Fiscal Affairs, Dr. Samora P.Z. Wolokolie has declared that there is a huge opportunity for governments, financial institutions and the private sector to harness and scale up these diaspora investments for sustainable economic growth in areas of emerging markets by deploying policies and frameworks that encourage and target diaspora investors.
According to him, diaspora interventions come with the specific spice of bringing in innovations and potential for significant outcomes. He added that focusing on diaspora investors could yield significant results for Africa’s emerging markets and help achieve the Sustainable Development Goals (SDGs).
Speaking in United Kingdom recently when he addressed the African Achievers Awards International Colloquium on the “Mobilizing Diaspora Investment for Sustainable Development in Africa,” Deputy Minister Wolokolie said African diaspora has traditionally been recognized as a source of significant resource flow to countries of origin through remittances.
He added that an increasingly vital source of funding is annual diaspora savings which can be transferred from workers living abroad to recipients in countries of origin.
He said remittances and direct investment by Africans in the diaspora are today among the highest sources of foreign exchange in recipient countries.
Dr. Wolokollie noted that as multinational firms become more reserved and cautious in making investment decisions in many African countries, investment by diaspora Africans in their home countries will go a long way in giving a boost to economies in Africa.
He informed the gathering that remittances represent the largest share of diaspora savings transferred to countries of origin, with remittance flows to Sub-Saharan African countries estimated to have been approximately $33 billion dollars in 2016, according to the World Bank.
“Diaspora Bonds on the other hand are sovereign debt instruments sold by governments to their diaspora populations. These bonds are a significant financing instrument that can be used to attract financing for investment projects in Africa. Like most bonds, the value of diaspora bonds will increase over time and attract bondholders as long as they are secured and reliable and easily redeemable. When properly deployed, Diaspora bonds can be an attractive source of resources for investment activities in Africa,” Dr. Wolokolie stated.
Among many African countries, he opined that long term diaspora investment potential remains untapped and underutilized.
Therefore, he stressed the need for African governments and private institutions to tap into the opportunities that diaspora investment provides.
By doing so, he thinks governments would avoid taking on high interest bearing loans, which ultimately becomes a burden for future generations.
“It is important to note that African diaspora populations are growing, as are their savings. Yet, and until recently, African countries have made little progress in attracting these savings. This is an area of huge potential, and it would behoove African countries to trim their attention to attracting diaspora investment,” the Deputy Finance Minister said.
He declared that high on the list of factors that could hamper or discourage diaspora investment in Africa is the absence of security.
He said no investor or serious investor for that matter would gamble his savings and invest in an environment that is politically unstable.
Thus, he mentioned that rule of law is a key consideration for investment decision making and another key consideration he pointed to is the availability of basic services, mainly reliable sources of power (electricity), functional infrastructures, and strong democratic tenants.
“A relatively stable environment is an attractive consideration for investment decision making. African governments must therefore provide the enabling environment to attract diaspora investments.
“In addition to a stable environment, governments must also take deliberate actions, mainly through policy decisions to incentivize diasporans to invest in their home countries. For example, tax rates must not be prohibitive. The business climate must be welcoming and not restrictive and cumbersome. Deliberate policy actions aimed at attracting investment by diaspora Africans should be considered in the grand scheme of things.”
He concluded by stating that barriers to diaspora investment according to UNCTAD and the Commonwealth foundation include: lack of knowledge of the country of investment (among 2nd, 3rd generation migrants), fears of corruption, perceived political instability, fears of bureaucracy, lack of partners in the country of origin, among others.
“These unfavorable thoughts make diaspora investors adopt a conservative pattern channeling funds to informal sectors through extended family and social networks rather than through formalized enterprise structures.
“All of us, policy makers, entrepreneurs, and ordinary citizens must collectively work together to attract diaspora investment. This is an area of immense potential and prospects for capital infusion. With the right political climate, appropriate investment policies and rule of law, host countries in Africa stand a greater chance of attracting diaspora investment,” Dr. Wolokolie noted.