By Farai Ncube
Calls for Diaspora remittances to sustain the Zimbabwean economy have reached a deafening level and this is the way to go instead relying in foreign direct investment alone.
Remittances have been described in various ways like monetary payments transferred between people or organisations.
It has also been described as transfer of money from family members to recipients in other countries.
Due to the huge sums involved, remittances are now being recognised as an important contributor to the country’s growth and development.
Given the current social, political and economic climate, remittances may be the first call for sustainable development.
While there has been partial removal of illegal Western sanctions on Zimbabwe, this has not stimulated foreign direct investment.
As such remittances play a crucial role in developing and sustaining the economy.
It is an undeniable fact that Zimbabwe has a strong skilled and non-skilled Diaspora population mainly in South Africa, the United Kingdom, Canada, Australia and the United States.
Over three million Zimbabweans are in the Diaspora and they regularly send money back home to sustain their families.
To harness this, the Reserve Bank of Zimbabwe (RBZ) is exploring appropriate facilities to effectively harness Diaspora savings for the development of the domestic economy.
Of serious concern are the statistics released by the RBZ indicating that international money transfers received by transfer agencies (MTAs) and formal banking channels declined markedly by 15 percent from US$2,1 billion in 2012 to US$1,8 billion in 2013. According to Minister of Finance Patrick Chinamasa, in order to harness the Diaspora market the Government should formalise the platform for dialogue with the Diaspora by engaging the Zimbabwe Diaspora Home Interface Programme (ZIDHIP).
Harnessing Diaspora monies may help not only to sustain the family but with proper investment create business for locals and increase employment opportunities for graduates.
Gomo through his article submitted to the Voices, Perspectives and Development indicated that the Diaspora mitigated the impact of Asian economic crisis in the late 90s.
He went on to suggest that China, India and Taiwan offer three different business-oriented models in enlisting Diaspora contributions to development. Taiwan invented a “brain trust” model designed to attract its human capital from the Diaspora, while China set out to attract direct investment and open trade opportunities through its overseas Chinese communities.
India’s initiated Diaspora policy is multi-pronged, pursuing direct investment, portfolio investment, technology transfer, market opening and out-sourcing opportunities.
All these three countries have succeeded in becoming among the leading global economies.
They never relied on FDI only.
India received US$70 billion, more than the value of its exports of information-technology services. Remittances to Egypt were larger than the country’s earnings from the Suez Canal.
And expatriate earnings accounted for more than one-third of Tajikistan’s national income.
Remittances have reduced poverty in Bangladesh, Ghana and Nepal.
Children from recipient households in El Salvador have a lower school dropout rate; in Sri Lanka, they have more access to private tutors.
The money finances health care, housing and businesses. Micro-finance borrowers can even use remittance receipts as evidence of credit history.
The Istanbul Programme of Action for LDCs stressed that “Remittances are significant private financial resources for households in countries of origin of migration. There is a need for further efforts to lower the transaction costs of remittances and create opportunities for development-oriented investment… ”
The Zimbabwean reality
We can never stop people from going but at least as a country we can encourage them to send money home. Indeed, worldwide trends suggest that members of the Diaspora may or may not want to return to their country of origin, but most want to make a difference to their country by contributing money in the form of remittances, skills and knowledge – often called “social remittances”; establishing networks and connections; and investing in business ventures or technology transfer.
If the money being sent is used for proper investment, employment can be improved with the standard of life improving greatly from these remittances.
Mugwagwa indicates that in 2012, as part of its support to Zimbabwe’s Government of National Unity, the World Bank weighed in to help the Diaspora community engage with the Government. The ZIDHIP and its affiliate in the United States, the Zimbabwe Diaspora Network North America (ZDNNA), was established to ensure a fruitful dialogue is done. A plan was designed based on five priorities to contribute to the country’s development, as follows:
Develop an IT-based skills locator to facilitate self-reporting by Diaspora-based professionals and build a database of expertise within the Diaspora, which both the public and private sector can tap into;
Establish a think-tank to share knowledge on various subjects and topics that would be available as input for socio-economic strategic planning purposes, for the public sector as well as for business decision-making. Activities would include video conferencing, information exchange during seminars and workshops, and research papers;
Define investment pathways by finding partners that are “a good fit”, a process that is challenging because investment choices are more individualistic and a result of intensive exchanges often of a confidential nature that requires certain levels of trust. The Diaspora would be networked to form resource pools to take up opportunities in both the public and private sectors;
Support philanthropic causes through shipping and distribution of donations of equipment and supplies for health facilities, books for schools, and clothes and other consumables for orphans; and
Develop programmes to build public and private sector capacity through virtual training and sabbaticals, among other activities.
Remittances come with a myriad benefits that include, but not limited to, raised incomes and reduced poverty, boosting aggregate demand and spurring economic growth, facilitating human capital investments, improving credit ratings of countries and help raise external financing and they can also help developing countries raise external financing through securitisation.
Here, banks that receive remittances in developing countries can issue bonds to foreign investors with the backing of future flows of remittances.