The latest Continental Migration Report 2021 published by the Economic Commission for Africa (ECA) in partnership with the African Union Commission (AUC) has projected that remittances to African countries will decrease by 5.4 percent from $44 billion in 2020 to a projected total of $41 billion this year.
The report titled ‘African regional review of implementation of the Global Compact for Safe, Orderly and Regular Migration’ attributed the projected drop in the continent’s remittances to the effects of COVID-19 pandemic.
The report builds from four sub-regional reports compiled by AUC and a summary from stakeholder consultations at the just concluded 2021 African regional review meeting on the Global Compact for migration held from August 26 to September 1, in Morocco.
The researchers noted that although the COVID-19 pandemic was expected to lead to a decrease in remittances to Africa in 2020, findings of the reports show that by October 2020 remittances to Africa had reached approximately $78.4 billion, constituting 11.7 percent of global remittances.
This implied that remittances had demonstrated greater resilience and reliability as a source of capital in Africa than foreign direct investment (FDI) flows.
To address the projected decline in remittances to the continent, the report recommended that governments across the world should take effective action to facilitate and boost remittances in view of supporting the fight against COVID-19 and ultimately building a more sustainable post-pandemic world
According to the report, the costs associated with sending remittances to Africa are some of the highest globally. Until very recently, average transaction costs were equivalent to 8.9 percent of the amount being sent for a remittance payment of $200. This showed that Africa is still far from achieving the 3 percent target set out in Sustainable Development Goal 10.
The Addis Ababa Action Agenda of the Third International Conference on Financing for Development and Sustainable Development Goal indicator 10(c) provides that countries should, by 2030, reduce to less than 3 percent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 percent.
Research findings further indicate that remittances are estimated to constitute approximately 65 percent of the income of some receiving countries and senders spend an estimated 15 percent of their income on remittances.
For 25 African countries with large diaspora populations, remittances account for the primary source of national income and most of the countries have initiated measures to lower the costs of remittance transfers. For instance, some countries also offer diaspora bonds to investors and have relaxed foreign exchange controls to allow for electronic and mobile money transfers at reduced costs.
The report further stated: “It should be noted, in that regard, that the use of digital money transfer platforms reduces transfer fees in Africa by an average of 7 percent.
“Private financial institutions also offer incentives to encourage members of diaspora communities to use their services, including low transaction fees for remittances, and facilitate diaspora-initiated projects, especially in the real estate sector. These measures all promote the financial inclusion of migrants and their families”, it added.
To further facilitate easy and cost-efficient remittances to the countries in Africa, the report recommends that member-states should support migrants and their families through the adoption of laws and regulations to facilitate the sending and receiving of remittances, including by fostering competition among banks and other remittance handling agencies with a view to establishing low-cost transfer mechanisms.
In addition, the report advised African countries to also make every effort to reduce the transfer costs associated with remittance payments by making more extensive use of digital transfer solutions, such as MPESA, and by streamlining the regulatory constraints associated with international money transfers, amongst others.
This is even as it also recommended that African States should also engage with destination countries to identify ways to enhance the provision of basic services to migrants in those countries.
To achieve Global Compact objectives 1, 3, 7, 17 and 23, the report canvassed the need for member-states to implement steps proposed in the context of regional economic community-led dialogues on migration; and consider the increasingly important role played by diaspora communities in fostering development, including through remittance payments, skills development initiatives and the adoption of emerging technologies.