A Decade of NEPAD - Economic Commission for Africa - uneca

In addition to economic reform, peace and stability, and
high commodity prices, the emergence of China as a major
market for African goods and commodities also helped bolster
both manufacturing and natural resource investment.
International banking activity in sub-Saharan Africa
nearly tripled between 2004 and 2007 when total foreign
claims on sub-Saharan economies held by banks reporting
to the Bank for International Settlements rose to roughly
US$205 billion at the end of 2007. In addition, bond flows
increased by US$7.13 billion between 2006 – 2007 as Nigeria
(US$350 million), Ghana (US$750 million), Gabon
(US$1 billion) and the Seychelles (US$200 million) issued
international bonds for the first time. 55
Portfolio equity flows to Africa’s equity markets also rose
roughly 100% in 2006, doubling to US$15 billion although
88% of these flows went to South Africa. Cote d’Ivoire,
Botswana, Ghana, Kenya and Mauritius were the other
exchanges to experience portfolio growth.
In addition to increasing FDI and private capital flows, another
important source of capital for African countries over
the past ten years has been formal and informally transferred
remittances from African “Diasporans” based in North America
and Europe, and from migrant workers on the continent.
Africa today has over 30 million people in the Diaspora.
Of all the world’s regions, however, Africa’s predominant
migration is the most intra-regional although there is also
significant international migration to former European
colonial powers such as France, the United Kingdom of
Great Britain and Northern Ireland, the Netherlands and
Italy, among other countries.
Remittance flows to and within Africa approach US$40
billion 56 . Countries in Northern Africa (i.e. Morocco,
Algeria and Egypt) are the major remittance receivers on
the continent, although Eastern African countries depend
most heavily on these flows, with Somalia standing out as
particularly remittance dependent. For the entire region,
annual average remittances per migrant reach almost
US$1,200 and on a country-by-country average represent
5 per cent of GDP and 27 per cent of exports.
55 Macias, Jose and Massa, Isabela, The Global Financial Crisis and
sub-Saharan Africa: The Effects of Slowing Private Capital Inflows on
Growth, African Economic Conference 2009, Addis Ababa, Ethiopia,
AfDB and ECA, p.2
56 www.ifad.org/remittances/maps/africa.htm
4. NEPAD and the African Private Sector Today A Decade of NEPAD
Remittances to rural areas are significant and predominantly
related to intra-regional migration, particularly in Western
and Southern Africa. The mobility of Africans within these
regions has been followed by the sending of regular amounts
of money. Two thirds of West African migrants in Ghana
remit to rural areas in their countries of origin.
However, when compared with other regions, money transfers
to Africa are among the most problematic, mainly due
to the two major challenges faced by the continent: high
rates of informality, particularly within the continent, and
a regulatory environment that favours monopolies. Consequently,
transfer costs are higher and remittance senders
obtain less value for their money. Most African countries
restrict outbound flows of money unless used for trading
and money transfers to banking depositary institutions.
As a result, informality emerges as a solution to the need
to remit. Another effect, however, is the persistence of monopolies
on transfers by banks and the few money transfer
operators (MTOs). In all of Western Africa, for example,
70 per cent of official payments are handled by one MTO,
which demands exclusivity in money transfers of the banks
Since banks are the only entities allowed to pay money
transfers, all official flows end up being handled by a small
group of financial institutions that rely on less than four
MTOs. Migrants in South Africa are also faced with significant
regulatory restrictions on sending money, and
thus rely on informal networks. Because regulatory environments
often prevent other non-banking financial
institutions from making transfers, or restrict outbound
transfers, financial access is also a casualty. As few institutions
participate in the transfers, and banks do not cater to
lower-income individuals, financial access among African
senders and recipients is relatively low. In some countries,
for example South Africa, barriers to entry relate to legal
status, thus disenfranchising migrants. Other countries,
for example Kenya, are seeking to increase financial access
by leveraging remittance transfers through the use
of mobile telephony.
In 2010, remittances to Africa totalled close to US$40
billion. Dubbed DDI 57 (or Diaspora Direct Investment),
these remittances were, in 2007, greater than overseas development
assistance in Botswana, Cote d’Ivoire, Lesotho,
57 Thomas, D. and Ardovino, M., Diaspora Direct Investment: The
Untapped Resource for Development, U.S. Agency for International
Development, May 19, 2009
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