Remittances to Africa expected to drop in 2021
Most African households depend on remittances from family members abroad for their sustenance. The remittances come to pay for school fees, housekeeping, medical bills and major investments in real estate. While remittances sub-Sahara Africa totalled $44 billion in 2020, it is projected that due to the impacts of the COVID-19 pandemic, remittances to the region would decrease 5.4 per cent to $41 billion in 2021.
According to the Continental Migration Report 2021, although the COVID-19 pandemic was expected to impact remittances to Africa in 2020 and cause a decrease, the report finds that by October 2020 remittances to Africa, including North Africa had reached approximately $78.4 billion, constituting 11.7 per cent of global remittances.
Despite the projected decrease, the report noted that remittances have demonstrated greater resilience and reliability as a source of capital in Africa than foreign direct investment flows.
The report titled, “African regional review of implementation of the Global Compact for Safe, Orderly and Regular Migration,” which was produced by the Economic Commission for Africa (ECA) in partnership with the African Union Commission (AUC), recommends 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
It notes further that, the costs associated with sending remittances to Africa are some of the highest in the world. Until very recently, average transaction costs were equivalent to 8.9 per cent of the amount being sent for a remittance payment of $200.
The report indicates that with respect to the cost of sending money, Africa is still far from achieving the 3 per cent target set out in Sustainable Development Goal 10.
It states that 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 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent.
Remittances are estimated to constitute approximately 65 per cent of the income of some receiving countries and senders spend an estimated 15 per cent of their income on remittances, it said.
According to the report, for 25 African countries, all of which have large diaspora populations, remittances are the primary source of national income.
In response, a number of African countries have taken action to lower the costs of remittance transfers. 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, it says.
“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 per cent,” the report added.
By Emmanuel K. Dogbevi
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