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Misheck Ugaro
The country has become a notable recipient of diaspora inflows from its citizens that are scattered around the world. Statistics show that this line of foreign currency inflows has grown steadily and now rivals receipts from notable development partners. In 2019 development partner receipts amounted to US$610 million compared to diaspora receipts of US$635 million.
Projected 2020 development partner receipts is US$677 million, while diaspora receipts are expected to grow in tandem as the country continues to face economic difficulties.
A comparison of cumulative disbursements by development partners to end December 2019 shows that it was US$610.4 million, with bilateral partners contributing US$449,1 million and multilateral partners US$161,3 million was below diaspora receipts of US$635 million.
In 2020 development partners’ support is projected to increase to US$677,6 million, with bilateral partners contributing US$506,7 million and multilateral partners US$170,9 million.
Given the increasing difficulties faced by Zimbabwe of attracting foreign funding, including development partner finance, diaspora flows have become an increasingly important source of support for the local population’s livelihood.
This has significant policy implications for the authorities regarding the institution of relevant incentives that can further enhance these inflows in a sustained manner going forward. Internationally, diaspora flows are a significant contributor to economic development and countries such as Ireland, Nigeria, and many East European countries are well known for their economic development owing to incoming flows from their citizens that have emigrated largely to the West.
Zimbabwe finds itself in a similar situation largely due to its labour mobility arising out of a combination of the economic hardships experienced locally as well as the good education and skills they possess. Authorities are urged to come up with diaspora friendly policy measures.
The analysis of the volume of funds inflow above shows a rising trend in line with the increasing difficulties in the country. This is a sign of increasing reliance on family support inflows. Many of the direct recipients are close family members in both urban and rural areas.
While most urban recipients have some form of financial literacy, the rural based folk are largely excluded. Authorities need to devise attractive plans to harness this and sustain it going forward and a good starting point is a review of the National Financial Inclusion Strategy (NFIS) instituted by the Government with particular focus on financial literacy, consumer protection, delivery channels, low cost bank accounts, loans to various segments, micro-insurance, financial services exchange for MSMEs and micro-pensions, among others.
It is, however, coming to an end in 2020 but is due for evaluation and monitoring. Authorities are urged to build on this strategy to harness inflows from the diaspora as a guaranteed stream of small to medium scale projects funding. An example is the Homelink housing scheme that showed initial signs of success but seems to have died off although it represents a good way of attracting our foreign based cousins to invest back home.
While many recipients are urban based and participate on the parallel foreign exchange market to make maximum returns possible by trading against the local currency, a significant portion of it is directed to the financially excluded/unbanked population in the rural areas and is evidenced by the level of availability of the United States dollars in rural areas being used for many transactions such as the trading of livestock like chicken, goats and cattle. This is the reason it is argued that the official inflows statistics are potentially understated.
Authorities are therefore urged to review policy and adopt more confidence generating friendly policies that can move all the inflows onto the official channels.
An example is that the habit of physical searches of travellers at the borders is seen as aggressive and intrusive! It creates more animosity and instead of reducing money laundering, it instead further drives flows underground. Numerous investment vehicles or channels can be put in place but with equal assurance of repatriation from such investments when required.
As an example, proceeds from the sale of a residential property originally funded from diaspora funds should be treated as a free funds investment available for repatriation when required. The authorities need to realise and accept that the likelihood of the diaspora generation relocating back home becomes more remote as they pass on to their offspring who will have lesser identity roots with the country.
Authorities need to construct suitable incentivised policies that can assist in maintaining the umbilical code of the current diaspora generation and to ensure they can pass on a heritage to their children born outside the country. An example of a diaspora friendly policy is for the country to invest in accessing them their rights to vote.
This is in our view, a more cost effective way of achieving international re-acceptance led by the country’s citizens based in the foreign countries instead of sending delegations funded from an equal level of funds. The diaspora represents a powerful diplomatic representation opportunity for Zimbabwe if handled well.
The number of Zimbabweans based outside the country is estimated to be above 3 million representing almost a quarter of the population. Unfortunately, this generation and their offspring represent a potential future loss to the nation and flows may die down with this first generation as their children are less likely to be connected with people back home.
It is imperative that we empower the current generation of the diaspora and plant a heritage seed for their offspring to continue identifying with the motherland Zimbabwe. We need to manage the potential generational disconnect.
Misheck is a former expatriate banker based in several SADC countries and currently works as a Corporate Advisory Services Consultant. He is the founder of Rucabel Investments Private Limited, an investment company based in Zimbabwe. He is a member and past Vice President of the Zimbabwe Economics Society. [email protected]; +(263)777 052 004/712 808 140.
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