The Role of the African Diaspora in Shaping Economic Development on the continent
By: Henry Awere
Tags: Africa, Economic Development, Diaspora Africa, Public Policy

Africa has the biggest emerging markets and the youngest population in the World. The UN estimated by 2050, the world population will surpass 9 billion, with Africa accounting for the majority of the 2.3 billion increase — which is more than India and China combined. In contrast, developed countries population is expected to increase slightly from 1.23 billion to 1.28 billion (United Nations, Department of Economics and Social Affairs, Population Division, 2009).

The rapid increase in the African population has several implications for policymakers who want to engage the continent. Firstly, appropriate policies need to be designed to promote sustainable economic development which will benefit all segments of the population. Secondly, African countries are integrating into the global economy which is driven by the emerging markets in Asia, thus they are seeking new emerging markets to conduct business in. Thirdly, economic policies need to address economic development that is focused on sustainable poverty reduction and promotes climate change. The integration of the world means the outbreak of diseases, economic and social failures are easily transferred from one country to the other. What this means is we are no longer protected by our border from a deadly outbreak of diseases as we saw in 2014, ebola outbreak in west Africa.

Africa is an untapped market

Another important factor policymakers should take into consideration is 60% of the entire continent population is below the age of 25. With 200 million people aged between 15 and 24 (the youth bracket), Africa has the youngest population in the World. Couple this with the fact that the governance situation is steadily improving and the advancement of technology has created plenty of opportunities for future generations, which did not exist for previous generations. All over Africa technology is enabling the rapid development of basic services like education, healthcare, sanitation, and banking. For example, “In Uganda, the web-based application Mobile VRS has helped increase birth registration rates from 28% to 70% across the country”, which has enabled politicians and decision-makers to track health outcomes and improve access to services for these children.

The Role of the African Diaspora

Another phenomenon happening is African from the diaspora are returning home. Because Africa is home to some of the fastest-growing economies in the World and due to the fact that, a promise of a better life in the west is no longer a reality for most African living abroad. Social, and economic mobility is not guaranteed. A lot of well-educated African’s, find themselves working 80-hour workweeks in corporate jobs, with very little chance of breaking the glass ceiling. Chams Diagne founder of Talent2Africa, a Dakar-based recruitment agency that specializes in recruiting African professionals from Europe says, “In the West, it seems like there’s a glass ceiling that cannot be broken,”. “People are moving back to grow their careers faster.

For Africa, to reach its full potential, the African diaspora will need to play a vital role and contribute its diverse skill set to the development of the continent. On average, African immigrants are better educated than people born in the U.S. or the immigrant population as a whole. It’s a population that’s very diverse in its educational, economic and English proficiency profile,” said Jeanne Batalova, a senior policy analyst at the Migration Policy Institute a think tank in Washington and co-author of a report last year on sub-Saharan African immigrants in the U.S.

The diaspora's financial contribution to the African continent and the countries they live in is also unmatched. In 2012 alone, remittances from the diaspora were put at an estimated $60.4 billion. In the U.S. alone, there are roughly 35 million citizens of African descent in the U.S. with a collective purchasing power of about $450 billion per year. A sum that if represented by a single country would make it one of the 15 largest economies in the world.

According to the Migrations Policy Institute, “29 percent of Nigerian-Americans over the age of 25 hold a graduate degree, compared to 11 percent of the overall U.S. population”. Yet, Nigerians still face racist stereotypes, which often-times limits their ability to progress in the corporate world. In a recent meeting with his advisors, U.S President Donald Trump said that Nigerians would never go back to “their huts” once they saw America. This negative stereotype is driving Africans back to the continent to seek new opportunities.

The opportunity has never been greater for African leaders to create favourable economic, political, and social conditions for individuals who want to return home from the diaspora. To achieve this, the host countries need to ensure they have institutions that are transparent and accountable, such as an impartial court system and predictable regulatory systems. A recent survey conducted by the World Bank found 60% of African professionals working in the banking, manufacturing, and tech sectors would return home if, the judicial system and regulatory systems were more predictable.

What Needs to Change?

Predictability of the Judicial System

Court impartiality is essential to business confidences. When courts are perceived to act impartial and decisions are enforce based on legal facts and not on political affiliations, businesses are more likely to engage in contractual transactions, such as credit with suppliers and clients. This is because businesses have confidence in the legal systems that disputes will be resolved legal disputes in a fair and timely manner. In contrast, a lack of confidence in the legal system leads to mistrust, destroys business confidence, and leads to corruption, because individuals try to influence decision-makers. Gallup survey conducted in 2013, found “less than half of sub-Saharan Africans (48%) express confidence in their judicial system.

Predictability of Regulatory Changes

Another area of concern is the regulatory environment is unpredictable in African countries. Unpredictable regulatory systems are likely to harm long-term business planning and investment, confuse interpretations of the rules, and increase the potential for corruption. I recently visited Ghana for 6 months, and during my visit, I had a chance to talked to a few business owners, who had recently moved back to Ghana from the U.S to start a business.

They expressed to me that a predictable regulatory system in the short and long term is vital if the continent is going to continue to attract the best and brightest people from the diaspora. “What we want is consistency and predictability from the institutions that govern our lives”.

Court impartiality and predictable regulatory systems need to be a top priority if African countries are to capitalize on the enormous resources and human capital. Strong, efficient and transparent institutions contribute to business confidence and help facilitate transactions. It also helps reduces transaction costs and reduce corruption. Strong and reliable institutions ensure that procedures such as customs clearance and export/import documentation are streamlined and efficient while detecting unlawful operations. They need to be coupled with a well-functioning judicial system that encourages the rule of law and guarantees investors will be treated fairly if legal disputes arise.

Recommendations

African countries will need to reform its institutions.

Some of the reforms include overhauling the tax codes, improving tax administration procedures, and easing tax burdens, simplifying procedures for construction permits, and improving contract enforcement. Despite some business indicators showing that Africa’s laws and regulations are more restrictive than other regions, some countries have already taken the right steps forward to solve some of the challenges noted in this article.

For example, Ghana used to have a very complicated and time-consuming process when it came to registering a business. Registering a business in Ghana used to involved 12 procedures, 81 days and entrepreneur would spend 78% of the per capita Gross National Income (GNI) to start a business. However, the “red tape” has been significantly reduced, it now takes 8 procedures, 33 days and 26% of the per capita GNI. This has improved Ghana ranking from 145th to 99th on the ease of starting a business in the World.

Similarly, Rwanda has taken steps to eliminate burdensome bureaucracies that hinder entrepreneurs. Prior to the reforms, an entrepreneur would have needed to complete 9 procedures, spend 43 days and about 232 % of the per capita GNI to start a formal business in 2004;however, the system has been overhauled and it only requires two procedures that take less than three days and cost 9 % of the per capita GNI. As a result, Rwanda’s ranking has improved substantially from 58th easiest country in which to start a business in 2007 to 9th in 2011.

The chance has never been greater for Africans to go back and contribute their knowledge, skills, and expertise to the continent and more importantly rewrite a positive narrative about the continent.