Impact of Diasporas: impressive numbers!

By Kara Diaby

African diaspora remittances have become a major component of financing African economies. Since 2010, these transfers have experienced significant growth, reflecting the increasing importance of diasporas in financially supporting their countries of origin. Here is my detailed analysis of the evolution of these financial flows, their economic and social impact, as well as regional and national disparities.

A constantly growing source of fundingGeneral evolution of remittances since 2010

Between 2010 and 2023, remittances to Africa saw substantial growth. In 2010, remittances amounted to just over 50 billion USD, while by 2023, they reached 91.66 billion USD. This progression reflects several key factors:

Significant increase in the number of Africans living abroad in search of better economic and educational opportunities.The rise of digital and mobile platforms such as Orange Money Europe (Mobile App) and Danapay (blockchain) have made remittances faster, safer, and more affordable.Despite the COVID-19 crisis, remittances showed remarkable resilience, supported by family and community solidarity.The peaks observed in 2019 and 2021 coincide with periods of global economic growth and an increased capacity of the diaspora to send additional funds to support their families in the face of challenges like the COVID-19 pandemic.Regional disparities in remittances

The regional analysis of remittances reveals significant disparities between different areas of the continent:Northern Africa: With countries like Egypt and Morocco, this region is the main beneficiary of remittances, receiving more than 46% of the total amount sent to Africa. Historical and cultural ties with Europe and the Middle East facilitate these financial flows.West Africa: This region receives more than 36.5% of remittances, with Nigeria, Senegal, and Ghana leading the way. The diasporas from these countries are widely dispersed across North America, Europe, and the Middle East.East Africa: Accounts for about 13% of remittances, with Kenya, Uganda, and Ethiopia as the main beneficiaries.Central Africa: Remittances represent 2% of the total African transfers, reflecting either a smaller diaspora or obstacles to financial transactions in the region.Southern Africa: With countries like South Africa and Zimbabwe, this region receives around 2% of remittances, showing a slight increase in recent years.These differences reflect variations in migration patterns, the size of the diasporas, economic policies, and the ease of financial transactions in each region.3. Impact of COVID-19 on Remittances Variations between 2019 and 2023: The COVID-19 pandemic had a significant impact on global economies, but remittances to Africa showed remarkable resilience:2019: Remittances reached a record high of $85.38 billion USD.2020: Despite pessimistic forecasts, the decline was limited to $82.25 billion USD, representing only a 3.7% drop.2021: A spectacular rebound to $95.03 billion USD, marking a 15.5% increase compared to 2020.2022: Remittances slightly decreased to $93.84 billion USD, likely due to the post-pandemic economic stabilization.2023: Remittances were estimated at $91.66 billion USD, showing a slight decrease but remaining at high levels.Several factors explain this resilience:

Diaspora members increased their financial support to help their families cope with the health and economic impacts of the pandemic.Travel restrictions accelerated the adoption of online and mobile transfer services such as Wave, TapTap Send, and Danapay.Government assistance programs like partial unemployment and economic support programs allowed the diaspora to maintain their transfers.

4. Use of transferred fundsRemittances play a crucial role in the daily lives of many African families.75% of funds are used to cover immediate needs:

Ensuring food security, particularly during crises.Access to medical care, purchasing medicines, and financing local health infrastructure.Payment of tuition fees, purchase of school supplies, and support for vocational training.

15% are allocated to savings and investment:

Creation of small businesses, purchase of agricultural equipment, and real estate investments.Building capital for future projects or to face unforeseen circumstances.

10% are specifically allocated to other needs such as family ceremonies, community donations, and expenses related to religion or culture.Case Study: Use of funds according to research by Abderrahim Saidane (2021)Abderrahim Saidane’s thesis highlights that remittances are essential for maintaining household nutrition levels, especially in rural areas affected by unfavorable climatic conditions.

The funds sent help fill gaps in local health systems, particularly by funding expensive treatments or those unavailable locally.Investment in education is seen as a way to break the poverty cycle by offering youth better future prospects.

5. Economic dependence and national disparitiesCountries Most Dependent on Remittances in 2023Some African countries show significant dependence on remittances from their diaspora.The analysis of financial flows to certain African countries in 2023 reveals a complex and multidimensional economic reality. It not only shows the dependence of these countries on remittances from their diasporas in terms of GDP percentage and absolute value, but also highlights the impact of these flows at the individual level.The case of Comoros perfectly illustrates this complexity. With remittances accounting for 20.60% of its GDP and an average amount of 330.49 USD per capita, this small island nation shows a marked dependence on remittances. This situation underscores the importance of these flows for the economic well-being of each Comorian citizen.Morocco presents a contrasting profile. Although receiving the highest absolute value of remittances (12.13 billion USD), these transfers represent only 8.25% of its GDP. However, the per capita impact remains significant at 321.64 USD, reflecting the strong commitment of the Moroccan diaspora to their home country, despite a more diversified national economy.Lesotho and The Gambia embody cases of high relative dependence. With 21.49% and 26.28% of their GDP coming from remittances respectively, these nations show notable economic vulnerability. For Lesotho, this translates into 238.10 USD per capita, highlighting the importance of these funds for households in this landlocked country, despite a relatively modest total of 510 million USD in remittances.Senegal, with 2.94 billion USD in remittances, shows a more moderate per capita impact (167.09 USD), partly due to its larger population. Nevertheless, these transfers remain a crucial pillar of the Senegalese economy, supporting many households across the country.These figures indicate that in some countries, remittances represent a substantial part of the national economy and are essential for citizens’ well-being. However, heavy reliance on these flows can present challenges in the event of fluctuations.6. Strategic role of the DiasporaEconomic and social contributionBeyond financial transfers, the African diaspora plays a multifaceted role in the development of their home countries:

Sharing of skills: Diasporas contribute by transferring knowledge, skills, and technologies acquired abroad.Transnational entrepreneurship: Creation of businesses that link international markets to local economies, promoting trade exchanges.Cultural influence: Promotion of African culture abroad, enhancing the continent’s image and attractiveness.

Current challengesDespite the importance of remittances, several challenges remain:

High transfer costs: In some corridors, fees remain prohibitive, reducing the final amount received by beneficiaries.Financial ionfrastructure: Insufficient banking and financial systems in some countries limit the efficiency of transfers.Political instability: Political and economic tensions may discourage the diaspora from sending funds or investing in their home country.

The African diaspora’s remittances are a major pillar of financing for the continent’s economies. Their continued growth since 2010, resilience in the face of global crises such as the COVID-19 pandemic, and their significant impact on household well-being make them a key subject of importance.My detailed analysis of the data shows that these transfers are not only financial support but also vectors for economic and social development. Regional and national disparities highlight the need to understand the specifics of each country to fully grasp the impact of remittances.This report emphasizes the importance of the African diaspora in the continent’s economic landscape and underlines the potential for strengthened collaboration between home countries and their expatriate communities for sustainable development.*Kara Diaby is the founder and CEO of Repat Africa, a company focused on facilitating investment from the African diaspora into the continent. Source: Kara Diaby Thesis – SciencesPo Paris