The Economic Commission for Africa (ECA) and African Union Commission (AUC) has projected remittances to African countries to fall by 5.4 per cent from $44 billion in 2020 to $41 billion in 2021, findings of the Continental Migration Report 2021 has revealed.
The report showed that the downward projection is due to the effects of the COVID-19 pandemic.
The report which titled, “African regional review of the implementation of the Global Compact for Safe, Orderly and Regular Migration” was released on Monday by the ECA in partnership with the AUC.
The report was built from four sub-regional reports compiled by AUC and a summary from stakeholder consultations at the just concluded 2021 African regional review meeting on the Global Compact for migration held August 26 to September 1 in Morocco.
Although the COVID-19 pandemic was expected to lead to a decrease in remittances to Africa in 2020, findings of the reports show that by October 2020 remittances to Africa had reached approximately $78.4 billion, constituting 11.7 per cent of global remittances.
With this, remittances have demonstrated greater resilience and reliability as a source of capital in Africa than foreign direct investment flows.
However, the report revealed that the costs associated with sending remittances to Africa are some of the highest in the world, setting Africa backwards from achieving the three per cent target set out in Sustainable Development Goal 10.
Meanwhile, 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 three per cent, the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than five 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. For 25 African countries, all of which have large diaspora populations, remittances are the primary source of national income,” the report stated.
However, the report noted that many African countries have taken action to lower the costs of remittance transfers, with some countries offering diaspora bonds to investors and relaxing foreign exchange controls to allow for electronic and mobile money transfers at reduced costs.
The report noted, “It should be noted, in that regard, that the use of digital money transfer platforms reduce transfer fees in Africa by an average of 7 per cent.
“Private financial institutions also offer incentives to encourage members of diaspora communities to use their services, including low transaction fees for remittances, and facilitate diaspora-initiated projects, especially in the real estate sector. These measures all promote the financial inclusion of migrants and their families.”
Meanwhile, the report recommended that governments across the world should take effective action to facilitate and boost remittances to support the fight against COVID-19 and ultimately building a more sustainable post-pandemic world.
According to the report, member States should support migrants and their families through the adoption of laws and regulations to facilitate the sending and receiving of remittances, including by fostering competition among banks and other remittance handling agencies to establish low-cost transfer mechanisms.
Also, it called on African countries to make every effort to reduce the transfer costs associated with remittance payments, inter alia, by making more extensive use of digital transfer solutions, and streamlining the regulatory constraints associated with international money transfers.
Furthermore, the report advised the African States to engage with the destination countries to identify ways to enhance the provision of basic services to migrants in those countries.
“ECA projected that remittance inflows to Africa could decline by 21 per cent in 2020, implying $18 billion less will go to the people who rely on that money.
“It is therefore critical to preserve this essential lifeline. As the world enters an economic downturn, remittance flows will be more important than ever for the poorest and most vulnerable people, especially those without access to economic and social safety nets,” the report added.