Remittances to African countries are expected to decrease by 5.4 percent due to COVID-19
Remittances to African countries are expected to decrease by 5.4 percent from US$44bn in 2020 to a projected US$41bn in 2021 due to the effects of the COVID-19 pandemic, says the Continental Migration Report 2021.
The report, titled “African Regional Review of Implementation of the Global Compact for Safe, Orderly and Regular Migration,” was produced by the Economic Commission for Africa (ECA) in partnership with the African Union Commission (AUC).
It builds 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.
Although the COVID-19 pandemic was expected to lead to a decrease in remittances to Africa in 2020, the findings of the report show that by October 2020 remittances to Africa had reached approximately US$78.4bn, constituting 11.7 percent of global remittances.
Remittances have therefore demonstrated greater resilience and reliability as a source of capital in Africa than foreign direct investment flows.
The report recommends that governments across the world should take effective action to facilitate and boost remittances to support the fight against COVID-19 and ultimately build a more sustainable post-pandemic world.
The report also revealed 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 percent of the amount being sent for a remittance payment of US$200.
With respect to the cost of sending money, the report said Africa is still far from achieving the 3 percent target set out in Sustainable Development Goal 10.
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 percent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 percent.
Remittances are estimated to constitute approximately 65 percent of the income of some receiving countries and senders spend an estimated 15 percent of their income on remittances.
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 should be noted, in that regard, that the use of digital money transfer platforms reduces transfer fees in Africa by an average of 7 percent,” said the report, adding: “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.”