Raw deal for Tanzania in global remittances as Kenya tops region

President Uhuru Kenyatta and his Chinese counterpart Xi Jinping shake hands during a deal signing ceremony. Some African countries may seek to renegotiate repayment of existing debts to China as a way of helping their economies hit by lower crude and commodity prices. PHOTO | AFP 

By The guardian reporter

 Whether it is for supplementing household incomes or remitted as gift or for investment, money sent home by relatives and friends living abroad has today become a pivotal aspect of life and national economies in the poor world.

 

However, some countries like Tanzania are yet to benefit meaningfully from the trend, which if optimally exploited could greatly help address the country’s fiscal and monetary challenges especially the perennial foreign exchange woes.

 

Currently the country receives less than US$100 million (215.1bn/-) compared to countries like neighbouring Kenya, which is one of the few economies in Sub-Saharan Africa (SSA) receiving over a billion US dollars annually.

 

In fact, the whole of the EAC bloc still fares poorly in tapping diaspora savings. The US$2.7 billion remitted to the region last year was almost eight times short want Nigerians sent home and accounted for only 8.2 per cent of the total inflows to SSA.

 

“The regional growth in remittances in 2014 largely reflected strong growth in Kenya (10.7 per cent), South Africa (7 per cent) and Uganda (6.7 per cent),” the World Bank said early this year in the Migration and Development Brief

 

According to it, “remittances to Sub-Saharan Africa (SSA) are estimated to have increased by 2.2 per cent (to US$32.9 billion) in 2014, after a sluggish 0.9 per cent growth in 2013”. Nigeria alone accounted for around two-thirds of total remittance inflows to the region, but its remittances were estimated to have remained flat, at roughly US$21 billion in 2014. 

 

The global lender estimates that more than 230 million people were living outside their country of birth in 2013, and many of them sent money home. Tanzania does not have many migrant workers and most of those who send money home were not only few but also did so informally.

 

The April Migration and Development Brief puts Tanzania’s 2010 stock of emigrants at 316,900 saying it was 0.7 per cent of the population. The top destination countries were Kenya, Uganda, the United Kingdom, Canada, Mozambique, Malawi, the United States, Burundi, Rwanda, and Australia.

 

The country also does not have a proper mechanism to monitor the inflows, which is yet another reason why the level of its remittances remains low. Sending money to this part of the world is also expensive with the average cost of sending US$200 in SSA estimated at 9.7 per cent.

 

“If money is remitted through formal financial channels, then the Bank of Tanzania (BoT) can track the money. When informal ways are used, it becomes a big task and a tall order for BoT to track,” Prof Honest Ngowi of Mzumbe University said.

 

The October Migration and Development Brief project Tanzania’s 2015 remittances to reach US$61 million (about 131.2 billion compared to Kenya’s estimate of US$1,571 million (about 3.37trn/-).

 

Last year, the two neighbours and the EAC biggest economies received US$59 million and US$1,441 million respectively. Their respective remittance stocks in 2013 and 2005 were US$59 million and US$19 million and US$1,304 million and US$425 million.

 

Uganda is second after Kenya with US$1,053 projected for 2015 compared to the receipt of US$1,029 million last year. The third top diaspora cash recipient in the EAC is Rwanda, which expects to get US$172 million this year compared to US$170 million in both 2014 and 2013.

 

At the bottom of the ladder is Burundi with US$49 million in both 2013 and 2014 while this year the World Bank estimates the politically troubled country will harness US$50 million.

 

“These numbers are gross underestimates, because millions of Africans rely on informal channels to send money home,” cautions Dilip Ratha, manager of the Migration and Remittances Unit at the World Bank.

 

The Bretton Woods institution says that SSA growth in remittances in 2015 would largely be driven by strong remittance growth in South Africa (9.8 per cent) and Kenya (9.1 per cent).  Ethiopia and Uganda are expected to show moderate growth in remittances (1.8 per cent and 2.3 per cent, respectively), while remittances are expected to remain flat in Senegal. 

 

The growth rate of remittance flows to the region is projected to rise to 3.3 and 3.7 per cent in 2016 and 2017. The report has it that the level of remittance dependency varies across countries. Remittances to Liberia, the Gambia, Lesotho, and Comoros are almost a fifth of GDP.  

 

Remittances also finance a substantial share of imports in some of the larger countries; for example, in 2014 remittances financed around one-fourth of imports in Nigeria and about one-fifth in Senegal, it adds.

 

“While Sub-Saharan Africa remained the highest remittance cost region, the average cost of remittance transfers declined from 11.6 per cent in the second quarter of 2014 to 9.7 per cent in the second quarter of 2015,” the latest brief reads in part.

 

“Technology, especially the increasing spread of mobile money transfer services, may be playing a role. The costs of sending money from South Africa to Zambia, Malawi, and Botswana are the most expensive in the region,” it adds.

SOURCE: THE GUARDIAN