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Systems of Governance

Migration Business is Good Business

Jean-Christophe Servant argues that while Africa is being welcomed into the pool of global capitalism, one of its most precious resources – its citizenry in the diaspora – remains prey in the shark-infested waters of international remittance and western government complicity.

A Western Union office in Paris. Outside, on the sidewalk, a call to make sure the wire transfer has gone through. On the other end, somewhere in Africa, a scene right out of Sembene Ousmane’s Mandabi: a wife, a brother, a business partner, a mother, a cousin is waiting for that precious wire transfer, just like the filmmaker showed it back in 1968.

Unbeknownst to most in the West, this type of gesture – an exercise in solidarity – remains today as it was all those years ago. Now as then, it is an obligation you can scarcely bypass, attended on either side of the transaction by the same moves of sending and waiting that Sembene brought to the screen 40 years ago.

Still, some things have changed. Now, thanks to electronic banking, you can wire money to the most out-of-the-way villages. It hasn’t gotten any easier, though; in fact, even greater sacrifices are required. Beholden to ever more precarious conditions, migrants feed an increasingly insatiable machine of service-industry jobs to which they give themselves body and soul. More than 200 million people work in the shadows, cast into exile, some forced, others by choice, hailing from all parts, facing longer and harder hours, in the face of host countries and institutions growing, as in fortress Europe, more restrictive and exclusionary by the day.

Life is tougher than it’s ever been for these migrants. Some are without papers. Many have university degrees. At times, they are unaware of the dangers they face. More often than not, they find that the voyage might not have been worth it after all. None of this stops them from sending money home, though, cutting into meagre salaries to support loved ones who didn’t make the trip. Since the beginning of this year, worldwide, immigrants have remitted US$300 billion. Of that, $20 billion was sent home by Africans.

Granted, this is significantly less than in the Asian (Philipino, Chinese, Indian) and Latino diasporas, but it represents a significant increase. African remittances have grown by 55 percent since the turn of the century. What this means in practical terms, notes historian Olivier Le Cour Grandmaison, “is that tens or even hundreds of thousands of men, women and children – indeed, entire villages and urban neighbourhoods – depend on moneys sent home in order to live, eat, find housing and, in the best cases, go to school.”

Migrants don’t necessarily travel far. People in Côte d’Ivoire, Kenya and, most markedly, South Africa, are well aware of this. Thirty percent of the gross national product (GDP) of Lesotho, for instance, comes from the work of people crossborder in South Africa, the magnet for inter-African migration. Meanwhile, in Nigeria, banks rush to keep up with the flood of remittances. One out of every five African migrants is Nigerian. These expats are the human infrastructure at the core of a vast network – a meta-Naija, you might say – that stretches from São Paulo to Houston, London, Dubai, New Delhi, Hamburg, Bangkok and Atlanta.

Photo of Zimbabwean traders travelling from Johannesburg.

Zimbabwean traders travelling from Johannesburg.

In 2007, nearly $5 billion thus made its way from around the world back to the mother country. Those are the official numbers. The amounts double if unofficial transactions are plugged into the equation. Nigeria alone accounts for 30 percent of wires sent to Africa through Western Union. First Bank, which holds the Western Union franchise for Nigeria, has opened more than 20 branches across the country, primarily to deal with wire transfers. United Bank has struck a deal with the other major player in the field, also a US outfit: MoneyGram.

Similar to Western Union, MoneyGram’s exponential growth is equally indebted to two factors: (1) globalisation and its attendant boom in migratory flows and (2) 9/11. In the wake of 9/11, drastic measures have been taken to curtail the financing of international terrorism. This has significantly impacted informal money transfer networks, such as the well-known hawala system. Hawala depends on trust. To send money, a client meets with an agent, who in turn contacts another agent as close as possible to the place where the intended recipient is located. The first agent receives money (the remittance) from the client and, against a promise that he will be reimbursed by the first agent, the second agent, charging a small commission, passes on the money to the recipient.

The system is specific to the Muslim world and is particularly well known in the horn of Africa. At the time of transfer, no money changes hands between the two agents. Trust among the members of the network is the key – the currency of record. Since 9/11, however, the system has atrophied and, as a result, African migrants living in OECD countries have had to find other ways to send money home. The big boys of the trade – Western Union and MoneyGram – have cashed in like bandits. They now have a near-monopoly, with 65 percent of all transactions. Their commissions are extremely steep – an average of 15 percent for every 140 Euros – bringing in no less than $10 to 15 billion in profits each year.

In theory, Africa is being welcomed into the age of global capitalism. In fact, everything possible is being done to exploit its every last resource – in the current instance, the money earned under extreme hardship by the continent’s migrants. “Happiness is just a call away,” Western Union says; “Choice is in your hands,” MoneyGram claims. The question, of course, is whose happiness and whose hands? The answer seems clear enough.

In the business world, the numbers are trumpeted as proof of a magnificent success for entrepreneurship and the world of new information and communication technologies (NICTs). Given the sheer number of Africans who own cellphones – more than 300 million – it most certainly is a success, particularly where SMS wire transfers are concerned. The continent has become the world’s largest market in such transfers, a means of wiring money and paying for everything from basic shopping to bills by way of text messaging.

A key example of this is the Mpesa model developed in East Africa. True, the system doesn’t require that you keep a minimum balance and fees are minimal (the equivalent of US15-78 cents per transaction). For international funds now rabidly investing in Mpesa and related enterprises, however, this development is a boon, allowing them to access a huge population of small wage earners, more than 80 percent of whom do not have bank accounts. The rich are making a quick buck off the backs of the poor, with nary a shred of shame. Sure, there’s not much money to be made in the first instance, but soon enough opportunities open up, with offers of variable rate credit such as are now being offered by a new breed of bank accessible only via cellphone. For the many bankers making a mad dash for the continent, the future is paved with remittances and telecom partnerships. And how do the Africans themselves come out in all of this? Well…

Following in the footsteps of the private sector, the Nigerian state has jumped on the remittance bandwagon. A “brilliant” idea has emerged: use remittances to fund Africa’s development. Howard Jeter, a former US ambassador to Nigeria, is leading the way: Nigeria, he says, should take the initiative by developing policies that encourage citizens abroad to invest back home. The African Diaspora, he explains, is a wellspring of intellectual, financial and technological competency, which must be exploited to ensure the continent’s development, reverse the degradation of its natural environment, guarantee food and energy self-sufficiency, battle HIV/AIDS and make headway in bringing to pass equitable economic growth. Make developing countries pay for their own development? This pragmatic notion is based on a simple calculation: Remittances today account for some 2.6 percent of the GDP in the African countries concerned – second only to foreign direct investment. According to some analyses, remittances constitute a more reliable and stable source of financing than private sector investments or even public development aid (PDA).

Indeed, for some African countries, remittances are equivalent to 750 percent of PDA. In Cape Verde, for example, moneys sent home by those in the diaspora finance one-quarter of all economic activity. According to a recent joint study by the African Development Bank and the French Ministry of the Economy, Finance and Employment, Senegalese and Malian expatriates living in France sent home, respectively, 449 and 295 billion Euro in remittances (equivalent to 19 percent of Senegal’s GDP and 218 percent of its PDA; 11 percent of Mali’s GDP and 79 percent of its PDA).

Migration. Photograph by Delwyn Verysami

In France, co-development policies, as they are now known, seek to orient remittances by African workers toward sustainable investment projects. The idea is to foster a “more productive” use of funds and to “help” those who are thinking of emigrating to stay home by directing remittance resources to the health and education sectors and toward the creation of new businesses. Co-development savings accounts, offering a 25 percent tax break, have been proposed to foreign workers legally in France who are interested in investing in their home countries. Such investment can be used to create a new business or buy back an existing one; acquire a rental property or office space; or get involved in a micro-finance scheme, to give but a few examples.

Also available is a co-development savings account that “allows the migrant to build up savings which, if used to invest,(s)he can then leverage into a loan that will be sweetened with a cash incentive”. Under a veneer of compassionate humanism lurk unmistakable neo-colonial intentions – a ploy of the Sarkozy regime that has not gone unnoticed by African observers. The self-proclaimed master, it seems, has decided to instruct the little guys as to what is good for them and their countries, throwing in a few gold bricks for good measure, and in the process shirking his obligations on the development front.

A Beninois blogger registers disbelief: “Imagine political authorities instructing Europeans to invest back home the tidy sums they have made in Africa! These setups perpetuate economic inequality while providing a fine alibi to those who baulk at financing public development aid. They take the onus off international financing institutions and the leading developed nations by shifting the weight (and the blame) of misery onto the shoulders of those who already suffer the most.”

France is unabashedly after the immigrant community’s money. In 1994, the post office, a government enterprise, signed a contract with Western Union, allowing the latter to open 6000 branches in public buildings. No effort was made to encourage Western Union to lower its rates. Africa remains the continent in which mobile communications and internet access are the most expensive and where it costs the most in commissions to wire money. It is being charged an awfully high premium to secure its entry into the global market. Whether this money, as Western Union’s rosy ad campaigns claim, is significantly changing the lives of those who receive it is unclear. But it’s not rocket science: if Western Union and MoneyGram lowered their rates by just 5 percent, Africans sending money home would up their contribution to their homelands by a staggering $3.5 billion.

Little research has been done on the subject, but there is paltry evidence of impact on a macro-economic scale. What few findings there are indicate that households receiving regular remittance income have a better standard of living than the national average. Remittances contribute to poverty reduction and reduce the recipients’ vulnerability. So too, according to a study conducted in Mali, regular income from abroad increases the ability of recipients to cope with external shocks and allows them to develop risk-lowering strategies. However, according to Jean-Pierre Garson, a migration specialist with the OECD, “it is unclear whether remittances benefit development, particularly if they are considered in light of the deleterious impact that migration has on local labour forces”.

It’s a brain-drain issue. And then there’s the fact that remittances can prove altogether damaging. In Mali, in the Kayes region, from which large numbers of people have emigrated, a recent study shows that the influx of remittances, has caused a dip in the day-to-day production of fruits and vegetables, as recipients, no longer dependent on farming to remain afloat, neglect agricultural pursuits. Elsewhere, in countries most in need of remittances, observers fear the onset of a veritable Dutch disease (an increase in revenues from inflows of foreign money, resulting in the nation’s exports becoming more expensive for other nations to buy).

Further, only a small percentage of remittances appear to be redirected toward income-generating activities. According to economist Ravinder Rena, of the Eritrean Institute for Technology, “remittances do not foster development because they are not invested. They are used, mostly, to ends that do not produce goods or services (transport, debt reduction, housing, and land acquisition) and they can also be, simply, stockpiled or spent in the form of conspicuous consumption”.

Between 75 and 80 percent of all remittances apparently go into everyday consumption, with the rest serving to secure housing for an eventual return to the home country in the migrant’s later years. On the disenfranchised outskirts of Dakar and in villages further afield in Senegal, real estate has in this manner become one of the primary focuses of investment for those in the diaspora. In Mali, real estate investment accounts for 41 percent of monies sent from abroad. Such investment with a view to living out one’s final years back home might be essential, but a study in Ghana shows that it also fosters speculation: “Real estate investment by migrants causes costs to spiral upwards and results in fewer low-income people locally being able to acquire property… Land owners are more inclined to sell to people living abroad, as the latter can afford higher prices and are able to pay in cash”. Worse, the Kayes study shows, it is not uncommon for migrants living abroad to pay three times the normal construction cost because, without credit, they are forced to build in tranches.

The boom in remittances generated by folk stuck in the toughest jobs that the old and emergent worlds have to offer seems to have profited only those who have found a way to render the field “liquid”: big business and, on a global scale, purveyors of financial services with access to NICTs – a new bank-industrial complex of sorts. It is high time for migrants to start pressuring these veritable oligopolies.

In the US, some 100 Latino associations came together as part of the Tigra network and, following a boycott, managed to force Western Union to lower its commissions for wire transfers to Central and South America. The company even started a fund for development in Mexico.

Africa, however, continues to lag behind, despite warnings by Rena: “Throughout the continent,” he observes, “human capital is more necessary to development than financial capital, because only the latter can be leveraged into real development. If we do not develop new strategies, the status quo will perdure: we can send all the money we want, Africa will remain poor”.



This story features in the Trade Routes section of Chimurenga Vol. 16: The Chimurenga Chronic (available here).

Set in the week 18-24 May 2008, the Chronic, imagines the newspaper as a producer of time – a time-machine – which travels backwards and forwards, to place these events within a broader context and thereby to challenge the logic of emergencies and immediate needs that characterise contemporary African media.

Buy the Chronic


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