Tapping Diaspora capital to kick-start Zim economy

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By Gilbert Muponda

THE first part of Reserve Bank governor Gideon Gono’s Mid-Term Monetary Policy commentary briefly mentioned the need to encourage and enhance foreign currency remittances by Zimbabwe’s non-resident citizens (NRC).

Millions of migrant workers send remittances to their families and communities of origin. Worldwide, annual remittances may amount to more than one hundred billion dollars, primarily sent from the industrial to the developing world.

The mid-term policy statement was disappointing in that it lacked any clear plan on how to enhance contribution from NRC given that GMRI Capital estimates indicate that every extended family in Zimbabwe has at least three NRC who regularly remit foreign currency to support families in Zimbabwe.

The Zimbabwean Diaspora community now plays such a critical role in the nation’s financial well-being such that any meaningful policy review should acknowledge this and seek ways to enhance this contribution.

Remittances are a good buffer against macro-economic volatility. Remittances by NRC help improve balance of payment, balance of trade, and foreign exchange shortfalls. Remittances are generally less affected by political crisis or conflicts or even corruption. Transfer costs are lowest when remittances are sent through regulated financial institutions, such as banks and money transfer agencies such as Crown Exchange, Western Union and World Link. Significantly, when financial institutions offer these services to immigrants, they also sell other products.

In slightly better-off communities, improved consumption as well as investment and employment created through remittance-led activities promote significant economic growth.

In Mexico, for example, it is estimated that each $1 received in remittances increases GDP by $3. Whilst this is on the higher side, there is nothing that can stop Zimbabwe from matching such a multiplier effect.

During the Asian economic crisis in 1997-99, when foreign direct investment (FDI) tumbled down, remittances actually increased and helped cushion the impact of the crisis. Because people in the Diaspora feel special empathy towards their relatives and friends in times of crisis in the home country, they tend to be even more generous and forthcoming with remittances than in normal times.

During the various state sponsored operations (Dzikisa Mutengo, Murambatsvina etc) a study by GMRI Capital revealed that many money transfer agencies sending money to Zimbabwe experienced significantly higher volumes of business.

Conservative estimates indicate that around 200 million people migrate annually around the world. In many countries, the demand for foreign labour has increased. Moreover, migration flows are not unidirectional, from the South to the North.

For example, Greeks migrate to Germany and the United States, while Albanians migrate to Greece. South Africans move to Australia and England, while Malawians, Mozambicans, and Zimbabweans work in South African mines and the service industry. This trend is not temporary and as such there is need for clear policy to ensure mutual benefits for the NRC and the home country.

Ireland stands out as a clear shining example of economic success backed by effective mobilisation of non-resident remittances and investments. Until just over a decade ago, Ireland used to be one of the poorest countries in Western Europe. To avoid poverty and to improve their lot, a large number of Irish people migrated to the United States and other countries. This pattern is very similar to what Zimbabwe has been experiencing over the last few years as the economic and political environment became hostile.

As they became more prosperous, the Irish Diaspora started investing in their home country. With the correct sets of consistent and progressive policies and incentives, Ireland started prospering. Currently Ireland has a booming economy and has joined the league of the richest countries in the world.

In addition, there have been positive impacts of remittances in national development in countries ranging from Israel to Jordan, Lebanon, Turkey, Mexico, the Philippines, India, Pakistan, Bangladesh and Sri Lanka.

In terms of servicing the large and growing number of NRC, it is highly desirable that Zimbabwe’s diplomatic and consular services be restructured and strengthened in countries and regions where there is a large concentration of NRC with a clear aim to encourage their participation in the national economy beyond just sending money. This has to be done in a sustained manner and not as an election gimmick or quick fix solution to current crisis.

As a supporting measure, there is an urgent need to review and amend Zimbabwe’s immigration regulations especially with regards to dual citizenship. A significant number of Zimbabwean NRCs are now settled in foreign lands and are unlikely to be interested in giving up their new immigration status just for the sake of going back to Zimbabwe.

The Indian government recently introduced the "Overseas Citizenship of India (OCI)" scheme in order to allow a limited form of dual citizenship to Indians. This is a model that Zimbabwe could adopt with the necessary adjustments. This can open channels to allow NRC to vote and possibly have exclusive members of parliament representing non-resident Zimbabweans who are in the Diaspora. This measure will go a long way in showing commitment on the part of the authorities to incorporate policies which serve all Zimbabweans, not just those in Zimbabwe.

It is clear that a quick make-over of the monetary policy will not deliver the economic prosperity that Zimbabweans seek .There is need for more comprehensive policy changes to usher a modern, progressive, more tolerant democracy to build a just, prosperous, peaceful society where people’s human and property rights are respected. This is critical to build confidence among the NRC and encourage investments by the NRCs.

Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. More articles at www.gmricapital.com

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