Remittances are often essential for African families. They are also a way for the diaspora to invest in the African economy. According to the Brookings Institute, these transfers will decline by 14% in 2021.
The money sent by migrants to families in their country of origin is an essential source of income for millions of African households. Remittances to low- and middle-income countries reached $ 550 billion in 2019, including $ 48 billion in sub-Saharan Africa alone. A figure that exceeds foreign direct investment and official development assistance. And the actual statistics are perhaps even more important, since these are only the recorded flows. In 2020, 44 billion dollars were sent to sub-Saharan Africa, and the figure is expected to drop to 41 billion in 2021.
Exchange rates that influence habits
The Covid-19 pandemic is one of the reasons for the continued decline in flows. Particularly because many Western Union or MoneyGram offices have had to close. But this does not explain everything. Sub-Saharan migrant workers, particularly those from high-income Organization for Economic Co-operation and Development (OECD) countries, have lost their jobs or seen their incomes drop. This considerably reduced their ability to send money to relatives back home.
Falling oil prices have also affected remittances to Africa from Gulf Cooperation Council (GCC) countries in the same way, although the US dollar has outperformed the euro in period. pandemic.
Exchange rates have also had an influence on remittance flows: when home currencies, such as the euro, depreciate against the U.S. dollar, the value of U.S. dollar remittances declines, causing them to decline. calculations taking dollars into account. When the currency of the recipient's country depreciates, migrants may send more money home to take advantage of lower prices, thus pushing up the numbers.
In Africa, many countries still practice various forms of currency control, resulting in a divergence between the parallel exchange rate and the market exchange rate, and leading to a diversion of flows to informal and unregistered channels. Again, this lowers the balance sheet for remittances.
It takes little to be happy
Almost 40% of the populations of Central Africa and the African Sahel live in extreme poverty. Efforts from different governments are needed to support struggling households, and international efforts should be made to keep remittances going to Africa.
Between the weak job prospects, generalized travel restrictions and the increasingly glaring lack of fluidity in administrative services, the outlook is not encouraging. Especially since, tIn trying to impose visa restrictions, host countries are imposing restrictions that could prevent companies from hiring foreign workers during the post-pandemic recovery phase.
And while income disparities, especially between Africa and Europe, and climate change are expected to dramatically increase migration flows in the coming years, there is no guarantee that they will have an effect on remittances. Only the development of African countries, and therefore inter-African transfers, can cause an effect on the volume of remittances.
Finally, another obstacle makes the future of remittances very vague… Indeed, the difference in shipping costs between Western countries and African countries, which reached 9% in 2021, often deters migrants from sending money to the continent. This is indeed the highest rate in the world and is three times higher than the Sustainable Development Goal for remittance fees set by the African Union.