How AfDB will support diasporans to build Africa
Professor Kevin Chika Urama, Chief Economist and Vice President for the Economic Governance & Knowledge Management Complex at the African Development Bank (AfDB) tells TOPE TEMPLER OLAIYA at the recently concluded African Diaspora Investment Symposium (ADIS) in Silicon Valley, California, how the bank is engaging with diasporans to invest, create wealth and transfer knowledge in Africa
In 2003, the African Union (AU) constituted the African diaspora as the sixth region after the five geographic regions of North, South, East, West and Central Africa. How can the African diaspora, which includes people of African descent living outside the continent, drive development in Africa?
They are an important segment of our population and resources as Africans and this informed a global convening we did at the African Development Bank in December 2022 on what we call Development Without Borders, which is how we can link the diaspora for sustainable growth and development in Africa. That convening brought together thousands of experts in the diaspora to bring together all the leaders to consider how we can begin to leverage this huge asset of Africa. It was co-convened with the African Union Commission, Africa Continental Free Trade Area (AfCFTA) secretariat and with the International Organisation for Migration (IOM).
There are five keys driving this dialogue on the engagement with the diaspora. The first is on remittances. Remittances have been a stable and credible source of financing for consumption on the continent. Now, we are trying to develop instruments to securitise those remittances so that they become investible funds. The remitter from the diaspora can benefit by making returns and the countries that the resources go to can benefit by gaining development outcomes. That way, the remittances become more productive, rather than supporting just consumption.
“Within that framework, we can have several other schemes that still allows remittances to achieve the same goals that the remitter had in mind in terms of helping families to get through challenges, short-term liquidity challenges and also education and health insurance schemes to allow the remittances to meet the social needs of families.
How can Africa’s engagement with the diasporans go beyond remittances?
The second one is diaspora bonds. How we can create crowd-funding options that will allow any level of investible funds from the diaspora to be able to go into the bonds. We have seen good examples like in Nigeria, where diaspora bonds were very successful, but we have not seen many cases in Africa as we see in the Philippines, Israel and other areas where diaspora bonds have helped to drive development significantly.
The third area of engagement is on trade and investment promotion. As you know, AfCFTA constitutes about $3.3 trillion dollar market with over 1.4 billion people on the continent. It’s a huge market that needs to be supplied and we want to try and avoid the situation where Africa’s trading is more on raw materials and primary commodities. We want to see that AfCFTA becomes that free trade area for manufacturing and trading in manufactured products. That requires investment promotion and trade promotion by the African diaspora.
As a diasporan, you know your country of origin and birth, you know the culture, the people and you have your networks. Same in your country where you reside, you have learnt the networks, the culture and people and businesses. Beyond the capital that these diasporans own that often go into low-return investments in their countries of origin, there is now the opportunity of networking to bring in new investors, identify opportunities in Africa, identify investors in countries of origin and through that, create opportunities that is win-win for everyone. There will be job creation and reduction of poverty alongside development of the receiving countries. It also saves the planet because if you build industries near sources of raw materials, you reduce the carbon footprint of products. Instead of shipping raw materials to China, Europe and America to produce and then bring back to Africa, you can now start producing those products near the sources of raw materials.
The investors themselves will benefit significantly because of return on investment. One of the panelists was sharing how some investors were getting up to 22 times of their investment in a startup, you don’t get that anywhere else because Africa is still a virgin land, it is still a treasure throve for the world and is still a place where cost of labour and production is cheap.
I give an example of the battery minerals where our research shows that if you are investing in producing the cartridge iron batteries in Democratic Republic of Congo (DRC), it will cost you like three times less than it will cost to build the same factory in China or in the United States. It reduces the cost of production and logistics. It creates jobs and reduces migration, which many countries in the West spend billions on trying to prevent people from coming into their country. But if you address the root cause of migration, people will not want to leave their country for anywhere.
Then the other one that we have identified is on science, technology, innovation and knowledge exchange because we have great experts from Africa that have gone abroad to study and we develop a lot of skills to work in these places. Our thinking is that it is very possible for us to create platforms where African diasporans can continue to contribute their knowledge and skills to drive sustainable development in programmes and policies and processes in Africa.
The final area of engagement is brain circulation. We don’t really want to talk about people going back home. We are in a global community and you can contribute to anything from anywhere in the world. So, why would Africans be conditioned to go back to their countries before they can contribute to their quota. You can stay in the U.S. and invest in China, Nigeria or anywhere.
What are the practical steps to fostering this engagement and partnerships?
Currently, we organize training programmes from the AfDB in policy dialogue and we have over 14,000 people all over the world from all continents engaging in shaping the development of Africa. We hope that the brain circulation concept will start to remove the stigma around what we use to call brain drain, like you are not doing something not too patriotic for leaving your country. It shouldn’t be, because you are leaving to have access to infrastructure and the knowledge ecosystem allows you to develop the technology you need but are we as diasporans thinking of developing technologies and innovations to solve Africa’s problems or are we just comfortable where we are and only solving the problems of where we are.
I give an example of COVID-19, it took us one year to find a vaccine, we have had malaria for how long, where is the vaccine? If we as Africans who are working in Pfizer and other major pharmaceuticals call these problems priority problems, we will be able to come up with those vaccines that are needed to address some of Africa’s problems. In many ways, being in advanced economies is a positive thing for Africa. In all the five areas that we have identified, we are thinking of a win-win situation, we are not thinking of a blame game situation.
Under the leadership of President Akinwunmi Adesina, we have convened this global community of experts called development without borders so that we are bringing the diasporans to sit around the table to map out strategies, policies and instruments because the knowledge and experience is there and the culture of innovation is there among diasporans. You can take an African out of Africa but you cannot take Africa out of the African. That’s a fundamental fact.
We are working with the AU Commission to try and convene what we call a global Africa summit that will bring together all diasporans and heads of state so that we can have quality dialogue on how to operationalise the AU decision to recognize the diaspora and the people of African descent living outside of the continent as its sixth region, so that we move from talk to action.
For AfCFTA to truly add value to trade, we need to turn Africa into an area of manufactured goods, production of manufactured good and industralisation of the continent into different areas of comparative advantages, that way we will be able to trade value between each other and with the rest of the world, not trading commodities, which is what is happening now.
Our analysis has shown that the real value of commodities have been going down in the global market. Africa’s traded commodities have been going down but if you are able to add value to your cocoa and tap into the trillions of dollars of chocolate market or add value to agricultural produce, you will be able to achieve the rent that comes with technology prowess; if we add value to our minerals, we will be able to trade at a higher level in the value chain.
India has done it, China is doing it, and there are only two policies: One is local content policy, where you insist on a given level of value addition to your product before it can go into the market, instead of moving those raw materials out to the West or China, turn them into finished products and then ship them back to serve the 1.4 billion market in Africa. The second one is franchising policy. It is a situation where Nigeria can go into franchise arrangement with Microsoft to come and establish in Lagos to employ the young tech-savvy youths who are there in Yaba. Instead of building the factories in the US, they will build factories where labour is cheaper and you can outsource some of those businesses.
But are the narratives about Africa not going to be an impediment to the diaspora enagement?
Narratives about Africa matter because they shape mindsets and anything you do in life is all about what is your perception and what you see. So, you can choose to see problems or chose to see opportunities for innovations and like Einstein said, in every problem, there are opportunities for innovation.
The narratives on Africa have been negative in many ways and those negative narratives make the African think that he or she can’t. We need to change it because what I have seen in my short life and reading history over time is that Africa can, and that narrative about Africa can needs to be there all the time.
A simple example is our micro-economic performance on the continent, you see that despite COVID-19, continued impact of climate change and the impacts of geo-political tensions like the Russia-Ukraine war and the inflationary effects on currency among other challenges it has created on the continent, Africa is still growing at a very positive rate, 3.8 per cent as of last year, 2022, and projected with a very stable outlook to be growing at four per cent this year.
Inflation is rocking the boats everywhere, but on the continent, we have had countries where inflation remained below the double digits, even in countries where it went above double digits, there are signs of rebound and recovery owing to stable fiscal policies and prudent financial management that are being implemented. Our projections is that it will go down in 2024. These are all positives and if you consider that and compare it with other established economies, on average the global economy is expected to grow at 2.7 per cent and inflation is at high rate in many countries of the world. If you make a clear prognosis, you are safe to say many countries in Europe are at risk of facing recession but that is not the case in Africa.
And this is the same continent when the pandemic struck, all the prognosis I was hearing was that the continent will be decimated because we don’t have adequate healthcare infrastructure, which is true. Today, Africa has about 26 per cent vaccination rate but still the indigenous health systems have helped the continent to bolster the shocks and these are stories that are not being told.
The media has a huge responsibility to tell the true stories about the continent because Africa from all I have seen is a very resilient continent, the odds in terms of the global financial architecture and global governance systems are so huge for the continent. It has always been a treasure throve for the world where people go for raw materials and human capital but the continent still continue to forge ahead.
So, my appeal is for the diasporans, what do we learn from what they are doing in the developed societies that has helped to build their economies that we can take home to help build Africa and what have we learnt in Africa that made us resilient that we can export to the rest of the world to make their economies as resilient as that of Africa.
There are several thing to learn from Africa, the traditional medicine, the community spirit, the Ubuntu culture and our traditions. Some of these things are actually what we can share with the rest of the world and it becomes a mutual relationship, not one that is parasitic or one that is a donor kind of idea where they are doing us a favour by giving us grants. Grant has never developed any economy in the world, trade does, equal partnerships does, investment does. Let us therefore push our diasporans towards creating investment opportunities on the continent, especially in the private sector.