Covid-19 shows Africa must reduce dependence on personal remittances

Personal remittances to Africa, which far outstrip foreign direct investment, have plummeted as a result of the Covid-19 pandemic, severely undermining food security for the continent’s poor.

The wages and employment of many migrant workers evaporated overnight. Service-sector jobs have been hard hit, as migrants working in hotels, restaurants, salons, shopping malls and farms continue to lose their jobs. Healthcare professionals that are still working have struggled to send money because of the demands on their time and the lockdowns.

For the African continent, this will have a catastrophic impact.

  • Africa as a whole received $82.7bn in personal remittances in 2019, nearly double foreign direct investment (FDI) flows of $46bn.
  • Personal remittances amounted to $26nb in Egypt compared to $9bn in FDI.
  • Nigeria received $23.8bn in personal remittances versus $3bn of FDI.
  • Among major African economies, only South Africa received more FDI than personal remittances.

The 2019 remittance level will certainly not be reached in 2020. The largest remittance-sending countries – the US, Switzerland, Germany, France, Italy, the United Kingdom, Saudi Arabia and the United Arab Emirates – are still trying to restart their economies.

The near-term implication is a sharp decline in food security for Africa’s poor. This is especially true for African countries that were already struggling with food insecurity before the outbreak. Millions of people risk falling back into the extreme poverty from which they have only recently emerged.

Wasted human capital

Remittances to low- and middle-income countries, says the World Bank, are set to fall by 20% to $445bn in 2020, representing a loss of a crucial financing lifeline for many vulnerable households in the global South.

  • In 2021, the World Bank estimates that remittances to these countries will stage a partial recovery of 5.6% growth.
  • But the crisis should lead to serious reflection in Africa about the high dependence on remittances.

Covid-19 has shown the ugly, often hidden side of personal remittances. Foreign workers in Western countries, the Middle East and China have faced unsafe and dangerous work conditions during the pandemic. In Canada, for example, issues in the agriculture sector, including lack of access to protective equipment, crowded conditions that did not allow physical distancing and poor access to well-balanced meals during quarantine were exposed.

Source: https://www.theafricareport.com