Entitled ‘Leveraging Migration for Africa: Remittances, Skills and Investments’, the study shows that remittance flows into Africa reached $40 billion in 2010 and have quadrupled since 1990. African remittances currently account for 2.6 percent of GDP, a figure that in some countries equals or even exceeds both foreign direct investment and aid.
Most families in Zimbabwe rely on remittances from their families in the Diaspora, as it is estimated that about three million Zimbabweans are living in the Diaspora. It is estimated that Zimbabweans in South Africa alone remit $500 million every year, for family support and other personal projects.
“Remittance-receiving households are usually associated with reductions in poverty, increased household consumption, greater investment in human and physical capital, and less vulnerability from economic and natural shocks,” said the Bank.
Taxing remittances
The AfDB has therefore indicated that reducing the costs of remittances and maximizing their impact on development is its key objective. However, Zimbabwe seems to be working against this objective, with the pronouncement of the source based Income Tax Bill which seeks to tax remittances.
“The AfDB, through its Migration and Development Fund, also supports local initiatives and those from the Diaspora aimed at improving knowledge of remittances, reducing the costs of transfers, optimising the use of the resources transferred, and supporting local development in migrant home countries,” said the Bank
Formalising the informal
The Forum offered a unique platform for money transfer operators to meet regulators and develop action plans for lowering remittance costs, simplifying and harmonizing legislation, increasing market competition, and minimising risk. The forum also explored the economic implications and potential of remittances in Africa, and discussed ways to bring informal remittance flows into the formal financial system.
“While a large share of Africa’s remittances is controlled by a few international money transfer operators, a large proportion of African migrants still prefer informal transfer mechanisms,” said AfDB.
Post published in: Business