Diaspora Mainstreaming in EU Development Cooperation with Africa
Hajar Idriss - Janati // 17 September 2021
Diaspora communities hold incalculable potential to support their home countries and have long been acknowledged as actors for development thanks to their unique transnational understanding, mobility, and connection with their country of heritage. However, until now dialogue and collaboration between the diaspora, countries of origin, the EU and its Member States has been fragmented, often focusing on bilateral cooperation. In this setting, the aim is to facilitate the EU’s multilateral partnership with Africa to the next level, reinforcing the commitments undertaken at the AU – EU Summit. To realise this, transformative shifts in the management of global human and resource flows is key.
To this day, diaspora remittances are considered the most concrete and least provocative link between migration and development, summating $689 billion in 2018 worldwide. However, remittances alongside a weak distributive mechanism may in fact induce a poverty trap and vertical inequality among households or individuals of migrant and non – migrant families. This is partly because it relegates the government’s incentive to retain fiscal policy discipline as a result of subsequently reduced political incentives from households to pressure the government to implement reforms that facilitate economic growth and infrastructural transformation.
Having adopted the European External Investment Plan (EIP) in 2017, the EU recently initiated the European Fund for Sustainable Development (EFSD), a financial instrument that mobilises EU grants to catalyse investment from public and private sources in order to assist countries in Africa and the neighbourhood, to achieve the 2030 Agenda for Sustainable Development (SDGs)
Nevertheless, a study points out that ‘the multitude of objectives the EFSD intends to promote reflect high expectations for what it can achieve’. Hence, it has predominantly been used to leverage funding from public institutions rather than private investors.
In Europe, few countries like the UK engage in harnessing diaspora contribution towards their home countries in Africa. For example, AFFORD UK mobilises financial, intellectual, and political assets of the African diaspora and channels them to drive economic growth and social development.
This is not to say that barriers to diaspora investment do not exist. Studies undertaken by the IOM on Zimbabwean and Somali diaspora highlight that trust among diaspora members towards their home institutions and governments is generally weak. Entrepreneurs and investors are disinclined to invest, in fear of the expropriation of assets, labour unrest, and civil dissention. Similarly, surveys conducted by UNCTAD, and the Commonwealth Foundation indicate that diasporas face a lack of knowledge of the country of investment, limited investment capital, and a lack of financial facilitations. As a result, diaspora investment patterns often appear to be conservative and mostly channelled through informal sectors via extended family and social networks, rather than structured investment products.
Building on current efforts, EU Delegations therefore have a key role to play in supporting social capital formation and nurturing trust through programmes at high institutional political engagement by acting as a ‘bridger’ between the diaspora and the home country. The EU can build multi-stakeholder alliances that attract a broad range of private and public partners to leverage resources to scale-up solutions for national and global impact, which can apply a substantial multiplier effect to the EU’s EFSD initiative. Engagement at a high institutional level combined with political legitimacy and recognition from diasporas was identified as a key reason for success by the IOM, as investors look for non – partisan, transparent regulatory investment frameworks.
Fundamentally, diaspora financial capital could form part of the EFSD financing mix. The innovative use of blended finance and enabling financial instruments such as diaspora bonds or crowdfunding can help harness diaspora capital and create public – private partnerships. Not only can crowd funding mobilise investments towards targeted development projects, it is also an inclusive strategy that can attract further diaspora, particularly those who are on a low income and are usually excluded from financial investment schemes available in their countries of origin. Crowdfunding has begun to emerge across the Rabat Process regions, namely the UK and France, but is barely nascent in other Rabat Process regions.
A primary step to achieving this form of engagement with the diaspora relies on mapping and targeting the right individuals. Many diaspora initiatives have failed because they did not identify the highly motivated individuals willing to stick with the initiative for a long time. EU Member States can conduct household surveys that enable assessments on the profile and nature of diaspora entrepreneurs, network/ group/ organizational belonging, the size of investments, and sectors of interest. Acknowledging the diversity of the diaspora could prevent the adoption of homogenizing policy approaches and in return enable a large range of areas for collaboration. Ultimately, mapping exercises will comprise an important part to craft strategies for engagement and to facilitate diaspora enterprise by creating businesses and jobs, stimulating innovation, channelling social, political, and financial capital across borders.
Similarly, adopting incentives and a supportive regulatory environment that will attract diasporas to participate is key. EU member states can provide incentives through the provision of tax relief proportional to the levels of investment. For instance, AFFORD – UK’s RemitAid programme financially incentivises and stimulates investment in high-risk ventures through Remittance Tax Relief as a strategy to claim for remittances spent on productive regenerative ventures and other development activities in LDCs.
Such an approach will endorse the virtue of EFSD’s policy relevance, providing financial and visibility additionality specific to EU priorities. Similarly, broadening the scope of private actors will harbour the economic empowerment of the diaspora, whilst energizing continental integration into the global economy. Dependencies in the long term shall reduce, and independence must be strengthened, creating an attractive and credible environment within Africa that can be recognised globally.
EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).
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