Remittances to Africa to fall 5.4% to $41 billion - Covid-19 pandemic and high shipping costs blamed - emerging markets

According to the results of the Continental Migration Report 2021, remittances to African countries are expected to fall from $44 billion in 2020 to $41 billion.

The Covid effect

As expected, the Covid-19 pandemic is identified as one of the main reasons for the decline. Despite this projected decline of 5.4 percent, a report by Africa News explained that remittances now show “greater resilience and reliability as a source of capital in Africa than foreign direct investment flows”.

Consequently, the 2021 Continental Migration Report, prepared by the Economic Commission for Africa (ECA) in collaboration with the African Union Commission (AUC), recommends “governments around the world to take effective measures to encourage remittances in light of supporting the fight against COVID-19.”

In addition to the pandemic, remittances to Africa continue to be hampered by high sending costs, the report said. For example, if $200 is sent to the continent, the sender incurs an average cost equal to eight percent of the value sent. These average shipping costs are more than five percentage points higher than the UN Sustainable Development Goal 10 of three percent, according to the report.

Reducing transfer costs

However, as the report notes, some African countries have taken steps to reduce the cost of remittances. Some of the measures taken include “relaxed exchange controls to enable electronic and mobile money transfers at reduced costs.”

For its part, the 2021 Continental Migration Report recommends that Member States support migrants and their families by adopting laws and regulations to facilitate the sending and receiving of remittances. This could be done by “promoting competition between banks and other remittance providers with a view to establishing cost-effective remittance mechanisms”.

As expected, the report praises digital remittance solutions such as Mpesa, the mobile phone-based money transfer service, but makes no mention of crypto-based solutions.

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