Joint Africa
Institute High-Level Seminar: February 2008
Theme: Promoting
Diaspora-led Investments as sources of financing for enhanced growth
and development in Africa
Context:
The
African Union and African Governments have embarked on a process of
engaging the African Diaspora for the continent's development. This
agenda include six areas of focus: (i) Economic Cooperation, (ii)
Regional Development and Integration, (iii) Women, Youth and Vulnerable
Groups, (iv) Historical, Socio-Cultural and Religious Commonalities,
(v) Peace and Security, and (vi) Knowledge Sharing and Learning.
The
World Bank is supporting the AU and African Government agenda through
a collaborative program of mobilizing the African Diaspora in the continent’s
development. This program involves facilitating: (i) the Diaspora to
build on ongoing efforts through a blended strategy of "virtual"
participation; short, medium and long term placements; return and retention;
and institutional partnerships and networks; (ii) governments to create
enabling environments including operational policies for Diaspora to
provide services and products; and deploying professionals through national
focal points; (iii) business and investment promotion networks through
mechanisms for Diaspora and home country partners to access development
funds ; and (iv) donor partners including the African Development Bank
to support a Diaspora Investment Fund based on global initiatives that
exploit the benefits of Diaspora remittances.
A
Memorandum of Understanding (MOU) between the African Union and the
World Bank will be signed in January 2008 to formalize the collaborative
efforts on this agenda of mobilizing the African Diaspora for the continent's
development.
The
seminar would enable African Governments and partners identify the concrete
measures to put in place in realizing the potentials of Diaspora investments.
For example, preliminary estimates (Ratha et. al. 2007)1
suggest that:
Sub-Saharan African
countries can potentially raise $1-3 billion by reducing the cost
of international migrant remittances, $5-10 billion by issuing Diaspora
bonds, and $17 billion by securitizing future remittances
and other future receivables."
"The African
Export Import bank (Afreximbank) has been active in facilitating future
flow securitization since the late 1990s. In 1996, it co-arranged
the first ever future-flow securitization by a Sub-Saharan African country,
a $40 million medium-term loan in favor of a development bank in Ghana
backed by its Western Union remittance receivables.
"There are
however several institutional constraints to future-flow securitization
in Sub-Saharan Africa such as: low level of domestic financial development,
lack of banking-relationships with banks abroad and high fixed costs
of legal, investment banking and credit rating services, especially
in poor countries with few large entities makes the use of these instruments
especially difficult."
Bank engagement
and support instruments
As
part of furthering the agenda, the Bank organized an Open House for
the African Diasporas in North America in November 2007 with plans for
similar event for the Diaspora in Europe. Over 250 Diaspora professionals
and representatives participated in the open house where the Bank presented
and discussed its instruments for engaging and supporting the Diaspora.
The specific instruments include:
Use of existing
Bank Group portfolio and pipeline projects to engage the Diaspora in
the design and implementation of Bank supported programs in Africa
Proposed Multi-Donor
African Diaspora Engagement and Facilitation Fund
Proposed African
Diaspora Remittances Investment Fund
Supporting partner
countries in creating “enabling environments” for engaging Diaspora
in Development
Knowledge sharing
The open house concluded with
Bank and Diaspora commitment to work hand-in-hand to ensure the realization
of the ideals of the support program.
An
immediate step of moving the engagement agenda forward is a High Level
Seminar on the African Diaspora to be organized under the auspices of
the Joint African Institute (JAI) of the African Development Bank (AfDB),
World Bank and the IMF. This high level seminar is aimed at
identifying concrete / practical steps for facilitating African Diaspora
investments, leveraging and securitizing remittances on the continent.
Objectives
of the High Level Seminar
The overall objective of the
seminar is to discuss with government and relevant agencies concrete
/ practical path of adapting and replicating recommended practices
of strengthening the enabling environment for promoting and supporting
Diaspora-led investments in Africa. Particular focus will be placed
on the roles of the World Bank, AfDB, member Governments, and Africa
regional banks.
Specifically the seminar will:
provide a platform
to share information and learn about how African countries have gone
about preparing for enabling environment and how this have been received
by the investors (Diaspora)
provide a platform
to share information and learn about how other countries particularly
in Latin America have promoted and supported Diaspora-led businesses
and investments to boost growth and development;
discuss with Africa
Governments the steps required to prepare the enabling environment for
promoting and financing Diaspora-led investments through issuance of
bonds, leveraging and securitizing remittances;
guide / assist Government
officials so that by June 2008 willing countries would have developed
strategies and milestones toward realizing the objectives set forth.
Expected
Outcomes of the High Level Seminar
(i) Possible options and recommended
pathways for promoting Diaspora-led investments, leveraging and securitizing
remittances;
(ii) List of essential steps
to strengthen the enabling environment for supporting Diaspora-led investments.
Specifically, the seminar would chart concrete steps that must be in
place for:
Leveraging remittances,
including local banking services for recipients of remittances, and
in financing of MSMEs, etc;
Reducing the transaction
cost of remittances;
Countries to issue
Diaspora bonds (as has been done by India and others);
Countries and sub-regional
institutions (e.g., ECOBANK and Development Bank of Southern Africa,
etc.) to help establish a Remittances Investment Fund and Diaspora engagement
and facilitation fund;
Sovereign credit
ratings and securitization of remittances toward raising additional
funds/loans and issuance of bonds by national and sub-national entities
in the global financial markets (as in the case of Brazil, etc.);
Approach
of the Seminar
The seminar would bring selected
Diaspora practitioners with investments and fund mobilization expertise
who are already active in Africa to interface with senior African government
officials. The stakeholders would learn from the experiences of these
Diaspora investment practitioners and Latin American and Asian countries. The seminar is structured to
stimulate intensive interactions and experience sharing among participants
and invited experts. It will include short presentations of actionable
investment cases and financing arrangements, and discussion with panel
experts. Specifically, the approach will involve:
(i) Presentations and group
discussions of actual investment cases and related financing support
arrangements in Africa and Latin America;
(ii) Sharing lessons on essential
steps for strengthening the enabling environment for promoting and financing
Diaspora businesses and investments;
(iii) Engaged reactions and
suggestions regarding possible commitments to recommended practices
and pathways.
Duration: 3 days: February 06 - 08, 2008
Target: Permanent Secretaries; AfDB Management;
World Bank Management, IFC; IMF
Resource
persons / organizations associated with the African and Latin American
experience: Inter-American
Dialogue (IAD), US (Africa Development Foundation); Inter-American Development
Bank (IADB) Development Bank of Southern Africa (DBSA), ECOBANK, Targeted
Diaspora investors.
1
Dilip Ratha, Sanket Mohapatra and Sonia Plaza, “Beyond Aid: New
Sources and Innovation Mechanisms for Financing Development in Sub-Saharan
Africa”, World Bank, 2007