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TRADE-AFRICA: Europe Looks to Encourage Diaspora Investment

Michael Deibert

NEW YORK, May 31 2007 (IPS) - Africa’s robust diaspora in Europe will soon have an investment facility to help people make direct investments to better develop their home countries thanks to a new study by the Brussels-based Africa Caribbean Pacific (ACP) Business Climate (BizClim) facility.

“We are seeking to reach some concrete results,” says Christophe Malherbe, a senior financial analyst at BizClim, who says the study will launch at the end of June.

“There have been studies and surveys of Africa over the last 40 years and unfortunately they didn’t help much. We are looking for what kind of concrete instrument we could set up by boosting diaspora investment in Africa,” he said.

The study would most likely result in the recommendation of a closed-end private equity fund, officials say, that would invest alongside a group of diaspora investors to provide them with at least start-up capital. In addition, discussions are also underway to provide technical assistance facilities for any such project.

Though remittances have historically involved direct transfers to the household income of relatives or friends in the sender’s country of origin, increasingly analysts are trying to find ways that remittances can be used to further registered banks and non-bank financial institutions, such as credit unions and microfinance organisations, thereby contributing to the overall economic health of the sender’s country of origin.

Remittances from Africans working abroad between 2000 and 2003 averaged roughly 17 billion dollars per annum, according to a 2005 report by the United Nations Office of the Special Adviser on Africa. Total Foreign Direct Investment (FDI) flowing into African nations averaged about 25 billion dollars per year over the same period, meaning remittances are the majority of FDI flows.

Though official development assistance remained Africa’s main external resource flow, Africa’s share of FDI was only 7 percent of all FDI to developing countries from 2000 to 2003. That’s down from 10 percent in the 1990s.

“Aid can’t solve everything,” observes Karim Dahou, an advisor to the Africa Partnership Forum, which was formed at the G8 Evian Summit in May 2003. “It has to be well-targeted and well-tailored into areas where it can leverage private investment.”

“Bond guarantees, specific guarantees to loans for small and medium enterprises (SMEs) and the agricultural market…Africa’s diaspora is not only about investing as a first step, but also to be able to finance themselves and to develop in the long-run,” Dahou told IPS.

With long civil wars in Angola, Liberia and Sierra Leone having largely come to an end, many in the African diaspora are taking an interest in dipping their toes into an increasingly stable West African political environment.

“The Europeans have a leg up in the sense that some of these places are former colonies and they still have influence in these countries,” says Daniel Anagho, president of the Maryland-based African Investment Corporation. “But the winds of change are coming where it will no longer be about exterior investment but about encouraging the diaspora to get involved.”

Anagho, a native of Cameroon, formed his company in 2003 as a way to promote foreign investment into African countries via consulting, business partnership development and project finance endeavors.

The demographic of African immigration to Europe has changed substantially in recent years, with only 16 percent of African immigrants to continental Europe now classified as “refugees.” Many African immigrants seeking greater economic opportunities in Europe have as of late used mid-way staging points, particularly the Spanish-controlled enclaves of the Canary Islands in the Atlantic Ocean, as well as Ceuta and Melilla in North Africa as springboards for entry in continental Europe and a search for gainful employment.

In the Netherlands alone, for example, more than 170,000 legal immigrants of sub- Saharan origin reside, yet that number does not take into account the number of those illegally in the country.

In nations with even larger West African populations, such as Britain and France, many immigrants as well as first-generation children of immigrants have become firmly ensconced in the economies of their adopted countries, a fact that programs such as the ACP Business Climate facility are keen to utilise.

“The African diaspora can exert leverage on foreign direct investment since they still have connections in and understanding of the target market, and can bring in access to export markets and transfer technologies, as well as good business practices, especially against corruption,” says BizClim’s Malherbe.