Diaspora Remittances keep Zimbabweans afloat

WHEN John Masaya’s mother succumbed to a heart condition in Harare in May last year, he was down and out.

Owen Gagare

An informal trader in Mbare, Masaya had not been able to go to work since 30 March 2020, when the government effected a lockdown to contain the spread of the Covid-19 pandemic.

Two months of not working hit Masaya’s pockets hard, and when disaster stuck, he was in a difficult place.

“I live from hand to mouth, so two months without going to work was a disaster. If I couldn’t feed my family, it also means there was no way I could feed mourners or pay the funeral expenses,” Masaya said.

“Thankfully, I have a young sister in South Africa and a cousin working in Australia. She lived with us when she was young and is now married to an Australian. When she called after my mother’s death, I told her we were in a difficult situation and thankfully she sent some money through Mukuru. My young sister also sent some money and I am very thankful for what they did although they could not attend the funeral because of Covid-19 and restrictions.”

Masaya revealed that besides assisting with the funeral expenses, his cousin occasionally assists him with money to pay school fees and other obligations.

Masaya is not alone in this.

With Zimbabwe in the throes of a prolonged economic crisis which has resulted in company closures, currency volatility and shrinking opportunities many people – both skilled and unskilled, documented and undocumented – have left the country to seek greener pastures outside the country’s borders.

Most have found themselves mainly in neighbouring South Africa and United Kingdom, but generally Zimbabweans are dotted all over the world, some excelling in their fields, particularly professionals.

Zimbabweans in the diaspora have played an important role in sustaining their families back home, by sending foreign currency and food at a time many are struggling. At the peak of Zimbabwe’s hyperinflationary era in 2008, many households were sustained by family members abroad.

Now, Zimbabwe like the rest of the world is battling the Covid-19 pandemic. The diaspora community has once again come in handy to support people back home at a time the government has failed to provide social security to its citizens.

Social protection has not been a priority for the government as seen by Vice Constantino Chiwenga’s failure to announce measures to cushion vulnerable people when he announced a 30-day lockdown on 2 January.

Last week, government announced it had set aside ZW$7 billion (US$70 million) for the heightened fight against Covid-19.

Health and Child Care Deputy Minister John Mangwiro said the funds would be used to recruit more personnel and procure equipment to respond to the virus. Again, there was no mention of social support to vulnerable Zimbabwe.

On a positive note, however, Zimbabwe has been experiencing a surge in official diaspora remittances since the outbreak of the Covid-19 pandemic, official statistics show.

Although the World Bank predicted that remittance flows to sub-Saharan Africa would drop by 23.1% from US$48 billion in 2019 to US$37 billion in 2020 in the wake of the Covid-19 induced economic crisis, figures show that the opposite was true in Zimbabwe.

There was growth in remittances.

The southern African nation recorded a 33% increase in diaspora remittances to US$466,2 million as at 31 July 2020 compared to US$349,7 million at the same time in 2019, according to Reserve Bank of Zimbabwe governor, John Mangudya.

In November 2020, Mangudya said official remittances from the diaspora were up 45% during the January-September period from 2019 at US$657.7m.

In a special report titled Diaspora Remittances Critical to Post Covid-19 Recovery, Comesa Director of Trade and Customs Dr Christopher Onyango listed Zimbabwe as one of the leading recipients of remittances in 2019.

“In Comesa region, the leading recipients of remittances were Egypt (US$ 26,791 million), Kenya (US$ 2,819 million), Tunisia (US$ 1,912 million), DR Congo (US 1,823 million) and Zimbabwe (US$ 1,730),” Onyango said.

“In terms of contribution of remittances to GDP, Zimbabwe led with 13.5%, Comoros (11.5%) and Egypt (8.2%).”

According to the United Nations 2030 Agenda of Sustainable Development (SDG) remittances have multiplier effects in the economy through savings, investments, fiscal and debt sustainability.

By increasing the consumption base, remittances also expand the revenue base, and allow the government to carry more debt or incur more expenditures.

At household levels, remittances support start-up of small- scale enterprises, while increased household consumption, inspired by remittances increases the demand for locally produced goods and services.

In addition, remittances are a vital source of income for health and nutrition, education opportunities, improved housing and sanitation, entrepreneurship, financial inclusion and reduced inequality.

Economic analysts attributed the increase in diaspora remittances to the use of formal channels as well as the need to support families back home following the outbreak of Covid-19 pandemic which worsened the economic situation.

“The driving force (behind the increase in diaspora remittances) is that most of the diaspora remittances were now channelled formally, economist Godfrey Kanyenze said.

He said the closure of borders meant that Zimbabweans in South Africa, a major source, were not able to use buses and malayitshas (informal transporters) to send money back home.

“Secondly, given the suffering, remember having someone in the diaspora is also a very important social safety net. So as a result, now, we were already in a crisis before the Covid-19, a lot of households needed food support and all those things and also given that Zimbabwe did not have the fiscal legroom to do what other countries are doing, emergency relief measures and all those things that can prop up households.

“Remember that under our social protection system we are paying households around ZW$300 (US$3) per month which hardly can sustain a family. So, it means therefore we had to rely on our diaspora. So, the diaspora had to send in more money as well,” he said.

Kanyeze also said the country has witnessed a very marked increase in remittances in the form of food stuffs and medicines.

Another economic analyst Prosper Chitambara concurred, saying since the unofficial channels had been affected by the restrictions, people in diaspora had no options, but to send remittances formally.

“That’s what accounts because a lot of remittances before Covid-19 were being remitted unofficially. So now there is Covid-19 and its associated restrictions in terms of movements, I think a lot of these remittances are now being channelled officially,” he said.

Chitambara said there was a need for the government to come up with incentives that would help harness more remittances into the productive sectors of the economy.

“It supports the financial sector but I think there is need, because most of these remittances are not being channelled towards capital development expenditures, they are financing social protection at household level, which is okay but I think we need to come up with greater incentives so that we can be able to harness more remittances into the productivity and enhancing sectors like infrastructure,” he said.

“When you look at countries that are doing well like Ethiopia for example, a few years ago they issued an infrastructure diaspora bond to mobilise resources from the diaspora to finance infrastructure. I think that’s the route we need to be going towards. We need to be encouraging investments in key infrastructure projects from the diaspora.”

Economist Blessing Machiva said with the unemployment rate in Zimbabwe above 90% and the lockdown affecting the informal sector, the diaspora community was pushed “to increase their remittances in support of the struggling population”.

In 2019, diaspora remittances grew by 2,6% to US$635 million from US$619 million recorded in 2018.

Although the country incurred negative inflows in the first eight months of 2019, the month of September marked a positive shift with US$52,5 million flowing in compared to $46,4 million in 2018, which was a 13% variance.

The positive trajectory was maintained in October and November with December 2019 recording the highest monthly growth of 27% to US$67,5 million from US$53 million. – News Hawks

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