DO REMITTANCES OFFSET AFRICA'S BRAIN DRAIN?
A remittance is a transfer of money by a foreign worker to an individual in his or her home country. Money sent home by migrants competes with international aid as some of the largest financial inflows to developing countries. Remittances are playing an increasingly large role in the economies of many countries, contributing to economic growth and to the livelihoods of less prosperous people (though generally not the poorest of the poor) (Ratha, 2003). As remittance receivers often have a higher propensity to own a bank account, remittances promote access to financial services for the sender and recipient, an essential aspect of leveraging remittances to promote economic development. According to Ratha (2003), remittances have social significance that extends well beyond the mere financial dimensions in African countries. The recent increase in formal remittance flows can be explained by the increase in the number and income of migrants, the greater number of remittance providers, wider networks in the global financial services industry, and government policies that improve financial market access, all of which have reduced remittance costs and promoted the use of official remittance channels (Yang & Martinez, 2006). Whatever the reasons behind this surge, the growing importance of remittances as a source of foreign exchange and their contribution to economic development have attracted increasing attention from policy-makers and academics alike.
Brain drain refers to the departure or emigration of individuals with technical skills or knowledge from organizations, industries and geographical regions. It is common in developing nations, particularly in many former African colonies, the island nations of the Caribbean and in centralized economies such as the former East Germany and the Soviet Union (Skeldon, 2008). Remittances are transfers of money, goods and diverse traits by migrants or migrant groups back to their countries of origin or citizenship. Although the notion of remittances conjures only monetary aspect, remittances embrace monetary and non-monetary flows, including social remittances. Yang and Martinez (2006), defines diaspora’s social remittances as ideas, practices, mind-sets, world views, values and attitudes, norms of behavior and social capital (knowledge, experience and expertise) that the diasporas mediate and either consciously or unconsciously transfer from host to home communities.
The African brain drain is not large enough to have much effect on Africa’s skill gap relative to the rest of the world. Since other regions had a larger brain drain, the skill gap between Africa and the rest would actually be larger in a counterfactual world of no brain drain with the same amount of skill creation. According to one of our calculations, the present value of remittances more than covers the cost of educating a brain drainer in the source country (Rodriguez & Horton, 1994). Brain drain has a positive effect on skill accumulation that appears to offset one for one the loss of skills to the brain drain. Hence it is not surprising that we fail to identify any negative growth effect of the brain drain in Africa. African diaspora interviewed stated that they obtained social remittances from different sources: through professional expertise in work places in the host countries; through values, norms and work ethics; through their socialization and acculturation in host countries; and by constructing vast transnational networks across countries and continents, linking the process of globalization to ‘globalization’ in their countries of origin (Oucho, 2008).
According to Mutume (2005), sub-Saharan Africa, western Africa receive nearly double the remittances to the entire block, with Nigeria, Ghana and Senegal, in descending order, dominating the pack. Eastern Africa is topped by Kenya, followed by Somalia, Uganda and Ethiopia. Apart from Kenya, the rest are countries that have had political problems which left conflict in their wake, the last two attracting remittances as an important resource for national construction. Central African countries of Angola and Democratic Republic of Congo (DRC) lead the packing receiving remittances. Finally, in Southern Africa, South Africa is by far the main recipient, with Lesotho second – a well-known remittance- and deferred payment dependent economy. Remittances alone are unlikely to lift people out of poverty; rather it is their interplay with other economic, social and cultural factors which determine the scale and type of impact remittances can have on poverty reduction. While remittances to Africa amounted to US$5.9 billion in 1990, it reached US$ 14billion by 2003, which was a mere 15 per cent of all remittance flows to the developing world. The leading recipient countries have been Algeria, Morocco and Egypt in Northern Africa. In sub-Saharan Africa, Nigeria, with remittances exceedingUS$1.3 million is by far the largest recipient, accounting for 30-60 per cent of the regions receipts (Mutume, 2005). While some other latest estimates suggested that the total amount of Africans working abroad send home amounts some US$45 billion a year.
Negative Impacts of Brain drain in Africa
The growing international transfer of human capital from Africa to the developed countries undermines the human capital development efforts in this region. Evidently most migrants are even more highly educated than the average citizen of their home countries (Belfield 2000). Often the best brain immigrants have enjoyed subsidized education offered by their government from taxpayer money and afterwards leave for greener pastures once their higher education training is completed. The loss of highly skilled professionals has several negative consequences for the economy of Africa. African businesses; and influencing the political climate by infusing democratic political habits, sometimes acting as pressure groups; shortage of skilled people limits the economic growth, While the brain drain is beneficial its flaws are inherently in its title because it usually involves the loss of human capital i.e. skilled labour force who are vital to the development of society and the country as a whole. In the case of skilled man power emigration of the skilled workers as “essentially providing personal benefits for individuals rather than public benefits.
Impact on the health systems in Africa despite the existence of significant global efforts trying to improve health and healthcare systems in the developing world, the money invested is insufficient as health workers from the developing countries leave their home countries and immigrate to the developed world assuming low-status positions in rich countries (Belfield 2000). As a result of many local health workers abandoning their countries, countries in Africa, developing world lack sufficient health care workers, which harm the local health system: health systems in the developing world are receiving financial aid to deal with significant diseases and health issues such as child mortality, AIDS, and Malaria. However the money is ineffective as there is no sufficient manpower in the form of medical and health professionals to do the work required, which further damages the health system rather than strengthening it (Belfield 2000).
Poverty; the impact of migration and remittances, on poverty is complex and difficult to disentangle given the reciprocal relationship between the two. Poverty and vulnerability provide incentives to migrate and on the other reduce the ability to move due to high transfer costs involved (Adams & Page, 2003). Those engaged in international migration are not the poorest of the poor as they must of necessity have some resources to facilitate their movement; first, remittances stimulate formation of small-scale enterprises thereby promoting community development. In different parts of rural Africa, recipient communities are economically vibrant relative to communities that never receive any migrants. Remittances ease credit constraints by providing working capital for the recipients who consequently engage in entrepreneurial activities (Adams & Page, 2003).
The implications for poor sending countries are stark. According to Belfield (2000), African countries lose 20,000 skilled personnel to the developed world every year. All the developed world's efforts to increase aid to these countries may not matter if the local personnel required to implement development programs are absent. Every year there are 20,000 fewer people in Africa to deliver key public services, drive economic growth, and articulate calls for greater democracy and development, however, there is a need to devise measures that recognize that greater mobility, not less mobility, is likely to be the most sustainable and efficient response over the long term. However, this approach presents an immense challenge: how to tap into the immense economic and other benefits migration can deliver for individuals and receiving countries, while simultaneously ensuring that sending countries also benefit.
Salary discrepancies and differences in working conditions between African and developed countries stimulate brain drain. Most African economies have experienced wage freezes, currency devaluation and rampant inflation. These conditions lead skilled people to seek safer countries where remuneration is consistent with qualifications and working experience, and where currencies are less subject to devaluation than in Africa.
Positive Impacts of Brain drain in Africa
The effects of remittance on countries of origin are even more complex. Certainly, the emigration of highly skilled nationals in particular leads to a significant loss of skills available for development. Yet, labour migration and brain circulation lead to a more efficient allocation of manpower within the African continent as well as overseas, and decreases social tensions in the countries of origin. Migrants acquire new skills and experience that are useful for their home countries, and transfer significant parts of their earnings. Migrants stimulate trade between their countries of origin and the host countries (Mutume, 2005).Recent studies explore this nexus between migration and home-country development and inquire about the optimal level of brain drain.
The return of migrants who have acquired new skills and knowledge abroad can be considered a form of knowledge transfer. In as much as the application of knowledge depends on the availability of technology, knowledge transfer is necessarily accompanied by a technology transfer. Even in case the migrants do not return home, however, they can still contribute to the development of their home countries (Beine, Frédéric & Hillel 2002). While staying abroad, they might promote cooperation between universities, technological research centres and business associations of the home and host countries. Internet- and satellite-based information technology greatly enhances this cooperation potential. Remittance can contribute to development in countries of origin. A crucial policy challenge of the future is to involve the skilled members of the African diaspora in innovative forms of cooperation and knowledge transfer to promote the expansion and sustainability of key-sectors for national development. Remittances are playing an increasingly large role in the economies of many countries, contributing to economic growth and to the livelihoods of less prosperous people.
Economic importance of remittances; the balance of payments statistics of the international monetary fund found that one of the major data sources of official remittances, reveals a significant global increase of migrants transfers. In most African countries e.g. Cape Verde, Cameroon, Ghana, Madagascar, Mali, Morocco, Senegal, Togo and Tunisia, the amount of annual official remittances increased by almost 100 per cent. There are economic developments in the countries of destination of migrants. According to Beine, Frédéric and Hillel (2002), it is safe to the developing countries’ economies since they do not currently rely on a steady flow of migrant’s financial transfers. The recent increase in formal remittance flows can be explained by the increase in the number and income of migrants, the greater number of remittance providers, wider networks in the global financial services industry, and government policies that improve financial market access, all of which have reduced remittance costs and promoted the use of official remittance channels. Official remittances do represent considerable financial inflows in many developing countries, and are, therefore, an economic reality that should not be neglected.
Poverty reduction; It targets transfers received in money, food and non-food goods from either internal or international sources. Applying a series of econometric model, the study found that households receiving internal remittances (that is from Ghana)have the lowest mean per capita expenditure and have the highest observed poverty on average of all the household groups; that households receiving international remittances from external sources) have the highest mean per capita expenditure and the lowest observed poverty on average of all the household groups ( Belfield, 2000); that international remittances have a greater impact on poverty reduction; and that both internal and international remittances have a negative impact on income inequality, as measured by the Gini coefficient. The study concludes that poverty reduction depends on the type of remittances being received, which leads us to caution that it is important to ascertain the kind of poverty being targeted (Beine, Frédéric & Hillel 2002).
Remittances can offset Africa's brain drain. The international flow of highly educated workers presents a critical challenge to developing countries particularly in Africa. For African countries to harness remittances in their development process, they should formulate policies in which they involve the diaspora, improve the investment environment and be constantly responsive to changes positively affecting utilization of the two resources. Policy frameworks and programmes targeting the diaspora and remittances could benefit from those already elaborated in Latin America where the two resources have made significant contributions. African countries should incorporate the contribution of their diaspora and remittances in national development planning and programmes. This could be done through African countries’ sustained engagement with the diaspora in multiple facets of development. Africa will continue to experience large-scale population movements, especially outwards. Labour-related migration will continue to provide a way to escape poverty or other forms of hardship at home; however, it also provides a way for educated, skilled and qualified persons to expand their career potential in today’s increasingly globalized world.
Adams, R.H. and Page, J. (2003) “The Impact of Migration and remittances on Poverty”, Poverty Reduction Group, The World Bank. Paper prepared for DFID/World Bank Conference on Migrant Remittances, London, 9-10 October 2003.
Beine, Michel, Frédéric Docquier, and Hillel Rapport.(2002). Brain Drain and LDCs’ Growth: Winners and Losers (Working Paper No. 129). Palo Alto, CA: Center for Research on Economic Development and Policy Reform, Stanford University.
Belfield, Clive R. (2000). Economic Principles for Education: Theory and Evidence. Cheltenham, UK: Edward Elgar.
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Skeldon, Ronald (2008)."Of skilled migration, Brain Drains and Policy". International Migration 47 (4): 3–29. doi:10.1111/j.1468-2435.2008.00484.x.
Yang, D. and C. A. Martinez (2006) “Remittances and Poverty in Migrants’ Home Areas: Evidence from the Philippines”, in Ozden, C. and M. Schiff (eds.) op. cit.