The harvesting and exodus of intellectual capital from African nations in form of Brain Drain is often countered by the flow of remittances to home nations of emigrants. Ugandans in the Diaspora contribute over $700 million per year to their national economy. In fact the African Diaspora remits over $50 billion to the African continent– surpassing Official Development Assistance from western countries. Diaspora Capital is estimated by the World Bank at over $400 billion in savings— which is indeed an oasis with potential to quench the thirst of African economies stranded in a desert with mostly cactus to chew on.
As the drums to turn off the faucets of foreign aid continue to grow louder, the Diaspora is an appetizing cash crop to exploit. Coincidentally, the combination of economic turmoil in the west and the insatiable appetite for corruption have led would be donors to finally say that enough is enough— African nations have to start baking their own bread. The way forward was to either tighten our belts or use band aids to seal the gaping wounds in the national budgets. Remedies in the first aid box include raising taxes, printing money or depleting foreign reserves. However, a case could be made that if our public officials were to recite and abide by the eighth commandment “thou shalt not steal,” our fiscal migraine could be partly cured.
The quest by African nations to raise more revenue led to adoption of Diaspora Bonds first implemented by China and Japan in the 1930s. These are debt securities targeting investors that have immigrated to other countries. This scheme encourages citizens in the Diaspora to invest in their home countries by providing the much needed revenue at lower than market interest rates—a patriotic discount. Uganda recently embarked on this initiative joining Ethiopia, Kenya and Nigeria. Other nations that have had great success with Diaspora Bonds include Israel and India that collected over $30 and $10 billion respectively. Though it’s evident that revenue is wasted through corruption, many African nations are still plagued by tax evasion, struggling economies and poorly performing capital markets necessitating additional sources of revenue.
Unlike remittances which often go towards domestic consumption, Diaspora Bonds offer nations an avenue to couple revenue towards infrastructure and other development projects. African nations are counting on patriotism to drive citizens towards taking ownership of stagnant national economies. However, it is worth asking if patriotism alone will be enough for Africans in the Diaspora to invest in the economies of their mother nations that often lack any form of credit rating. The failure of the first Diaspora Bonds issued in Ethiopia (Millennium Corporate Bond) and Kenya to live up to expectations highlight a multitude of barriers that include reluctance of the Diaspora to buy into this project, lack of awareness and poor marketing.
Patriotic discounts revoke Mark Twain’s assertion that “patriotism is supporting your country all the time and your government when it deserves it.” Africans in the Diaspora will surely take non-economic indicators into account before choosing to wet their beaks in the sea of uncertainty. This trust deficit is a major hurdle for many– emanating from poor governance, corruption, human rights violations, political uncertainty and the lack of individual liberties in many African nations. Can our governments be trusted to pay back investors from the Diaspora? Will the revenue from Diaspora Bonds be used to accomplish the stated infrastructure and development projects? Is it a bet worth taking in the interest of mother Africa? Is this our opportunity to jump on the wagon of African solutions to African problems?