Let’s have a non-mathematical analysis of remittances. As usual, let’s stick to the facts. This is an opinion piece. I want to chat with you. I mean you can’t talk back, but keep reading anyways. I don’t want boring statistics getting in the way of our conversation. And that’s what my column is indeed intended to be; conversations with you on whatever topic we decide to dissect.
Today: An Independent Autopsy Of Remittances.
We can leisurely describe remittances as domestic income that flows in from foreign economies resulting from locals moving to those foreign economies, whether permanently or temporarily. So the parent in the States that send you a couple dollars for your upkeep? The shoes your friend schooling outside sent you as a birthday gift? The money that your relative abroad keeps sending to the family to build that big house that after 4 years and 400 money transfers that new house hasn’t even reached foundation level? Yup, those are all remittances. Pretty simple, right?
Last year alone, Ghana bagged Three Billion United States Dollars’ worth of remittances. That’s $3,000,000,000 with nine zeros. To put that into perspective, within the whole of 2016 Ghana received foreign aid of $2.9 billion. Our non-traditional exports (NTEs) earnings in 2017 was $2.6 billion. And in 2018, the combined GDP’s of the Republic of The Gambia, the Republic of Seychelles and the Kingdom of Tonga was just about $3 billion.
Yes, Tonga (officially the Kingdom of Tonga) is a real country. Let’s stick to the facts. This is an opinion piece.
Very technical definitions of “Remittances” get very confusing. So I turned to my very best friend for clarification: The International Monetary Fund (read my previous articles to be in on the pun). The IMF split remittances into two: “Compensation of employees” and “Personal transfers”.
For Ghana, the “compensation of employees” would include income of migrant workers that will eventually leave, like say the Naija guy with a work permit, and locals employed by the embassies, foreign companies, international organisations etc.. Basically it’s the income of any foreigner who has a short-term job, or any Ghanaian with a job from a foreign company (IMF BPM6, 2009: page 272).
“Personal transfers” (IMF BPM6, 2009: page 273) would encompass any transfers in cash or in kind made or received by Ghanaians here to or from those Ghanaians abroad. What that means is that if Uncle Borga sends down money from Germany, it’s remittance. If you pay the fees of your ward studying abroad, it’s also remittance.
The not-so-obvious part of these two halves of the definition is this. If the Naija guy on a work permit in Ghana gets paid, he or she is not sending all the money overseas to family. There will be necessary living expenses and there will be chilling before something goes outside, but the FULL INCOME is counted as remittance. Also, the salaries of the Ghanaians employed by the embassies and the transnational companies are technically remittances even though those workers not foreigners nor are they transferring the monies anywhere.
So technically, it should be clear that remittances might not necessary have to be across borders; it can be within Ghana, technically. And there’s also this thing called “Social Remittances”. To explain that much easier, replace the cash or kind part of our definitions so far with all the knowledge, and values, and social and policy reforms, and innovative ideas and new technological skills that go from one end to the other. I just thought I should toss in that definition for good measure.
We are still sticking to the facts. This is an opinion piece.
There are about a quarter of a billion people (250,000,000) around the world living outside their home country. Immigration isn’t a fresh topic. The tales of leaving Ghana to seek greener pastures outside isn’t an unfamiliar tale. However, the scale of this at the turn of the 21st Century has been upturned. As far back as 2011 the number of Ghanaians in the diaspora was estimated to be 4 million people. Today, 8 years later I would have to copy-paste a source to confidently guess that number because things have changed. Ghanaians are more than ever moving back home and more willing to contribute to the national economy. The figures associated with our Remittances will only get bigger.
In this current “Ghana Beyond Aid” era, I believe any fiscal avenue that pulls in such numbers independent of foreign involvement should warrant a closer look in addition to carefully placed structures that are curated to facilitate a boom under the proper economic climate. $3 billion is a lot of money. The millions of Ghanaians earning outside is a lot of people. Ghana’s economic targets “without aid” is one heck of a gargantuan ambition.
The government has vocal on calls for the Ghanaian diaspora for get proactive in nation building. Vice-President Dr. Mahamudu Bawumia has previously said “It doesn’t matter if you’re a billionaire walking on the streets of America as a Blackman, they will see you no different from anybody walking on the streets of Africa, and so the emancipation of the people of African descent lies in the emancipation of Africa”. Aside the fact that I am pretty sure Jay Z and I would be viewed and treated and paparazzied differently on the streets of Bakersfield California, he is 100% correct in my opinion. The TRUE emancipation of the people of African descent lies in the emancipation of Africa herself. Ergo, the stock value of the Borga declines concurrently with a depreciation in stock of his homeland, which to many many whites, is just one big country called Africa.
Fun Fact: August 2019 marked the arrival of the first documented Africans from our continent to English America to be sold as indentured servants or involuntary labourers, a.k.a., slaves.
We definitely are sticking to the facts. This is still 100% an opinion piece.
Remittances are one of the most significant and tangible contributions of migrants to their home country and this government seems poised to take good advantage of the diaspora’s current euphoria about homecoming. It’s evident. Mr. Akwasi Awua Ababio, The Director of Diaspora Affairs Office at the Presidency, shared my current sentiment when he said about 2018’s $3billion remittance tally, “This is more than what we receive from donor countries as aid, and it’s time we recognized policies geared towards making sure we continue to get that stream of income coming into the country.” It’s true. These figure are more than the revenue generated from the export of resources like gold, or cocoa, etc.
The 2008 5-year Golden Jubilee Savings Bond sent a very good message. Banks and other financial institutions also devised investment packages to allow the diaspora invest in managed funds, equity trusts, real estate investments, amongst others. In recent years, some Ghanaian embassies and foreign missions have helped migrants direct their resources through formal channels for national development.
In theory and on a macro level I could type a lot. But the average Ghanaian tends to prioritize affordability over quality. And in the case of remittances, would you blame them? The monies sent by those living abroad help pay for their family’s food, healthcare, education, and eases difficulties. For many economies like that of Ghana, remittances often present a stable and sizeable source of funds to offset the cost of living. So if transfer charges amounts to, say, a week’s living expenses in Ghana, he might resort to informal channels.
Let’s stick to the facts. This is an opinion piece.
A very objective, fully sanctioned (by me), well-funded (mobile data invested), thorough, independent survey (involving only just me and 3 friends abroad on a WhatsApp conference call) conclusively finds that while recognized channels like financial institutions and Money Transfer Operators are always preferred for their greater credibility and increased supervision from regulators, if transfer charges were down, more money will be transferred through regulated channels than informal means. The informal channels of remittance include person to person, informal intermediary financial operations, self-carry, and other means that should concern the public.
The working Ghanaian diaspora, however, takes advantage of the continuous depreciation of the local currency. By getting more cedi per foreign currency transferred, Ghanaians find it beneficial to send greater amounts back home. The higher the remittances, the greater the improvement in the standard of living, particularly in rural areas where there is greater poverty. The remittance charge is the current concern.
Sometimes and at some places around the world (and that’s the beginning and the end of my disclaimer right there), aside the international transfer rates, a margin on the daily exchange rate is added to most foreign transfers, typically around 5% at major banks. It is the poor who suffer the impact of the high tariffs adopted by Money Transfer Operators (MTOs). The greater the amount transferred, the lower the fee paid by the remitter. So, migrants who send small amounts pay more transfer charges.
The government needs to offer remittance senders and receivers viable and affordable options as well as improve access of the working diaspora to financial services. Bank-to-bank partnerships, facilitating the process for opening and operating bank accounts while abroad, improving financial education, and providing investment opportunities to the diaspora are some areas to focus on.
**********
Hit me up on social media and let’s keep the conversation going! I read all the feedback you send me on LinkedIn, Instagram, Twitter and Facebook.
Also, feel free to send me your articles on relevant topics for publication on the Macroeconomic Bulletin. I’d give you full credit, an intro and/or an outro. Kindly make it about 1000 words.
Have a lovely week!
Maxwell Ampong is the Group CEO of Maxwell Investments Group, a Trading and Business Solutions consortium. He is also the Property Investment Consultant for Coldwell Banker Commercial Real Estate Ghana. He works with a team of motivated professionals, governed by industry experts with experience spanning over a century. He writes about trending and relevant economic topics, and general perspective pieces.
LinkedIn:/in/thisisthemax Instagram:@thisisthemax Twitter:@thisisthemax Facebook:@thisisthemax Website: www.maxwellinvestmentsgroup.com Email: maxwell@maxwellinvestmentsgroup.com Mobile: 0249993319
Discussion about this post