Thinking the Alternatives for Africa

FOREIGN REMITTANCE

There are over two million Kenyans in the Diaspora and these form critical aspects of this nation’s development prospects. By the estimates from the Central Bank, the Diaspora financial remittance stood at US$ 891 in 2011. This figure was superseded by 21 percent in 2012 when the country recorded US$1.2 Billion for the foreign remittance and hit the record in 2013 when the country gained US$1.27 Billion. As clearly reflected, remittances are becoming a significant source of finance for Kenyan economic development.

Estimates indicate that over 50 per cent of Kenyans in the Diaspora send money back home to their relatives who in turn use this money as a way to eke out a living in the country. In the household levels, these remittances are used as a finance base for basic needs like paying for housing, school fees, health care and food provision. To some extent, this very same money is used to in micro business and entrepreneurial investment activities which in essence forms the heart of Kenyan economy.

This loosely translated means that the Diaspora remittances have a significant way of growing our economy. According to World Bank economists report, evidence shows that increase in remittance has a direct link to reduction to the proportion to the poor people in the nation.

In her book Dead Aid; Why Aid is not Working  and how there is another way for Africa, Dambisa Moyo notes that for every US$100 sent to African countries, only US$ 80 gets to the people it is sent to. The remaining US$ 20 is levied as the charge costs for the money transfer to the African destinations. In comparison with the same transaction, from US to Mexico (US$ 85) and UK to India, only US$ 4 is cut for charges; a good US$ 96 gets home. This denotes how much expensively Kenyans who send money back home have to pay compared to their Indian counterparts sending the same remittance to India from the Diaspora. In other words for 2 per cent of that 1 Billion remitted in 2012 did not get to Kenya since they were charges on the monies sent home.

This form of higher taxation on remittance to Africa; in this case Kenya leads to secret remittance, reduced remittance or no remittance at all yet the government can tap into this source of financial flow by offering leaner costs for charges. The remittance costs can be brought down by either registering more money transfer entities beyond the few that we have so far in the country for more competition and thus cost reduction or better still, the government can offer "incentivized" aspects like facilitating the transfer for the Kenyans abroad. This could be in the form organizing a remittance network that can help with handling the Diaspora remittances at lower costs for particular ranges of remittance.

However, the most realistic approach for the government to increase its access to money for National development is to increase the number of the Kenyan middle class who can venture in something meaningful for the economy. They should be helped to start businesses which the government can in turn tax and use as its alternative source for revenues beyond hurting the ordinary citizen already complaining about the possible ramifications of the VAT Bill once effected especially in the cost of living front.

It is good the government is aware of this and embarking on a journey of expansive agricultural projects to bring the cost of living down but this can be implemented alongside increasing the number of people who join the middle class from the poverty levels.

Beyond the 6 Billion destined for the Youth, it would be prudent for the government to ensure that the youths of this nation get the desired title deeds for the large tracts of lands they own so that they can use them as the collateral for initiating investments. If they can access the title deeds then they can for sure walk into the banks to acquire loans which will in turn allow them to start their own taxable business; something that offers breather to the government’s quest for funds albeit besides the foreign aid approach.

The government must be bold in shunning aid seeking tendencies and the crippling aid dependency syndrome which literally kills a nations potential as witnessed with many African nations that have depended on aid for the last 50 years of independence. It must divest in her human resource, in her people’s potential but above all empower them to be the drivers of this country’s economic progress. The people must own the progress and their potential should be tapped to its fullest. Kenya must deliberately seek to believe that it will rise to the economic stardom but this must be attained hand in hand with her people being in the fore front.

The writer is the Training Director at Kenya National Debate Council (KNDC)