Every year thousands of highly-skilled Africans relocate to countries such as the United States, Canada, France and United Kingdom, in search of higher salaries and better career opportunities. A recently published report says this is not necessarily bad for the continent.

According to Leveraging Migration for Africa: Remittances, Skills, and Investments, a report jointly produced by the African Development Bank and the World Bank, migration rates of skilled workers in Africa are particularly high. In 2000, one out of every eight Africans with a university education lived in a country in the Organisation for Economic Co-operation and Development (OECD).

The migration of Africans is set to continue in the future, according to Hans Timmer, director of development prospects at the World Bank. “Migration pressures will only rise in the future as a result of demographic changes of rising population in Africa and falling labour forces in Europe and many developed countries,” he said.

The migration of skilled professionals, or the brain drain as it is called, is often believed to have a negative impact on the migrant’s home country. It involves the transfer of human capital, which is key for economic growth. In many instances, the transfer takes place from countries suffering from scarcity of such resources to countries enjoying relative abundance. Skilled emigration can hinder development by reducing the supply of important services; limit productivity spillovers to both high- and low-skilled workers; reduce the potential for innovative and creative activities that are at the core of long-term growth; and limit contributions to the health of social, political, and economic institutions. In addition, the loss of workers educated at public expense can represent a substantial fiscal drain on the country of origin.

Remittances

Despite the potential negative effects of skilled migration, the report highlights numerous benefits it could hold for African countries.

One of the greatest advantages of having tertiary educated workers abroad is the remittances they send back home. Between 1990 and 2010, reported remittance inflows to Africa quadrupled, reaching nearly US$40 billion last year, equivalent to 2.6% of Africa’s gross domestic product (GDP) in 2009. Actual remittances are expected to be significantly more than this figure. Only about half of the countries in Sub-Saharan Africa collect remittance data with any regularity, and some major receivers of remittances report no data at all. After foreign direct investment (FDI), remittances are the continent’s largest source of foreign inflows.

In order to capitalise on the huge remittance market, Kenyan mobile operator Safaricom recently announced a deal with Western Union that will enable the 13.5 million customers using its M-PESA mobile money transfer service to receive payments from any of the 80,000 Western Union agent locations across the world. “Through this partnership, our customers and their friends and families will benefit from affordable, faster and more convenient international remittances,” said Safaricom CEO Bob Collymore.

Nigeria, Africa’s most populous nation with around 160 million people, received about half of all officially recorded remittances to Sub-Saharan Africa in 2010. Egypt and Morocco were the two largest recipients in North Africa. Other large remittance recipients in dollar terms include Sudan, Kenya, Senegal, Uganda and South Africa.

In many instances, professionals living abroad support a significant network of family members in the home country through remittances. In areas of heavy out-migration, economic activity is often highly dependent on these inflows. Recent surveys show that investments such as land purchases, building a home, and starting a business were the highest uses of remittances sent home by African diaspora.

More benefits

In addition to remittances, the migration of highly-skilled professionals also holds other advantages. The report states that Africans living abroad facilitate cross-border trade and investment. Diaspora networks play an important role in cross-border exchanges of market information about trade and regulations. They may also invest directly in origin countries or provide their expertise to assist investments by multinational firms. In addition, returning emigrants can provide their country of origin with scarce skills.

The impact of highly-skilled migration: Lessons from Ghana

So how is highly-skilled migration actually impacting Africa? Original research for the report shows that the gains to migrants and their families are often large enough to offset the general losses to the home country.

Researchers tracked the top five students graduating from each of Ghana’s 13 best schools between 1976 and 2004. Three-quarters had migrated abroad at some point between secondary school and age 35. There was, however, significant return migration, with 43% of those who migrated returning to Ghana by age 45.

Among the group of migrants surveyed, 93% of those who were not studying abroad were sending remittances, and most were sending about $5,000 a year. The group had little involvement in trade: only 3% of migrants helped a Ghanaian firm make a trade deal or exported goods from their home country in the past year. However, about 19% of the migrants made investments in businesses in their home country. This translates to a mean investment of $3,700 per migrant.

For Ghana as a country, the main fiscal cost of migration is the lost income and sales taxes the country would have earned as a return on its investment in the migrants’ education. The fiscal benefit consists of sales taxes on any cash remittances spent in Ghana and the fiscal expenditure saved by not having to provide government services to migrants.

Taking these factors into account, the net fiscal loss to Ghana of each of these high-skilled individuals living abroad rather than at home is estimated to be about $5,500–$6,300 a year. This is about equal to the amount migrants are remitting each year and less than the sum of their remittances and investments made in home companies.

Strengthening ties

The report says that African governments should act to make the continent attractive for highly skilled professionals. Shantayanan Devarajan, chief economist of the Africa region at the World Bank, said: “Migration of skilled labour is particularly high in small and low-income African countries, which already have low levels of human capital. Fragile and post-war countries face even bigger challenges because of the flight of human capital. African governments and policy makers should focus on increasing education and skill levels and establishing an environment in which high-skilled workers have productive opportunities at home.”

More should also be done to derive maximum benefit from professionals living abroad. “African governments need to strengthen ties between diasporas and home countries, protect migrants, and expand competition in remittance markets,” said Dilip Ratha, main author of the report and lead economist at the World Bank. “Otherwise, the potential of migration for Africa remains largely untapped.”

It is suggested that allowing for dual citizenship can encourage greater participation by diasporas in their origin countries by facilitating travel; avoiding the constraints foreigners face on some transactions (for example, temporary work, land ownership); and providing access to public services and social benefits. More broadly, dual citizenship can help maintain emotional ties with the origin country, thus encouraging continued contact and investment. Despite these benefits, only 21 African countries allow dual citizenship.

Another innovation worth considering is diaspora bonds, which are sold by governments or private companies to nationals living abroad. These bonds have already been successful in tapping into assets of Israeli and Indian citizens living abroad. According to Ratha¸ Sub-Saharan African countries can potentially raise $5–$10 billion a year in diaspora bonds. Countries with large diasporas in high-income countries that can potentially issue diaspora bonds include Ethiopia, Ghana, Kenya, Liberia, Nigeria, Senegal, Uganda, and Zambia in Sub-Saharan Africa and Egypt, Morocco, and Tunisia in North Africa.

Download the full report: Leveraging Migration for Africa: Remittances, Skills, and Investments