For the past three years, remittances from Zimbabweans living abroad have been averaging $1 billion. This figure only accounts for funds sent home through official banking channels, as such the figure may be less than 70% of the actual remittances into our nation as some funds are moved via traditional channels.
The amount has been growing exponentially from $552 million recorded in 2012 to over $935 million recorded in 2016 as a result of the Reserve Bank of Zimbabwe (RBZ) incentives to lure diaspora funds. The RBZ currently gives a 10% incentive for all funds remitted back home. Remittances are now the second largest source of liquidity (more than tobacco exports) in the country after mineral exports.
Remittance flows to Sub-Saharan Africa declined by an estimated 6,1% to $33 billion in 2016, due to slow economic growth in remittance sending countries such as the UK and Australia and diversion of remittances into informal channels due to controlled exchange rate systems in the formal market. Remittances to the Sub-Saharan region were projected to increase by 3,3% to $34 billion in 2017, with Nigeria expected to get over $20 billion of that figure. Zimbabwe is also expected to receive a stable amount going into the future.
Over three million Zimbabweans live in the diaspora, in countries such as United Kingdom, USA, Australia and New Zealand. The highest number is in South Africa where nearly 2,2 million people have found refuge. Our greatest challenge as a country has been on channelling funds remitted back home into investments that can boost economic growth and improve the country’s forex reserves.
So far most of the remitted funds have been going into domestic consumption, largely because of liquidity challenges affecting households and the country at large.
Current engagements of the diaspora community by the president and RBZ has shown that the diaspora community is keen to invest in Zimbabwe in areas such as transport, agriculture processing, health services, insurance, manufacturing and tourism apart from the obvious property sector. Remittances have a potential to improve our nostro account balances, finance infrastructure projects locally and guarantee foreign borrowings or financial instruments.
At the micro-economic level, remittance benefits are inexhaustible though they are not the subject of the article. To channel remittances into the formal economy and spur economic growth in Zimbabwe, there is need to build their confidence in local financial systems and craft policies that incentivise an expatriate to think of investment instead spending.
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The recent approval of the $400 million investment into National Railways of Zimbabwe (NRZ) by a consortium led by the Diaspora Infrastructure Development Group (DIDG) and South Africa’s Transnet is one good example of the direction authorities need to take in terms of policy.
Investment forums and identifying investment groups abroad can bring immense benefits to both parties. Investment Inquiries from abroad are growing as most are nearing two decades of living in the diaspora and have made sufficient property investments back home to cushion them. So the time is now ripe for large scale investments back home, guaranteed those investments are safe and returns are sustainable.
Besides networking and partnering expatriates on investments such as the NRZ deal which is a typical public private partnership. The apex bank in association with various government ministries can craft strategies along the following existing policies to tap into diaspora remittances for economic growth.
Tax breaks for Special Economic Zones (SEZ) Investments
Zimbabwe has vast tracts of land in Bulawayo, Victoria Falls and Harare set aside for Special Economic activities under the SEZ Act of 2016. Most of the land is lying idle owing to liquidity and investment challenges the country is facing. Breaks on capital gains tax, corporate tax and value added tax to diaspora investors can lure capital. The major advantage of such a move is that dividends will stay home as opposed to foreign direct investment where they are repatriated outside. Further, the directors are subject to taxing on all their earnings or expenditure after a specified period.
Duty free importation of industrial equipment
Importation of mining, manufacturing or any other production equipment can only be beneficial to our country if done in a structured manner monitored by RBZ and Zimbabwe Revenue Authority.
The diaspora community, like most investors is exposed to world class technology which can spur capacity growth back home. They too would welcome such an incentive to invest back home.
Diaspora infrastructure bonds
Our infrastructure deficit is largely visible to every citizen. Diaspora Infrastructure Bonds can be modelled with financial advice from banks locally or internationally. Funds raised through these bonds will be channelled towards identified key infrastructure such as roads, electricity and ports development.
Interest from these bonds will obviously be invested in Zimbabwe by Zimbabweans. What will be key are government guarantees that these obligations will be honoured and setting a standard by honouring them when they fall due.