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Agriculture – a promising market for the diaspora

Over the last decade, remittance flows from diaspora communities to their countries of origin have been steadily increasing. With government support and agriculture-friendly legislation, agriculture could benefit from this substantial source of funding and expertise.

Africa received €51 billion in remittances from its nationals living abroad in 2016, representing a 36% increase from 2007 when remittances totalled €37.3 billion, according to an IFAD report. These financial flows are sometimes very substantial relative to the national GDP; total remittances received from diaspora account for over 3% of GDP in 19 African countries, with the highest proportions in Liberia (31%), The Gambia (22%), Comoros (20%), Lesotho (18%) and Senegal (14%). But what proportion of this money is invested in agriculture and agribusiness projects?

“Data reveal that households spend remittances sent by the diaspora in the most needed sectors: food and clothing, and then education and health. Finally, some purchase land, others invest in improving their farms or agricultural equipment,” says Sonia Plaza, diaspora specialist at the World Bank. Kenya, Nigeria, Senegal and Uganda are the main countries where diaspora remittances are used to purchase land.

Pedro de Vasconcelos, Coordinator for the IFAD Financing Facility for Remittances, qualifies this trend, “Although the funds used for agricultural purposes in rural areas are estimated to be relatively small – 5% of total diaspora remittances – this still represents four times the global official development assistance that goes to agriculture.” Shadreck Benati, a young Malawian living in South Africa and member of a group that supports smallholders in his homeland, regularly sends money to his brothers to help them buy inputs. With improved yields, Benati’s family are then able to sell part of their vegetable crops and use the profits to improve the education, healthcare and overall livelihoods of their family.

With institutional support, diaspora remittances can have a greater impact. In Somaliland, an independent self-declared state in the Horn of Africa, remittances are essential for the survival of rural communities because of arid climatic conditions and difficult access to financing. The Somali AgriFood Fund – a partnership between IFAD, the not-for-profit Shuraako programme and the BiD Network – has an agricultural investment model with diaspora investment representing at least 20% of the overall budget. The fund has unlocked capital from Somali diaspora (living in Australia, Canada, Finland, Germany, The Netherlands, Sweden, the UK and US) totalling over €800,000, financing 14 companies and creating over 200 jobs.

With funding from the Somali AgriFood Fund, Barwaaqo Marketing and Catering Services Company – a local fruit and vegetable wholesaler and cooperative – was able to purchase a solar-powered irrigation system, an additional cold storage unit and farming equipment to lease to its members thanks to a €83,500 joint investment from the diaspora, a local investor and IFAD. The financial support enabled the cooperative to increase its production and extend its distribution to new markets, while also boosting its monthly income by 500-600% since 2016, from €2,800-€4,250 to €14,200-€28,400, and ultimately creating 72 new jobs.

Engaging the diaspora
Governments in ACP countries often try to attract the attention of their nationals living abroad, but not just for their money. Kenya took a first step toward attracting the diaspora in 2014 when it published the Kenya Diaspora Policy outlining efforts to be made in terms of administrative procedures, remittances and the availability of market data to facilitate diaspora involvement in developing the country. Meanwhile, Ethiopia has facilitated procedures for obtaining long-term residence permits for ‘people of Ethiopian descent’, while reducing taxes on industrial equipment imports.

Uganda has also reiterated calls to the diaspora to invest in agriculture to promote commercialisation of agriculture. This appeal was heard by Andy Agaba, based in Cambridge (USA) and founder of Hiinga Inc. and Bantu Coffee, two social businesses with a mission to invest in small farmers in Africa. Hiinga funds cooperatives and rural credit unions in more than eight districts and has become a national benchmark in the sector. As a social business, Bantu Coffee invests its coffee sales profits in rural farming communities and is the only African brand to compete with national coffee brands in the US.

In Kenya, veterinarian Tony Kiragu, who had been living in the US, launched Kuku Nature Farm in 2014 in Naivasha, northwest of Nairobi. The hatchery has a capacity to hatch 50,000 poultry eggs with a market value of €67,000 every 3 weeks, and the chicks produced are disseminated to poultry farmers in the region. As a result of the success of the business, Kiragu resettled in Kenya in 2015.

Both Agaba and Kiragu stress that agriculture investment opportunities abound, provided there is capital available and an enabling environment. Vasconcelos explains that agriculture is an attractive market for the diaspora because investment in this sector can “ensure food security and protection for their families in the countries of origin, or enhance the profits of agricultural markets through domestic or foreign trade.”

The government of Jamaica can count on a well-organised and committed diaspora. Kimone Gooden, head of the Jamaican Diaspora Agriculture Task Force, whose core members live in the US, says “Diaspora engagement in Jamaica is prolific in other areas of development such as education and health. There is an opportunity for the diaspora to play an active role in the agriculture sector.” She specifies that, “There are less than 10 certified organic farmers in Jamaica. We are keen on helping farmers understand the opportunity available to access this €0.83 billion market, in addition to the health and environmental benefits.”

Maximising opportunities
The diaspora is a unique category of investors. An IFAD working paper on Senegal and Morocco states that the diaspora is attached to their country of origin, and acquires knowledge abroad and know-how to mobilise financial and technical partners. When remittances are not sent directly to family members, the diaspora invests in two ways: either individually or collectively in economic development projects in the countries of origin, or indirectly through savings accounts to benefit families living back home.

Despite having different goals, the diaspora nevertheless has to often overcome the same obstacles, including a lack of information and data on sectors and business set up procedures, poor access to financing and a dearth of basic infrastructure, such as electrical systems and roads. “To get the diaspora involved, you have to engage them to use their experience and training, to provide support for youth…especially for someone who has not been in his/her homeland for years,” says Nii Simmons, founder of the DAIN Network, an agribusiness consulting firm. “That said, the investment opportunities are greater than the challenges.”

By: Vincent Defait, with contributions from Pius Sawa and Charles Mkoka
Source: SPORE
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