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Behind the mask of remittances
Firoze Manji
Extracted from Pambazuka News 331
December 07, 2007

http://pambazuka.org/en/category/features/44839

How often do we hear the phrase "remittances to Africa are a key source of development funding"? The volume of funds being remitted to Africa are certainly impressive. In 2005, we are told, "they totalled $188 billion—twice the amount of official assistance developing countries received. Moreover, there is evidence that such flows are underreported. Indeed, remittances through informal channels could add at least 50 percent to global recorded flows. Most of the reported flows go to regions other than sub-Saharan Africa (SSA), but SSA has still been part of the overall rising global trend. Between 2000 and 2005, remittances to the region increased by more than 55 percent, to nearly $7 billion, whereas they increased for developing countries as a group by 81 percent." (Gupta et al 2007).

Can such remittances be equated with 'development funding-? What is the evidence that this contributes significantly to the elimination of poverty? And if remittances of funds from workers in the North to their families in the South be considered as part of the infrastructure of 'development-, then should not remittances of funds from the South to the North be also be considered as part of the equation?

The overwhelming majority of studies demonstrate that remittances are primarily used by households and families to help them survive the inadequate incomes that they already have. In times of crises, such supplementary income is used to "smooth household consumption and welfare". For the most part, these funds are used for consumption and payments for education, healthcare needs and food for subsistence. In other words, remittances are primarily used to supplement income because wages or income from agricultural production, petty-commodity production or 'jua kali- trade, or whatever activity people are engaged in to 'make a living- is inadequate. Remittances are not primarily used to create employment or develop new initiatives.

The reality is that the majority of rural families in Africa have long been dependent on the ability of members of their families who have jobs in urban centres to be able to remit a portion of their wages to help their families cope with impoverishment. This lies at the very heart of the system of underdevelopment that is characteristic of neo-colonial / post-apartheid economies as it was in the colonial and apartheid economies.

There is a close association between remittances and the maintenance of prevalence of low wages in Africa. One of the crucial determinants of low wages is the social cost of the reproduction of labour: from the employers point of view, the less it costs to enable the wage earner to survive and reproduce, the lower the wage needs to be. And the more people there are that are unemployed - the larger the 'reserve army of labour- - the harder it is for the worker to demand better wages, especially if they are unable to organise to put pressure on employers. If the families of workers are eking out an existence on marginalised land, a few pennies in the form of remittances from the employed worker makes all the difference.

When migrant workers (either transiently away from home or with more permanent residency in countries where wages are better) are able to supplement the cost of maintaining their families through remittances, then what they are doing is not only helping their families survive: they are also ensuring the maintenance of their families at no additional cost to their employer or the state. For the recipient, of course, these remittances are a lifeline since they have no other means of surviving - especially in the lean times.

But is this development? Surely not. Surely it is subsistence, barely enabling people keeping their head above the water. It is 'development- only if we were to consider that development is not about social progress but about providing charitable support to the poor. Remittances are essentially an individualised social support mechanism without which there would be even greater misery.

Now supposing the same funds were used, instead, to support people to organise for better living wages, for better social services, for better housing and healthcare. Such a use of remittances would certainly contribute to social progress, to real development. So long as remittances play only the role of providing charitable support, they perform the role of shoring up an existing unjust system that keeps people poor. Worse still, there is a potential for disabling Africa's people from becoming organised actors who can determine their own future.

As Paulo Freire (1970) put it: " . . . charity constrains the fearful and subdued, the 'rejects of life-, to extend their trembling hands. True generosity lies in striving so these hands - whether of individuals or entire people - need be extended less and less in supplication, so that more and more they become human hands which work and, working, transform the world." Do remittances really help human hands transform the world?

But even if we were to accept that remittances may be legitimately considered as 'development funding- or as part of the infrastructure of development, then surely movements of funds in the opposite direction - from South to the North - should also be taken into account. It is surprising this aspect is systematically ignored by those obsessed with promoting the apparent benefits of remittances. When Africans send funds from the North to the South, this is called remittances. When multinationals remit profits to the North, or when countries in the South are made to remit a part of their gross domestic product to the banks in the North, somehow this is not considered as (negative) remittances. If movements of funds in one direction are to be taken into account in the process of development, then surely movements in the opposite direction also need to be taken into account.

Surely, what is sauce for the goose is good for the gander?

Third World repayments of $340 billion each year flow northwards to service a $2.2 trillion debt, more than five times the G8's development aid budget (Dembele 2006). At more than $10 billion/year since the early 1970s, collectively, the citizens of Nigeria, the Ivory Coast, the DRC, Angola and Zambia have been especially vulnerable to the overseas drain of their national wealth. As Brussels-based debt campaigner Eric Toussaint concludes, 'Since 1980, over 50 Marshall Plans worth over $4.6 trillion have been sent by the peoples of the Periphery to their creditors in the Centre' (quoted by Patrick Bond 2005).

Research by the Tax Justice Network estimates that a staggering $11.5 trillion has been siphoned 'offshore' by wealthy individuals, held in tax havens where they are shielded from contributing to government revenues. "Around 30% of sub-Saharan Africa's GDP is moved offshore", writes John Christensen (2006) of TJN, "As several studies have suggested, this rate of capital flight means that Africa - a continent we are continually told is irrevocably indebted - may actually be a net creditor to the rest of the world."

In comparison, then, to the the wealth that is sucked out of Africa - which far exceeds the total amount of aid that comes from the North into Africa - the net value of 'remittances' (movements in both direction) is negative.

There are grounds, therefore, for questioning the overall value of remittances in development. That is not to say that sending money home doesn't help our families survive. Remittances remain essential for enabling the impoverished to cope with an unjust world that keeps them poor. But as a vehicle for social development and progress? I have my doubts.

* Firoze Manji is co-editor of Pambazuka News and executive director of Fahamu.

References

Patrick Bond (2005): Dispossessing Africa's Wealth. Pambazuka News - http://www.pambazuka.org/en/category/features/30074
John Christensen (2006). Tax Justice for Africa: A new development struggle - http://www.pambazuka.org/en/category/comment/31903
Demba Moussa Dembele (2005), Aid dependence and the MDGs, Pambazuka News - http://www.pambazuka.org/en/category/features/29376
Paulo Freire (1970). Pedagogy of the Oppressed.
Sanjeev Gupta, Catherine Pattillo, and Smita Wagh (2007): Making Remittances Work for Africa. Finance and Development 44 (2) 2007 - http://www.imf.org/external/pubs/ft/fandd/2007/06/gupta.htm

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