Monday, January 21, 2013

How diaspora investment is proving to be a magic lamp across the Horn of Africa - Comment - www.theeastafrican.co.ke

How diaspora investment is proving to be a magic lamp across the Horn of Africa

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Diaspora investment is proving to be a magic lamp across the Horn of Africa. Illustration/JOHN NYAGAH
Diaspora investment is proving to be a magic lamp across the Horn of Africa. Illustration/JOHN NYAGAH  
By Abdirashid Duale

Posted  Saturday, January 19  2013 at  14:11
IN SUMMARY
  • Diaspora-led investment in new industries has been a central driver of economic growth.
  • Continuing to create greater opportunities for overseas investment, particularly through the diaspora, must remain high on the agenda if the current hopes for a more prosperous economic future are to be fully realised.
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According to the latest estimates from the African Development Bank (AfDB), the economies of the Horn of Africa struggled to rebound last year after the devastating drought of 2011.
Figures show that after a modest recovery from the worst of the global financial crisis in 2008/09, the famine and mass displacement that struck Somalia, Djibouti, Ethiopia and Kenya dragged East Africa’s overall growth rate down from 7 per cent in 2010 to just over 5 per cent in 2012.
By contrast, the growth rate for the continent overall rose between 2011/12 from 3.5 per cent to 4.5 per cent.
Definitions of the Horn of Africa vary — with Kenya, Sudan and South Sudan often included — but if we look specifically at the region encompassing Eritrea, Djibouti, Ethiopia and Somalia, the impact of the drought is even more striking.
Accurate data from this region is difficult to obtain, but drawing on AfDB estimates, the combined growth rate of those four countries fell from 10.1 per cent in 2011 to 6.8 per cent in 2012.
Encouragingly, the AfDB is predicting a recovery to around 7.1 per cent this year. Ethiopia, by far the region’s largest economy, accounts for most of these fluctuations.
These figures, of course, far exceed anything in the West, and given that agriculture still accounts for most of the economic activity in the Horn, it is remarkable that growth did not fall further, considering the huge loss of crops and livestock sustained as a result of the drought.
Healthy export growth in primary agriculture is essential and smaller economies should be expected to outpace their larger neighbours.
However, the real driver of development is investment — be it foreign or domestic. Only through sustained investment can an economy develop, grow and become more resilient to shocks like the 2011 drought.
According to Reuters, foreign direct investment in the African continent is worth approximately $43 billion — 3.6 per cent of Africa’s total GDP.
The rate of return on foreign investment is estimated to be higher in Africa than in any other developing region. Last year, the United Nations predicted an increase in FDI by 2014 to as much as $100 billion, or 8.4 per cent of the current overall GDP.
The role of the diaspora in this process is crucial. Many of those who left the Horn of Africa 20-30 years ago established careers for themselves in the Middle East, Europe and North America.
As their earnings grew, so did remittance flows back to the region. Diaspora-led investment in new industries has been a central driver of economic growth ever since.
This has been particularly true of the Somali territories, remittance inflows to which over the past two decades have fuelled a boom in the telecoms, energy and construction sectors.
As is the case all over East Africa, mobile phones are now widespread and are facilitating commercial activity from banking to livestock trading.

How diaspora investment is proving to be a magic lamp across the Horn of Africa - Comment - www.theeastafrican.co.ke

How diaspora investment is proving to be a magic lamp across the Horn of Africa

SHARE BOOKMARKPRINTRATING
Diaspora investment is proving to be a magic lamp across the Horn of Africa. Illustration/JOHN NYAGAH
Diaspora investment is proving to be a magic lamp across the Horn of Africa. Illustration/JOHN NYAGAH  
By Abdirashid Duale

Posted  Saturday, January 19  2013 at  14:11
IN SUMMARY
  • Diaspora-led investment in new industries has been a central driver of economic growth.
  • Continuing to create greater opportunities for overseas investment, particularly through the diaspora, must remain high on the agenda if the current hopes for a more prosperous economic future are to be fully realised.
SHARE THIS STORY

  
 
0
Share
According to the latest estimates from the African Development Bank (AfDB), the economies of the Horn of Africa struggled to rebound last year after the devastating drought of 2011.
Figures show that after a modest recovery from the worst of the global financial crisis in 2008/09, the famine and mass displacement that struck Somalia, Djibouti, Ethiopia and Kenya dragged East Africa’s overall growth rate down from 7 per cent in 2010 to just over 5 per cent in 2012.
By contrast, the growth rate for the continent overall rose between 2011/12 from 3.5 per cent to 4.5 per cent.
Definitions of the Horn of Africa vary — with Kenya, Sudan and South Sudan often included — but if we look specifically at the region encompassing Eritrea, Djibouti, Ethiopia and Somalia, the impact of the drought is even more striking.
Accurate data from this region is difficult to obtain, but drawing on AfDB estimates, the combined growth rate of those four countries fell from 10.1 per cent in 2011 to 6.8 per cent in 2012.
Encouragingly, the AfDB is predicting a recovery to around 7.1 per cent this year. Ethiopia, by far the region’s largest economy, accounts for most of these fluctuations.
These figures, of course, far exceed anything in the West, and given that agriculture still accounts for most of the economic activity in the Horn, it is remarkable that growth did not fall further, considering the huge loss of crops and livestock sustained as a result of the drought.
Healthy export growth in primary agriculture is essential and smaller economies should be expected to outpace their larger neighbours.
However, the real driver of development is investment — be it foreign or domestic. Only through sustained investment can an economy develop, grow and become more resilient to shocks like the 2011 drought.
According to Reuters, foreign direct investment in the African continent is worth approximately $43 billion — 3.6 per cent of Africa’s total GDP.
The rate of return on foreign investment is estimated to be higher in Africa than in any other developing region. Last year, the United Nations predicted an increase in FDI by 2014 to as much as $100 billion, or 8.4 per cent of the current overall GDP.
The role of the diaspora in this process is crucial. Many of those who left the Horn of Africa 20-30 years ago established careers for themselves in the Middle East, Europe and North America.
As their earnings grew, so did remittance flows back to the region. Diaspora-led investment in new industries has been a central driver of economic growth ever since.
This has been particularly true of the Somali territories, remittance inflows to which over the past two decades have fuelled a boom in the telecoms, energy and construction sectors.
As is the case all over East Africa, mobile phones are now widespread and are facilitating commercial activity from banking to livestock trading.

Saturday, January 12, 2013

Ethiopia’s Expanding Sectors Prone to Corruption

Ethiopia’s Expanding Sectors Prone to Corruption

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Martha van der Wolf