The past year has been challenging and turbulent for many frontier markets in Africa. In 2022, African economies met headwinds of inflation, the aftermath of the COVID-19 pandemic, and sovereign debt challenges. This led to a decrease in demand for African goods and services, as well as reduced investment in the continent. In addition, many African countries rely heavily on exports of raw materials and commodities, which are subject to global price fluctuations, making their economies vulnerable to external shocks. Overall, while Africa has made significant progress in recent years, it still faces significant challenges in terms of trade and economy. Due to all of these challenges, the estimated average real GDP growth rate fell from 4.8 percent in 2021 to 3.8 percent in 2022.
Despite this, a large number of Africans living abroad continue to support, provide technical assistance, and transfer money to their home nations for trade and development. Given this reality, the African diaspora ought to be leading the drive for the continent’s economic development. In addition, African countries should establish mechanisms to engage their diasporas as a force multiplier for sustainable development. In this piece, we look at four areas where the African diaspora could support the continent’s sustainable development: trade, especially under the African Continental Free Trade Area; innovative research and development; investment; and peace and security.
African trade and AfCFTA
The new African Continental Free Trade Area (AfCFTA) has ushered in the potential to connect a vast continent through a free trade zone. Furthermore, many believe that the AfCFTA will be a crucial step in the growth of commerce and employment prospects in Africa. The AfCFTA aims to create a single market for goods and services across the continent, allowing for greater trade and investment flows between African countries. In reality, African consumers, entrepreneurs, and enterprises would be free to trade and conduct business among all 54 countries duty-free, leading to increased economic growth and job creation across the continent.
The agreement is also expected to boost intra-African trade, which has historically been low due to tariffs, non-tariff barriers, and lack of infrastructure. By removing these barriers and creating a more integrated market, the AfCFTA could help African countries to become more competitive and to diversify their exports. The agreement is also expected to promote industrialization in Africa, as it would allow countries to take advantage of economies of scale and to develop new industries. More jobs would be created as a result, and youth would gain new skills all throughout the continent. For the AfCFTA to be successful, it is essential to ensure visa-free access and frictionless travel, logistics, and supply chains. Several diasporans with international expertise can help with this; it will be essential to ensure that AfcFTA achieves the desired goals of boosting trade and employment by offering advice and technical support on logistics and supply chains.
Supporting 2.5 billion people by 2050 through innovative R&D
African countries must build innovative research and development (R&D) capabilities in order to become self-sufficient by 2050, when the continent's population will approach 2.5 billion people. To support the 2.5 billion future dwellers, it will be essential for African countries to produce new crop varieties for food and nutrition, ensure food security through cold storage and warehousing, and develop African solutions in medicine and health. Several Africans living abroad have supported efforts to secure food on the continent by moving back to the continent and offering technical assistance and investment. One example is Jerry Parkes, the managing director of Injaro Investments, a private equity company that focuses on agriculture and other rapidly expanding industries.
Diaspora-led investments: venture investing, scaling entrepreneurship, and emerging technologies
Despite a global downturn, African venture financing (debt and equity) grew by over 8 percent to US$6.5 billion in 2022. Many new venture funds are managed and run by African diaspora professionals, working between high-income countries and African capitals to make business deals. The diaspora starting businesses with venture capital will spur job growth, increase disposable income, boost GDPs, and bolster tax revenue for social assistance and the poorer members of society. As a result, new businesses in fintech, agtech, media, health, and medical sectors are being developed using cutting-edge emerging technologies like artificial intelligence (AI).
To meet and achieve the SDGs, African countries must invest in early-child development, healthcare, and create meaningful jobs for young adults. Some people who have returned from the diaspora are creating jobs through business and entrepreneurship, like the Ghanaian Fred Swaniker. who founded The Room, a talent firm that connects, vets, and trains freelance software engineers, cloud developers, financial analysts, and administrative talent.
The diaspora can play a significant role in achieving the SDGs, harnessing AfCTA, bolstering African economies, and helping African countries weather the shocks they encounter because of uncertainties and global events through impact and social investment. While the African diaspora is seen as an important stakeholder in development, members of the diaspora are seldom seen as impact and social investors. The global impact investing market is $1.164 trillion; imagine how that number could grow if investors from the African diaspora were considered significant contributors. This impact capital has the potential to create livelihoods, drive economic advancement, and tackle challenges that are underfunded by development and philanthropic dollars. In order to actualize diaspora led investment on the African continent, the impact investing market must acknowledge, trust, and collaborate with those investors to change the perceptions of risk and value in investing in emerging markets.
Securing Africa’s future: fragility and security
From coups in Burkina Faso and Guinea, to conflicts in Mali, the Democratic Republic of Congo (DRC), and Somalia, the year of 2022 ushered in instability and stagnant growth in these countries and their neighbors. While the African continent has been relatively stable compared to the 1990s, it still has a way to go to support peace and security. The diaspora should play a role in sustaining peace, and very well can by importing expertise, know-how, and resources from their host countries. For instance, a diasporan with experience in the military and peacekeeping could promote and advance widely recognized democratic values to reduce instability and conflict.
Ongoing diaspora engagement
The African continent will need to develop African solutions for African challenges and engage its diaspora professionals more than ever as its population increases from 1.4 billion to 2.5 billion by 2050. Ireland, Israel, and India have all successfully utilized their professional diasporas as a force multiplier. The world now knows that India is the number one producer of vaccines. How did India do this? The answer lies in the India diaspora—the Indian nationals who brought back their skills, know-how, finances, and gumption to take risks in life sciences, industrials, technology, chemicals, and telecoms to make India a global economic power. The divide between the rich and poor in India remains large, but India’s middle class has grown in the last couple of decades. If India can engage its diaspora professionals to great effect, why can’t African countries do similar?
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
Image credit for social media/web: Adobe Stock