AS Zimbabwe stumbles on without ba
lance-of-payments support, the government and the central bank are banking on Zimbabweans in the diaspora to bring in hard currency to supplement flagging export earnings.
A Reserve Bank of Zimbabwe team currently on an international drive to woo the exiles to remit their forex back home has been up-beat about the prospects of the initiative which has helped other countries to save their economies from collapse.
RBZ governor Gideon Gono believes exported labour can be the tonic needed for the country’s economic revival.
“The country’s foreign currency reserves would improve significantly if more people went to work abroad,” Gono was recently quoted as saying. “The exportation of labour has helped many countries in earning foreign currency as citizens use official channels to send money back to their families at home. I encourage Zimbabweans to seek jobs outside the country,” he said.
The benefits Zimbabwe has derived from the diaspora have generally been in the form of individual remittances and concomitant spin-offs into the informal sector. In other countries communities in the diaspora represent a significant source of investment capital.
For example, financial transfers from Lebanese expatriates to their country average about US$1,6 billion a year, making Lebanon the eighth largest recipient of workers’ remittances in the world relative to the size of its gross domestic product. Remittances from Lebanese expatriates have become a pillar of the national economy, growing at a faster rate than any other source of foreign exchange revenues such as exports, foreign direct investments or tourism receipts.
Countries such as India, Ghana and Egypt have also tapped into such financial transfers.
In 2000 Ghanaians in the diaspora, whose remittances contribute about US$400 million to the national economy a year, constituted the country’s fourth highest foreign exchange source.
Remittances by overseas Indian IT professionals, doctors and students making a beeline to Western and Gulf countries in pursuit of career advancement, have helped in the sustenance of their communities in the Punjab, Gujarat, Kerala, Tamil Nadu and Andhra Pradesh. In 2000 the 20-million strong Indian diaspora remitted US$160 billion back home – that is an average US$8 000 per person.
If each of the estimated 3,4 million Zimbabweans abroad were to bring in US$8 000 a year, there would be no need for balance-of-payments support from multilateral lenders such as the International Monetary Fund or the World Bank. But Zimbabweans abroad cannot manage that since most of them eke out a living as general hands or other low paid jobs.
RBZ team leader Herbert Nkala in London last week said Zimbabwe could earn between US$600 million and US$1 billion from the diaspora this year alone. That is on average US$295 per Zimbabwean per annum. Evidently exported labour cannot at the moment substitute for other exports as the chief forex earner.
Government policies over the past five years have seen a marked decline in export receipts from US$1,9 billion in 1999 to US$1,5 billion last year due to the decimation of the agricultural sector and the near collapse of downstream manufacturing industries which rely on farming. Zimbabwe’s annual foreign currency requirements total US$2,4 billion. Tourism arrivals and earnings from mining have also taken a plunge largely in response to imprudent macro-economic policies and government’s disregard for the rule of law.
The official excuse for the demise of the country’s industrial base has been that the country has been losing foreign currency through the parallel market. There is therefore the belief that the economy can be resurrected if all the foreign currency remittances are channelled through official lines, hence the birth of the Homelink concept.
In May the Homelink scheme brought into the country US$30 million, which is enough to meet the country’s fuel import needs for a month. The foreign currency auction system is currently trading about US$76 million a month.
But analysts have cautioned that the optimism should be watered down with the reality that there are adverse factors, which will militate against the success of the Homelink concept.
They say the biggest threat to the concept will always be how those in the diaspora view the country and its leadership. The majority of Zimbabweans abroad left because they saw no future for themselves under the current order. Many fled the repression of President Robert Mugabe’s regime. Some had to sell their key assets like houses and cars to get money for airfares and sustenance.
Analysts have said such people will send money to support relatives left back home but will not invest in any key sector of the economy as along as they do not agree with Mugabe’s policies.
Zimbabweans who left because they had had enough of Mugabe’s regime are willing to take up any job — mostly menial work — whose income is barely enough to make them survive. They cannot therefore remit much back to Zimbabwe.
An informal survey by banks last month said Zimbabweans abroad were prepared to channel more funds into the country if Mugabe was to leave office. Mugabe also stands accused of disenfranchising millions of Zimbabweans in the diaspora in the last presidential election.
Anti-Mugabe demonstrations have greeted the teams currently selling the Homelink concept in the United States and in the United Kingdom as Mugabe’s ghost has shadowed them at every turn. The air has been poisoned for Gono’s emissaries who are confronted with political questions such as: “Why should we fund the cleaning up of the mess which forced us to leave home?”
But economic commentator and chairman of the RBZ taskforce set up to harness foreign currency from locals in the diaspora, Eric Bloch, said political considerations would have a limited impact on the overall success of Homelink.
“The ghost (Mugabe’s) is a very pale one,” said Bloch. “There has been a very, very good response. There were demonstrations here and there but there were more people in support of the Homelink than those against.”
He however said forex remittances from the diaspora could never substitute for earnings from exports.
“It can only complement current exports. Even tobacco exports at current levels are much larger. There are also inflows from mining, manufacturing and a little from tourism,” he said.
RBZ teams on roadshows in the United Kingdom and the United States have been imploring Zimbabweans abroad to invest in key sectors of the economy such as agriculture, manufacturing and the money market. Economic commentators have said there will be no takers for this offer as long as there is no internal political settlement on the country. The country’s two main political parties, Zanu PF and the MDC, have failed to come to the negotiating table over the past 18 months and they are most unlikely to do so as they have now trained their attention on the general election next year.
In the absence of dialogue, political tension has remained high, which together with the air of uncertainty wrought largely by the flawed agrarian reform process, has scared away new investors and forced industrialists to close shop or scale down. Inflation, which is slowly creeping south but still on the high side of 448%, and astronomical interest rates, won’t attract meaningful investment.
While Gono has loomed large and is regarded with Messianic fervour in official circles, his policies — including the quest to draw funds from the diaspora — face myriad hurdles. Zimbabweans in the diaspora need a sweetener of a political nature to play ball. There are many who are bitter that they were forced to leave home and there are no prospects of the situation improving any time soon, especially ahead of an election next March.
The view of many economists is that confidence needs to be generated at home first, then word will spread into the diaspora. That’s not happening yet.