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Topic: Africa
Number of pages / Number of words: 7 / 1857
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Until the XXI century, it had been believed that Africa was a hopeless continent, the territory of which was isolated from the international system and situated on the edge of the world. Research about Africa was focused on the question of why the continent was in permanent crisis and Africans were living in the conditions of conflict, poverty, suffering from diseases, and crime. Moreover, a serious problem was the humanitarian disaster in Africa, as well as the fact that no significant political processes occurred. However, due to high rates of economic growth, attitudes toward Africa in recent years have changed dramatically (Adams & Page, 2005). Now it is considered a rising star. It is believed that the hour of Africa has come. Now the continent is experiencing the stage of recovery and economic development that has put an end to the era of darkness and started the time of Africa’s prosperity. In this regard, the quality of governance is growing all over Africa. At a time when private capital flows are very unevenly distributed, and the amount of material support for the poor countries is very small, it is becoming more important for African countries to acquire such a source of revenue as remittances of international migrants. Money transfers are important not only because they help the poorest inhabitants of the planet survive. Thus, influencing both countries exporters and importers of the labor force, migration and remittances serve as a valuable resource for the improvement of the social and economic situation within the continent.

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Migration Tradition in Africa

During the whole history of the African continent, migration was not less common than it is now. People have long been known to move on political, economic, and religious grounds, as well as for safety reasons in response to demographic factors. However, much later models and trends in migration motivation were based on colonial experience, which had a huge impact on the economic, social, cultural, political, and demographic development of countries. Movement occurred primarily for financial reasons. People leave their homes in search of better material life, or when they cannot satisfy their aspirations within the existing social conditions in their native areas (Capps, McCabe, & Fix, 2012). Of course, this does not apply to those who have to leave their homes because of some natural disaster, drought or famine, war or political repressions. Deciding where and when to move, migrants take into consideration their own experience or the information obtained from relatives who have migrated. African migrants have substantial advantages owing to an extensive network of friends and family in the cities. It facilitates the process of migration and resettlement in a new place. The wide kinship supports the new arrivals of migrants and protects them from the strain and stress of urban life. However, the decision to migrate from Africa is always taken by the entire family, not by one independent person (Azam & Gubert, 2006). Migrants are also trying not to break ties with relatives. Sometimes, they periodically visit them and transfer money to the relatives who stayed behind. In most African countries, job opportunities are presented on plantations, in commerce and transport, where mostly the male workforce is needed. As a result, men have a tendency to migrate by themselves, leaving their wives and families at home, at least in the beginning. However, such gender differentiation in the migration population ensures the maintenance of family ties.

Impact of Migration and Remittances

Countries exporters and importers of the labor force have certain benefits from such a phenomenon. These benefits largely influence the way the remittances donated by migrants are used. Countries importers of the labor force are getting the following advantages. First, the import of human resources accelerates economic growth: the additional demand for goods and services created by immigrants stimulates the growth of production and cause additional employment. Second, there is an increase in the competitiveness of goods produced by the country due to the reduction of production costs that are associated with the lower price of foreign labor and the ability to inhibit the growth of wages among the local workers due to the increased competition in the labor market (Ratha et al., 2011). Third, there are benefits from taxes, the amount of which depends on the qualification and age structure of the immigrant population. Highly qualified specialists that already speak the language of the host country become large taxpayers. Fourth, foreign workers are often seen as a particular buffer in the situation of unemployment growth: they can be fired first. Fifth, immigrants improve the demographic situation in developed countries that suffer from an aging population. Among the negative consequences generated by immigration, there are social strife, conflicts, aggravation of interethnic problems, crime, etc. Changes in the density of population and social strife are often used by governments as arguments in favor of implementing a restrictive policy on immigration.

Countries exporting labor also receive certain benefits. The first is the reduction of unemployment and, as a consequence, the decrease of social tension in the country. There is free training in new job skills for the citizens of labor exporting countries, familiarization with advanced technology, and work organization. Generation of the income due to remittances of emigrants. On the other hand, these countries feel the consequences of labor export in the form of reduced tax revenues due to the decrease in the number of taxpayers. Permanent migration means that there is an outflow of qualified, enthusiastic employees, which leads to a slowdown in the growth of the scientific, technical, and cultural level of the country.

Revenues of the labor-exporting country are not limited to only transfers of emigrants from abroad, although they are a significant part of them. Among other factors increasing the total GNP and favorably affecting the balance of payments are the taxes that are imposed on the firms that employ migrants. Direct and portfolio investments made by migrants in the economy of the home country also play a crucial role. There is an important reduction in education and health costs covered by migrants at the expense of the host countries. According to some estimates, coming back home, migrants bring with them as much cash as they were transferring through banks.

Remittances to the countries of origin increase the volume of GDP in the country of emigration and decrease it in the country of immigration. They increase the funds of households that contribute to the growth of consumption and working capital in migrant families; they have a multiplier effect by increasing remittance. However, the relationship between remittances and poverty has a bipolar nature. After all, it is poverty and lack of economic opportunities that stimulate migration in the first place, and, as a result, the inflow of remittances begins (Mutume, 2006). At home, the whole community uses these money transfers for its needs, and this process can be viewed as a "return" of the joint investment in the migration of their fellow villager. Poorer households that have family members away from home would more likely receive a stable income from abroad, which also confirms the relationship between high levels of poverty and the volume of funds sent. Furthermore, it was found that even when accounting for the reverse impact of transfers on poverty, in a model where their parameters are determined simultaneously and endogenously, the poverty-reducing effect is maintained.

A significant portion of remittances is used by households for consumption — buying food, clothing, durable goods, but a certain part is spent on education and health, which should be perceived as an investment in human capital. Part of the money sent to families from abroad or accumulated and brought by migrants themselves is invested into small businesses, mostly in building, trade, hotel, and restaurant business (Klasen & Woolard, 2009). In other words, remittances are a source of savings and investments, which in turn stimulate the local and national economy of labor-exporting countries. In a number of African households with low incomes, remittances are used as start-up capital when they need to open a small business and cannot use services of the formal financial sector. There is the inaccessibility of formal banking facilities for the majority of the population in sub-Saharan Africa, which hinders the development of the financial market and prevents the expansion of small and medium-sized businesses. Remittances increase the potential financing for their beneficiaries and the migrants themselves. For migrants and their families, access to bank accounts not only creates more secure channels for remittances themselves but also allows saving more money.

Need for Policy

As a result of long colonization processes in Africa and because of the instability of the political situation, the attention of the global community was drawn to this region, and the needed resources were provided for overcoming poverty, famine, and violence. They should be directed toward increasing the disclosure of development that is embedded in such a large-scale and stable source of capital as money transfers of migrants. Moreover, it is crucial to create an effective policy that would manage and control remittance flows. Such a system can be made if the concept of remittance itself is fully understood and analyzed (Gupta, Pattillo, & Wagh, 2009). If the factors influencing the volume and frequency of money transfers are known, then it is possible to use that knowledge to increase the total size of transfers that the migrants send home. Another important development that needs to be made is the formation of an efficient accounting tool that would control money flows and facilitate further analysis. Without the reliable accounting of remittances, the authorities are unable to objectively assess the effectiveness of interventions to attract remittances into the formal financial sector and the ways the resources provided by migrants are used in the economy.

In conclusion, it should be mentioned that remittances of African migrants to their homeland have grown steadily in the last 10-15 years. They were one of the most important sources of foreign exchange earnings and made a deep but ambiguous impact on the socio-economic development of the continent. The integration of households receiving remittances into the formal financial sector is only the first step on the way to their most effective use. Therefore, the main task of the economic institutions in the home countries is to turn the savings of the households into investment in the national economy. However, despite the significant differences between the emigration regions of Africa, the potential of the huge capital inflows has almost never been fully used to the extent to which it was possible. These results were the same almost everywhere on the continent. However, it is not due to the lack of entrepreneurial skills among migrants and their families but is rather the consequence of a number of structural barriers that exist on the local, national, and international levels. That is why the remittances from migrants can be used only as a source of material help to the people of Africa. The main issue is still in the understanding of the necessity of these incomes by the governments of the African countries. At the same time, the governments of the migrants’ home countries have made significant efforts to encourage national banks to actively participate in the business of money transfer.

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