Remittances to Sub‐Saharan Africa are expected to decrease significantly by around 8.8 percent between 2019 and 2020, from respectively $48 billion to $44 billion due to the COVID‐19 pandemic, restrictions in movement, and their devastating impacts on the global economy.
This is according to the recently released World Bank Migration and Development Brief 33 -October 2020 “Phase II: COVID-19 Crisis Through a Migration Lens”.
This declining trend the report says is expected to continue in 2021, when remittances are projected to decrease by around 5.8 percent to reach $41 billion. According to the World Bank Migration and Remittances Team, the decline in remittance flows is attributed to a combination of factors, all driven by the COVID‐19 crisis in major destination countries including EU countries, the United States, China, and GCC countries.
“Sub‐Saharan migrants are disproportionately affected in host countries as many are engaged in precarious working conditions and informal jobs, with high vulnerability to contagion and loss of employment.”
In addition, these migrants they wrote are often excluded from social protection systems, health care, and government stimulus measures. As the COVID‐19 pandemic affects both destination and origin countries of Sub‐Saharan migrants, the decline in remittances in origin countries is expected to further lead to a decline in foreign exchange revenue, an increase in food insecurity and poverty, and a decline in the overall GDP, which are jeopardizing the hard‐won development gains of the past few decades.
On remittance costs, the team analysed that sending $200 remittances to Sub‐Saharan Africa costed on average 8.5 percent in 2020 Quarter 3. This they say is a modest decrease compared with the average cost of 9 percent a year before.
They however noted that Sub‐Saharan Africa is the costliest region to send remittances. The relatively less expensive corridors are in West Africa (respectively Cote d’Ivoire to Mali and Senegal to Mali) while the most expensive corridors are in the southern African region: Uganda to Tanzania, South Africa to Botswana, and South Africa to Angola (latest data available only for 2020Q2).
However, with digital services, Sub‐Saharan Africa is doing relatively better than the MENA region with an average cost of less than 7 percent compared to over 7.5 percent respectively. The COVID‐19 pandemic has made it more difficult for migrants to remit money to Sub‐Saharan Africa using traditional or informal channels as most payments are still in cash and some MTOs are closed due to the crisis.
The promotion of digital technology, which is cheaper than nondigital services, combined with a regulatory environment promoting competition in the remittances market, and relaxing money‐laundering regulations are essential for Sub‐Saharan countries to achieve the SDG target of 3 percent by 2030.
By Zainab Iyamide Joaque