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Diaspora? What relevance do they have to a national budget?

Well at first glance the relevance might seem peripheral. By definition, diaspora would be those of Tanzanian origin who have moved out of the country and so their activities will not seem to affect the country’s revenue side (taxes will be paid elsewhere) nor expenditure side (as public goods and services consumed are those in their new countries of domicile). However, for African countries the contribution from diaspora is having increasingly significant macro-economic impacts.

“Diaspora remittances continue to support the economy” was the number one theme in PwC Nigeria’s “Nigeria Economic Outlook - Top 10 themes for 2019” publication issued in February 2019 – a ranking supported by some pretty startling statistics. In particular, in 2018 the Nigerian diaspora sent home an estimated USD 25 billion in remittances, representing 6.1% of Gross Domestic Product (GDP) and translating to 83% of the Federal Government budget in 2018 and 11 times the foreign direct investment (FDI) flows in the same period. These inflows were also seven times larger than the net official development assistance (foreign aid) received in 2017 of USD 3.36 billion.

Closer to home, we can see the significant impact of diaspora remittances in East Africa. The World Bank’s 2019 Migration and Development report highlighted that remittances to Kenya rose in 2018 to USD 2.72 billion (up from USD 1.96 billion in 2017) - equivalent to over three percent of Kenya’s GDP. Equally, remittances to Uganda rose to USD 1.24 billion in 2018 (up from USD 1.17 billion in 2017) – and equivalent to 4.5 percent of the country’s GDP. By contrast, Tanzania remittances were significantly smaller – USD 430 million, an increase of only USD 25m on the previous year and representing 0.8 percent of its GDP.

One could research the reasons for the differential. For historical reasons it may well be the case that Tanzania has a smaller diaspora – certainly decades ago as a university student in London my peers at my particular college included many Nigerians, Ghanaians and some Kenyans and Ugandans but I only came across one Tanzanian. But times have moved on, and the Tanzania diaspora will certainly be growing now. But is the diaspora dollar welcome at home?

Posing such a question may seem like an affront – but how else can one put it, if such diaspora who will have obtained foreign citizenship then as a consequence automatically lose a right to reside in Tanzania and invest in Tanzania real property as a consequence of the bar on dual citizenship. Importantly, such a restriction does not apply in Nigeria, Ghana, Kenya or Uganda.

The Greek term “diaspora” conveyed the sense of “scattering”, and indeed is the root of the word “dispersion”. For example, Greeks used it to refer to citizens of a dominant city-state who emigrated to a conquered land with the purpose of colonization, to assimilate the territory into the empire. The Bible also adopted the concept "thou shalt be a dispersion in all kingdoms of the earth" (Deuteronomy).

In all cases, the term diaspora carries a sense of displacement such that the population so described finds itself for whatever reason separated from its national territory, and usually its people have a hope, or at least a desire, to return to their homeland at some point, assuming it still exists. This emotional connection is important – because whilst for many diaspora it may be impractical to make a permanent return home, most invariably want to keep those ties strong and where possible invest back home. But, this is only possible if the policy environment for the diaspora is appropriately conducive; and where this is the case, the countries concerned are clearly reaping a handsome “diaspora dividend”.

By David Tarimo, Country Senior Partner – PwC Tanzania.

The views expressed do not necessarily represent those of PwC. For PwC updates on tax and other matters do follow @pwc_tz or visit our website