A group of researchers from the UK and Africa for the first time quantified flow of resources in and out of the continent, which shows that contrary to conventional wisdom Africa actually sends out more money than it receives in aid or even investment.
The report released earlier two years ago by Health Poverty Action, an NGO that seeks to eradicate poverty around the world shows outflows from Africa are $58b more than the inflows into our economies.
"The inflows they measured included official aid, foreign direct investment (FDI), inward remittances (kyeyo money) and private grans which amounted to $133.7b in 2014. In the other direction Africa sends out $191.9b in form of debt payments, multinational company profits, illicit financial flows, outward remittances and brain drain....
Admittedly most of these outflows are legitimate even necessary outflows but the net benefit still accrues to the developed world. For instance when we bump up our international reserves, these are banked in foreign banks which on lend them to their clients and derive a greater benefit than we do.
The same can be said for debt payments or repatriation of multinational profits, which are legitimate costs of interacting in a globalised environment and may even increase the capacity within our economies.
However, there are outflows like illicit financial flows – tax evasion and organised crime revenues, brain drain and illegal logging and fishing are as a result of criminal activity. Brain drain for instance the fact that our most talented feel a need to go abroad to better themselves is an indictment on our governments and this negligence borders on criminal.
That being said these figures are not an invitation to a pity party but an opportunity to open eyes and realise how much potential the continent and our respective countries have.
"For ages the narrative has been “Bambi, these poor Africans! They are hopeless they can’t pull themselves out of poverty. They need help.”
Research like this shows it’s obviously not true and our “benefactors” know it, and have known it for a long time....
The question for us as Africans is how do we retain a larger proportion of these funds for our own benefit?
First off we need to learn how to aggregate the resources we have to take advantage of greater economies of scale this starts from our individual households to our countries.
In Kenya where the savings and Credit cooperatives (SACCOS) are stronger by the end of 2014 their deposits had peaked at about $4.5b while their total bank industry deposits stand at about $20.7b – or about the total GDP of Uganda.
These funds aggregated in the financial sector rather than scattered under our pillows and mattresses or in our socks or bras can have a transformative effect on economies.
The growth of SACCOs is useful because they mop up resources where the high street banks cannot go.
Of course all of our major banks but one, are foreign owned entities so we might still be playing into that outflow narrative, compelling them to offload shares onto the stock exchange could tilt that balance more towards retaining funds locally.
The industry has grown sufficiently to the point that if some banks threaten to close shop rather than list on the exchange we can show them the door.
This important because our capital markets need to grow as they are an important other avenue of mobilising resources locally.
On a national level the creation of regional economic blocks like the East African Community (EAC) and The Common Market of East and South Africa (COMESA) as stepping blocks to a continent wide economic block are a step in the right direction.
Intraregional trade within the EAC grew threefold to about $6b in 2014 from $2b in 2004 with the coming into effect of the common market and then custom union and several other initiatives to ease cross border trade.
This accounts for about 23 percent of the region’s trade with the world, which is still low considering that intraregional trade in the European Union(EU) and North Atlantic Free Trade Area (NAFTA) is about 60 and 48 percent respectively.
"Our colonial legacy – artificial boundaries and main trade routes leading to the sea ports, means we have been wired to send stuff out and then reimport it, but by opening up our borders and reconfiguring our transport networks this can change....
The point is, within the limits of our political confines, there are things that can be done internally to not only mobilise our resources but unlock other resources to keep more of our money here, but also to grow the wealth for everyone.
It seems all it would take would be a reconfiguring of our elites thinking, but who are they working for?