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Entrepreneurs of the Diaspora, Major Players in African Development

Publish date: 
19/11/2010

The African diaspora has been named the sixth region of Africa by the AU. Its active contribution to the EU-Africa Partnership is critical in terms of its special role on issues of migration, mobility and employment. Its participation in the continent’s development is also significant. Flows of funds from the diaspora to countries of origin sometimes exceed other forms of outside financing such as official development assistance and foreign direct investment (FDI).

Through knowledge and experience gained abroad, the diaspora also contributes to the continent's economic growth through business and job creation and by stimulating innovation.

Mobilising immigrants’ skills and helping them to get investment projects off the ground in their countries of origin—this is the mission of organisations such as AFFORD and IntEnt.

Gibril Faal is the president of AFFORD, the African Foundation for Development, which was started by Africans expats in the UK to broaden the diaspora’s contribution to African development. He is also the founder of RemitAid ™, a tax rebate programme for immigrants transferring funds to developing countries, and an immigrant advisory board member at the EC-UN Joint Migration and Development Initiative.

Jan Jongbloed is director of International Entrepreneurship—IntEnt, a Dutch nongovernmental organisation which for twelve years has helped expats in Holland start businesses in their countries of origin. The NGO is continually expanding its activities, which began in countries from which sizeable populations in the Netherlands emigrated (Ghana, Ethiopia, Morocco, Cape Verde, Sierra Leone and others).

Given your organisation's experience, what sort of relationship do you think entrepreneurs of the African diaspora currently hold with their countries of origin?

Gibril Faal: In the past, many diaspora entrepreneurs reported one central problem—when their businesses were not actually based in their country of origin, they were poorly managed by staff or even family, leading to financial losses and business collapse. However, in recent years, this problem is being addressed in many different ways. For example, cheaper mobile phone and internet costs enable entrepreneurs to keep in touch with their businesses on a daily basis. Furthermore, in many African countries, diaspora entrepreneurs can now open and manage online bank accounts, allowing them to monitor business bank deposits and balances on a daily basis. Cheaper air travel also enables these businesspeople to travel frequently to their countries of origin to oversee their businesses in person.

This trend of ‘distant-management’ through information and communication technologies (ICT) is likely to increase and become more sophisticated. We have also observed a new trend in which diaspora entrepreneurs are becoming more formal in the way they run their businesses, hiring local qualified staff with the required skills and professional background (rather than friends and family).

Jan Jongbloed: IntEnt trains and assists entrepreneurs primarily from the diaspora in starting businesses in their countries of origin. I believe that businesspeople can find great opportunities to invest in developing countries and bring major benefits for these countries in the process.

Are diaspora entrepreneurs more likely to invest in their country of origin or to start businesses in the destination countries?

Businesses are also vehicles through which the diaspora can make substantive contributions to innovation, production and development in their countries of origin. These businesses are practical means of facilitating voluntary return, brain-gain, and transnational citizenship.

Mr. Gibril Faal

G.F.: Diaspora entrepreneurs who run businesses in destination countries tend to set up businesses in countries of origin as well. However, a significant number of people who are not entrepreneurs in their destination countries use their experience and skills to start up new commercial ventures in their countries of origin. In each case, there are multiple motivating factors.

Setting up a business enables individuals of the diaspora to transfer—profitably—the knowledge, skills, experiences and opportunities gained in countries of destination. Businesses are also vehicles through which the diaspora can make substantive contributions to innovation, production and development in their countries of origin. Jobs are created in the local economy and the profits accumulated afford entrepreneurs a quality of life higher than they enjoy in their countries of destination.

Furthermore, these businesses are practical means of facilitating voluntary return, brain-gain, and transnational citizenship.

J.J.: Investors must first consider economic criteria. For a project to be feasible, it must have a solid economic rationale. A mechanism should be established for the (partial) investment of remittances in developing countries so that these funds are not seen solely as gifts.

In what ways can diaspora entrepreneurs contribute to job creation and economic growth in their countries of origin? What are the best examples to follow?

G.F.: Given the level of capital investment, diaspora businesses are generally of SME size, meaning that, unlike micro-businesses, 5-20 jobs are directly created. Furthermore, through local procurement and supply chains, these ventures enable other businesses to protect and create new jobs. Through the spirit of innovation and technology transfer, it is possible to create higher-quality jobs.

The business models that have maximum impact in local economies are those that use technology and knowledge to generate optimum efficiency whilst creating skilled and professional jobs and sustainable value chains. Both the diaspora and local entrepreneurs need to aspire to such models. 

Furthermore, unlike foreign direct investment (FDI), the inflow of diaspora investment through business start-up is not countered by the general expatriation of profits from the countries of origin. The profits of these businesses are more likely to remain in Africa—to be invested in banks or spent within the local economy.

It is worth noting that the pioneering mobile phone company Celtel (later becoming the Zain company), which led a socio-economic ‘revolution’ in Africa, was founded by a member of the African diaspora—Mo Ibrahim—who became a billionaire as a result, and indirectly helped transform millions of lives.

J.J.: IntEnt works with immigrants settled in Holland, but we are also beginning to expand our activities with the diaspora living in Germany, France and Great Britain. We help individuals start businesses or finance existing businesses in their countries of origin. We are of course interested in their well-being, but our first priority is contributing to economic development and to the local private sector.

To date, IntEnt has helped launch over 400 companies which have led to the creation of some 10,000 jobs in these countries.

A few examples: We helped a Ghanaian in Holland to open a laundromat in a suburb of Accra. His clients include individuals, hotels and companies and he is now opening two more laundromats. His success has spurred other immigrants to seek our assistance in starting businesses in Ghana.
With our help, a young Moroccan immigrant was able to revitalise a fish company in his country of origin. The Frigorifiques Bouzargtoun is now Morocco’s largest exporter of fresh and frozen fish!We supported an Ethiopian entrepreneur who is a long-time resident of the Netherlands in implementing his plan for a potato chip factory in Addis Ababa.

IntEnt’s target group is immigrants since they already have connections in their countries of origin, but other entrepreneurs are also welcomed into the programme. For example, we helped a Dutch woman open a ‘souk kitchen’ in Marrakech and she now offers classes on the local cuisine to tourists.

Apart from Morocco, Ghana, Ethiopia, we are also involved in Africa in Cape Verde and Sierra Leone, have just begun operations in Angola, and have projects in South Africa.

What are the main challenges diaspora entrepreneurs face in setting up businesses in their countries of origin?

J.J.: Finding start-up funding. In most developing countries, particularly in Africa, access to venture capital is practically nil. Microloans are used to start family microenterprises, but are not intended for SMEs, which require larger investments. As for banks, before lending money, they require collateral, that is, a pawn to guarantee repayment in the event that a borrower fails to meet his or her payment obligation. But most immigrants do not have collateral.

We must look to private investors and financial institutions to play a role in launching this type of SME.

In your opinion what state-led initiatives in countries of origin or destination will encourage and support immigrants in becoming entrepreneurs?

G.F.: Allowing dual citizenships for members of the diaspora; setting up credit unions through which entrepreneurs can access funds in countries of destination for the purpose of setting up businesses in countries of origin; simplifying company registration and regulation procedures in countries of origin; providing free or subsidised business support; providing SMEs with tax breaks linked to creation of long-term local jobs, and investing in clean technology.

Let entrepreneurs be entrepreneurs, preferably without government interference. We are convinced that society should be built from the bottom up and not the top down. If the Africa-EU Partnership can help bring practical solutions to facilitate the development of local economies, it’s on the right track.

Mr. Jan Jongbloed

J.J.: Let entrepreneurs be entrepreneurs, preferably without government interference. Even if the government provides investment capital, it should stay out of business operations. We are convinced that society should be built from the bottom up and not the top down. If there is enough economic activity to justify starting a business, it should be started, and the infrastructure will follow.

Do you see a particular role for the Africa-EU partnership in this process?

G.F.: The Africa-EU Partnership can play a specific role in helping bring about the types of policies and initiatives mentioned above. I recently made specific recommendations to this effect at the meeting of senior African and European officials on migration, mobility and employment held in Brussels on 15-16 September 2010 to discuss future actions for the Africa-EU Partnership.

J.J.: Entrepreneurship should not be institutionalised. We are not interested in speeches and platforms where people do nothing but talk. We have a very practical approach and measure our success by the number of businesses we've helped create. If the Africa-EU Partnership can help bring practical solutions to facilitate the development of local economies, it’s on the right track.

What would you recommend to someone from the diaspora who wishes to invest in his or her country of origin? How does your organisation support this kind of initiative?

G.F.:  In the EU, private entities like banks, as well as state-funded institutions, provide free or subsidised business support. Unfortunately, in most African countries, good-quality support for SMEs is virtually non-existent. This is a major gap and it’s why AFFORD has developed its Business Development Support programme, which we have been implementing through different projects in Sierra Leone and Ghana.

Our latest initiative (for which we are still seeking partners and funders) is the AFFORD Business Centre (ABC). This centre offers all the basic services needed by new and fast-growing SMEs. Clients of ABC have access to a combination of high-quality office space and ICT facilities, legal, financial, ICT and human resources services and a business training course designed around ethical standards.

AFFORD currently has several other projects including: RemitPlus (linking remittances to local investment and new business start-ups); Business Bomba (nation-wide SME business competitions); and REMADE (support of diaspora entrepreneurs in starting new businesses in Africa).

J.J.: If you want to start a business and are really motivated to become an entrepreneur in a developing country, please get in touch with IntEnt.