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African Diaspora Investment Workshop Transcorp Hilton, Abuja, Nigeria 16-17 October 2008 PowerPoint PPT Presentation


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Policy recommendations and initiatives to enabling diaspora inflows to the region. ,. African Diaspora Investment Workshop Transcorp Hilton, Abuja, Nigeria 16-17 October 2008. Agenda. Introduction: the challenge Policy options and intiatives Origin Country Level Host Country Level

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African Diaspora Investment Workshop Transcorp Hilton, Abuja, Nigeria 16-17 October 2008

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Policy recommendations and initiatives to enabling diaspora inflows to the region

,

African Diaspora Investment WorkshopTranscorp Hilton, Abuja, Nigeria16-17 October 2008


Agenda

  • Introduction: the challenge

  • Policy options and intiatives

    • Origin Country Level

    • Host Country Level

    • Multilateral Institutions Level

    • Diaspora Level

  • African Diaspora Investment Facility

    • Information and Technical Assistance

    • DiaFund – Diaspora Investment Fund of Funds


Diaspora inflow to the region:The Challenge

Increase % of Remittances channelled to

Productive Investment

Increase

Volume of Remittances

DIASPORA INFLOW

Increase

Volume of Investment

(Community & Private)

Action needed at the Origin and Host Country levels as well as the level of Multilateral Institutions and the Diaspora community


Origin Country Level:Legal and Regulatory Framework

  • Dual Citizenship

    • Creates emotional bond

    • Facilitates investment

  • Investment Regulation

    • Enact legislation that would lead to more competition in the remittances transfer market

    • Establish the legal basis that would allow for the creation of innovative investment vehicles

    • Avoid the erection of artificial barriers to diaspora investment (diaspora considered as foreigner - investment)

    • Provide exceptions to the application of certain laws (ex: bankruptcy regime)


Origin Country Level:Initiatives/Mechanisms

  • Increase volume of official inflow of remittances & channel to productive sector

    • Framework allowing for introduction of innovative financial instruments by domestic financial institutions to capture remittances

      • Repatriable foreign exchange accounts with premium interest rates (and maybe premium FX rates)

      • diaspora bonds (debt instrument issued to raise financing from the diaspora - long term in nature)

    • Establish programs to improve recipient financial literacy

      • Information on financial instruments – financial services documentation distributed at the same time

    • Remittances securitization

      • Borrow on international capital market against future remittances

      • Can potentially raise US$ 17 billion


Origin Country Level:Initiatives/Mechanisms

  • Facilitate diaspora-led investments

    • Establishing specific tax/sectoral/export/tariff incentives

      • Preferential tax rates (5yr corporate tax amnesty for startups)

      • Concessional rates of duty on imported capital goods

      • Creation of a one-window clearance system for diaspora investments.

      • Preferential access to capital goods and raw materials import

    • Provide business advisory services

      • information on available investment opportunities, saving schemes, financial support, business start-up procedures

    • Use MFIs to directly support diaspora-led investments

      • Allow such non-bank financial institutions to play a role in the remittances market

      • Instrumental given their reach in rural areas


Host Country Level:Strategic Links

  • Engage with diaspora groups (HTAs)

    • Informal relationships and social capital should be preserved and supported

    • Co-development initiatives encouraged

    • Strengthen formally constituted institutions

  • Work with home countries on technical, regulatory and oversight matters to ensure transparency in the remittances market.

  • Facilitate increased access to the financial system by migrants


Host Country Level:Initiatives/Mechanisms

  • Establish technical and financial assistance programs providing support to diaspora entrepreneurs (DMADE)

  • Involve the diaspora in economic missions to home countries

  • Make provisions for short term work placements


Multilateral Institutions:Policy issues

  • Role played by migrants should be recognised and reinforced

  • ADI should become an integral part of global, regional and national strategies for poverty reduction

  • Measures to encourage the transfer and investment of remittances should be combined with strategic policies that are conducive to good governance and economic growth

  • Work with SSA public authorities to address diaspora investment with more consistent strategies, policies and legislations including:

    • nationality, commercial and financial law, tax law, international family and family property relations, international legal cooperation and litigation


Multilateral Institutions:Initiatives/Mechanisms

  • Community sector investments

    • Linking up with and supporting diaspora group initiatives

    • Encourage diaspora groups to become involved in international-funded local development projects

  • Private Sector Investments

    • Initiate and support schemes designed to support diaspora-led private sector investments

    • Facilitate the involvement of diasporas in existing initiatives and financing program

    • Support SSA countries’ investment climate improvement efforts

    • support to initiatives designed to leveraging remittances for contribution to the home economies


Diaspora Community:Initiatives

  • Home country level

    • Engage with the authorities at local, national and regionl levels

    • Contribute to promoting good governance and in improving the enabling environment for private sector development

  • Host country level

    • Actively engage with host country business promotion institutions

    • Foster trading links with their origin countries.

    • Make contributions that will foster a positive image of Africa in host country.


The AFRICAN DIASPORA INVESTMENT FACILITY (ADIF)

Supporting diaspora-led investment


Diaspora and Investment in Africa: Rationale

  • Diaspora = Dispersal of pollen by bees

  • The diaspora is able to disperse

    • Intellectual: professional, technical, entrepreneurial skills and expertise, new ideas and new work ethics

    • Social: values and relationships – cultural renewal

    • Political: lobbying and advocacy

    • Financial: remittances

Investment = combination of all 4


Diaspora and Investment in Africa: :Typology

  • Cross-border investor networks

  • Mentoring/Venture capital networks

  • Outsourcing networks:

    • Diaspora business owners outsource some of their operations to firms in their origin countries.

    • Diaspora executives working for multinationals abroad influence investment decisions to outsource operations to firms in their origin countries.

  • Brain circulation networks: managerial and knowledge expertise

  • Fostering bilateral trade


ADIF:Goal and Objectives

  • Provide an integrated set of services to support diaspora-led investments

    • information and documentation

    • development of bankable project proposals, facilitating of access to finance

    • management and marketing in view of improving existing and green-field diaspora-initiated businesses

    • Information and Technical Assistance – ITA)

  • Make available funding facility that would benefit the diaspora entrepreneur (DiaFund)


ADIF:ITA - Information services

  • Compile, document and disseminate information about available investment opportunities, including potential joint venture partnerships with local and foreign investors

  • Provide information on legal, financial and other requirements for investing in target home countries.

  • Provide information on government policies and procedures as well as the facilities and incentives made available to diaspora investors

  • Provide remittances senders and receivers with information on financial products and services in a bid to leveraging remittances for capital and employment generating activities

  • Facilitate financial literacy education to both senders and recipients


ADIF:ITA - Technical Assistance Services

  • Advisory and training services - business plans that meet the requirements of financial institutions

  • Liaising with these institutions to secure funding for projects

  • Structuring of joint venture partnerships with local and/or foreign companies.

  • Assistance in obtaining the approval of government authorities of target countries

  • Seeking out potential investors, providing guidance on how to approach them, being active in setting up meetings and contacts


ADIF:ITA - Implementation partners

  • Centre for the development of Enterprise (CDE)

  • Technical center for agricultural and technical cooperation ACP-EU (CTA)

  • African Management Services Company (AMSCO)

  • International organization for Migration (IOM)

  • Development NGO’s such as GRET, ATOL and TECHDEV

  • Network of consultants: Coachinvest, “retired” Senior consultants


DiaFund:Rationale

  • Financial institutions in host countries are reluctant to provide the diaspora investor with loans for investment into an African country.

  • International finance institutions and local African banks are reluctant to provide the diaspora investor with financing as they are not resident in Africa.


DiaFund:Mission

  • Fund of funds that will invest in quality seed and venture capital funds within and outside the SSA region that commit to invest in promising diaspora-connected businesses in the region.

    • encourage the availability of a wide variety of venture capital in the region interested in funding diaspora-connected businesses

    • help diaspora-connected businesses in the region gain access to sources of capital

    • Help to build a significant, permanent source of capital available to serve the needs of diaspora businesses in the region.


DiaFund:Investors

  • Institutions

    • The European Investment Bank

    • The African Development Bank

    • The World Bank

  • Private companies and Foundations:

    • companies and foundations - Shell, Diageo, BP, MTN, Celtel, etc..

  • Diaspora community

    • Individual investors, HTAs

  • Host country governments

    • DFID, SIDA, SDC, FMO, BIO, NorFund, FINNFUND


DiaFund:Fund Size and Investment Strategy

  • US$ 200 million self-sustaining Fund

    • Equity investment - with a specified competitive rate of return and scheduled redemptions

  • Strategy

    • high-quality venture capital funds managed by investment managers who have made a commitment to equity investments in diaspora-connected businesses located within the region

    • National-based diaspora investment funds - Nigerian Diaspora Investment Fund (NDIF) and the proposed Kenya Diaspora Investment Fund (KDIF) and other national-based funds that would be established in the future

The DiaFund will not make direct investments in individual businesses


DiaFund:Management Structure

  • Managed by a professional fund manager and governed by a special unit of the ADIF – the ADIF DiaFund board

    • Overseeing and reporting on the fund’s activities.

    • approving its financing

    • approving all portfolio investments made by the fund,

    • managing the fund’s project staff and external investment advisor


Q&A Session


Diaspora and Investment in Africa: Rationale

  • Diaspora = Dispersal of pollen by bees

  • The diaspora is able to disperse

    • Intellectual: professional, technical, entrepreneurial skills and expertise, new ideas and new work ethics

    • Social: values and relationships – cultural renewal

    • Political: lobbying and advocacy

    • Financial: remittances

Investment = combination of all 4

The DiaFund will not make


Diaspora and Investment in Africa :ICT sector – Past Initiatives

  • Interested in and committed to contributing in this sector

  • Many examples of diaspora ICT executives who have successfully invested in the continent. (Celtel)

  • A number of initiatives in this field

    • Digital diaspora Network Africa

      • Afrishare

      • Social venture fund

    • Digital village in Ghana (KNUT, UPEN, HP) $1.2 million IT infrastructure backbone

    • BREAD (Building Resources for Africa’s Development)

    • Telemedecine (Laproscopic surgery) by AFAX members

    • ..and many more

Past intiatives


Diaspora and Investment in Africa :ICT sector – New requirements

  • Piloting ICT based business ventures

  • Contribute to building the capacity of African businesses in the use of ICT (Go beyond hardware ….. think of software & services)

  • Serve as catalyst for promoting Africa as an « ICT outsourcing » and investment destination

New requirements


African Axis initiatives in ICT sector: African Diaspora Investment Facility

Origin:

  • African diaspora Investment Forum – June 2006

  • Information and technical assistance

    • information and documentation

    • development of “bankable” project proposals

    • facilitating access to finance

    • management and marketing

ITA services

components

DiaFund

  • Diaspora Investment Fund (DiaFundTM)

    • €20 million investment fund

    • Investors: Development finance institutions, private companies and foundations, diaspora, EU governments

    • 2 key sectors: ICT and Agro-allied


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