Monthly Archives: June 2015

Harnessing the remittance market for development in the Central African sub-region by Asanji Burnley Nguh, 19 June 2015

Remittances have been identified as the third pillar of development as their volume is second to Foreign Direct Investment and three times higher than Overseas Development Assistance and are steadier than both private debt and portfolio equity flows. Analytical studies have shown that remittances contribute to poverty reduction in home countries. Remittances are an essential source of external funds for developing countries.

Since 2001, the transfer of funds by Cameroonians abroad to their home country has considerably increased, as testified by the multiplicity of financial companies specialised in the transfer of funds in Cameroon. The multitude of these canals renders impossible the evaluation of the exact amount of these transfers. All the same, going by the 2009 World Bank report, we note an increase of the approximate amount transferred from abroad each year by Cameroonians for the period 2001 – 2008. These amounts, are estimated at US $ 11 million in 2000, to US $ 103 million in 2004 and US $ 167 million in 2008, representing 0,8% of the GDP in 2008.

According to a 2010 World Bank report, in the eight countries belonging to the Central African sub region, remittances do not exceed Official Development Aid (ODA) and are low compared to the other African sub regions. This is partly due to a lack of data reported for half of the countries the sub region. Out of the recorded remittances going to the remaining four countries (125.3 million Euros), Cameroun receives by far the biggest share (86%).

Recognising that remittances are, above all, private funds, but which also offer development possibilities for entire communities and countries, how then, do remittances impact development in Sub Saharan Africa especially in the Central African Sub region and how can remittance flow be enhanced?  This write-up also outlines barriers to remittance markets in the Central African sub-region as well as possible recommendations.

According to the World Bank 2011 Remittance Markets for Africa report, remittances can affect economic growth in a positive manner by raising consumption and investment expenditures. Remittances also increase expenditures on health, education, and nutrition that contribute to long-term productivity; and by improving the stability of consumption and output at both the household and macroeconomic level. These benefits in turn increase the supply of investment from both domestic and foreign sources by increasing financial intermediation, which can ultimately contribute to higher growth.

The 2011 report also brings out the fact that economies in which the financial system is underdeveloped such as those of the Central African Sub-region, remittances may alleviate liquidity and credit constraints and help finance small-business investments, thereby effectively acting as a substitute for financial development.

Consequently, remittances are also of great importance to countries for maintaining external-sector balance and macroeconomic stability. These are some of the reasons why remittances have been receiving increasingly the attention of politicians and analysts.

It is worth noting that despite the development implications, remittance markets in the Central African sub region remain plagued with many challenges.

The remittance market in the Central African sub region is plagued by regulatory bottle necks. Existing policies in a number of countries in the sub region create barriers for deployment of these flows for national gain. Regulations that restrict, limit or authorize institutions to carry out foreign currency transfers include those regulating foreign currency management and authorizing institutions to perform foreign currency transactions.

The decision to allow a particular institution to perform international money transfers is instrumental to expanding financial access for remittance senders and recipients. Countries with more restrictions on outbound payments often belong to monetary unions, such as the Central African Monetary Union (UMAC) or have legislation dating from
before 1998.

Whereof, these policies are there to increase remittances flows in the sub region they rather hamper its development and thus needs to be improved upon for better results, they are either not being implemented or improved upon due to some factors such as;

  • The non-implementation of a regulatory framework to reduce transfer cost in the different corridors;
  • Lack of inclusive finance;
  • Lack of support to investment motivations of the Diaspora amongst others.

The Central African sub region remittance market exhibits a low level of competition and has limited payout presence in rural areas. Going by an IFAD report (Sending money Home to Africa, 2009), 50 per cent of the banks in the Central African Sub-region countries pay remittances, but the percentage jumps to 100 per cent in countries like Angola where only banks are allowed to pay. This situation strongly discourages other actors from entering the remittance market.

Exclusivity arrangements severely limit competition and create barriers to entry. Most regulations in the Central African Sub-region permit only banks to pay remittances. In half of the countries of the Sub-region, they constitute over 50 percent of the businesses paying money transfers. About 41 percent of payments and 65 percent of all payout locations are serviced by banks in partnerships with Western Union and Money Gram.

More than 20 percent of the people within the reach of Microfinance Institutions (MFIs) receive remittances. Yet MFIs currently represent less than 3 per cent of remittance payers. In countries where MFIs do pay remittances they often operate as subagents of banks. This can be seen in the Central Africa Republic where they have an impregnation rate of about 20 percent.

High remittance costs represent an unnecessary burden on Central African migrants. In a 2011 World Bank report based on IMF survey, almost 70 percent of central banks in the Central African Sub-region cited high costs as the most important factor inhibiting the use of formal remittance channels.

According to data from the recently released World Bank Migration and Development Brief 23 Report of 2015, the cost of remitting to the Central African Sub-region remains above global levels (11.3 percent of sending the equivalent of US $200, versus the global average of 7.9 percent).

The lack of readily available data on the remittances markets in the Central African sub-region is another major difficulty. Most  states do not report data on remittance outflows or inflows to the IMF Balance of Payments Statistics, which is the main source for the internationally comparable dataset of the Migration and Remittances Factbook produced by the World Bank.

Also, most of the money sent home by migrants is unrecorded, and therefore does not enter many countries’ national statistics. Development planners increasingly stress the importance of tracking this money. That will help governments try to increase remittances as a source of development finance and better channel them into productive sectors. This makes it difficult to compute the impact of remittances on the development of the sub region.

In the light of these obstacles, the following can be advanced as possible recommendations that can enhance financial access in the Central African Sub-region.

Firstly, regulatory reform is central to leveraging the impact of remittances. There are a range of businesses that have the operational and financial capacity to conduct transfers, but that are not permitted to do so. When banks can perform transfers and MFIs can only act as sub-agents, both institutions suffer as they encounter barriers or lack incentives to enter the market.

Allowing more actors to perform money transfers will expand the reach beyond banks and foreign exchange bureaus, allowing greater competition among Remittances Service Providers (RSPs).

While there are eight banks on average in each Central African Sub-region country, the MFIs impregnation in these countries is about 6.5%, half of which are regulated, and at least three or four of which could compete as payers.

The Central African Sub-region countries have a very low number of payout locations less than 34%. Bringing MFIs and post offices into the market would double the number of payout locations.

According to the IFAD 2009 report cited above, 4 (Cameroon, Congo, Gabon, and Equatorial Guinea) out of the 8 countries of the Central African Sub-region do make use of the Post offices for Remittances payment. Gabon has a Post Office impregnation rate of 50 percent, while Congo has 28 percent.

It is also important that governments provide to MFIs equal market access. This may be done by ensuring basic benchmarks regarding their capacity to comply with the standard regulations on financial crime prevention, cash flow and liquidity to cover payments, technological innovation, trained staff, market presence and financial service cross-sale.

Policies should be designed to increase financial sector development. This may be done by encouraging greater competition among banks and by promoting alternative providers such as microfinance institutions, credit cooperatives, and postal savings. In this way banks are likely to have a beneficial impact on the market for remittances.

Improving competition is germane. In order to improve on limited competition, there is need to phase-out exclusivity agreements and contracts that prevent agents from forming partnerships with other providers or that block competitors from entering the market.

Governments in the sub region should encourage competition through foreign currency market promotion. Competition is enhanced through the dissemination of information and networking tools.

Increasing the role of post offices in remittances can be facilitated by several policy measures. Post offices can partner with destination-country post offices, banks, and money-transfer companies to extend existing domestic money-order facilities to international remittances. Better coordination among the various regulating entities should be promoted to ensure better consumer protection.

High remittance costs represent an unnecessary burden on the Central African migrants. Reducing remittance costs can lead to increases in the remittances sent by migrants, in turn increasing the resources available to recipient households.

The extended geographical coverage of domestic mobile money services and the growing number of customers with access to mobile money accounts may be encouraged in the Central African region. This may entail the need to extend money access points to include ATMs and mobile wallets as well as agents in many countries. The adoption of these innovative technologies is still nascent and will vastly improve access to both remittances and broader financial services, including low-cost savings and credit products, for the Central African migrants and remittance recipients.

Measures that would encourage the expansion of mobile phones to cross-border remittances include (a) harmonizing banking and telecommunications regulations to enable mainstream banks to participate in mobile money transfers and for telecommunications firms to offer micro deposit and savings accounts; (b) ensuring that mobile distribution networks are open to multiple international RSPs instead of becoming exclusive partnerships between an international money transfer operator (MTO) and country-based mobile money services.

Furthermore, Technological development will benefit financial access, including the adoption of new hardware, the development of software platforms, and the adaptation and integration of existing technologies. In the case of remittances, the key to technological development lies in strengthening payment networks.

Finally, as yet, relatively little is known about remittances to Central African Sub-region. The key to both informed policy decisions and private-sector interest is the availability of timely, accurate information.

As more information becomes available on a regular basis, governments, the private sector and the donor community are each better able to play their roles in maximizing the impact of remittances.

Conclusively, good governance and sound economic policy initiatives are also essential if the potential of remittances are to be enhanced in the Central African sub region.

Asanji Burnley is a diplomat by training from the International Relations Institute of Cameroon (IRIC). He is President and co-founder of the Cameroon based Central African Centre for Libertarian Thought and Action (CACLiTA).

Leave a comment

Posted by on June 19, 2015 in Uncategorized


Tags: , ,

Liberalisation: Key to catalysing the air transport sector in the Central African sub region by Sirri Caroline Nfornah, 18 June 2015

The air transport industry consists of activities that directly involve transporting people and goods by air, which includes airlines, airports and general aviation. It has a vital role to play in achieving sustainable development in the Central African sub region. The expansion of air services is a necessary condition for the development of a more diversified export base across the continent and for the expansion of tourism to the sub region. Improvements in the air transport industry would help to raise living standards and alleviate poverty by lowering transport costs, supporting more rapid economic growth and increasing personal mobility.

According to the African Union, ‘Aviation in general provides the only rapid worldwide transportation network, which makes it essential for global business and tourism – thus facilitating economic growth, particularly in developing countries.’ Liberalisation leads to increased air services, which in turn, facilitates growth in the sectors of the economy by supporting increased trade, attracting new businesses to the region, encouraging investment and enhancing productivity.

Liberalisation also offers efficient, competitive carriers an opportunity to enhance profitability by expanding into new markets, accessing a wider pool of investment and through consolidation.

There’ve been numerous initiatives and good efforts by governments of the Central African sub region to benefit from the opportunities of the aviation industry. The African Economic Outlook reports that there’s been an increased government-led infrastructure investment and modernization of Congo’s aviation sector- from the construction of new airports and the modernization of existing ones, as well as the expansion of the country’s national carrier’s footprint; Equatorial Congo Airlines( ECAir).

The domestic and sub-regional air service industry nonetheless has remained underserved, inefficiently connected, underdeveloped, and uncompetitive. Global bodies such as the International Air Transport Association (IATA), African Union (AU) Commission, Economic Commission for Africa (ECA), and the African Airlines Association (AFRAA), as well as African Civil Aviation Commission (AFCAC) are worried that until African governments liberalise the air transport sector, the much-desired development would continue to be wishful thinking.

Their worries are not baseless because the absence of an air transport policy that would define how the industry would be positioned is not in place. There has to be policy that would assist the industry to chart the way forward for Africa’s in general and particularly Central Africa’s economic development.

The Central African aviation industry has been facing a number of problems over the past decades including; poor management, government involvement, financial constraints, monopoly and increased safety and security measures amongst others. The aim of this write up is to show how the Central African sub region, like the rest of the aviation industry elsewhere is facing challenges as well. The way forward gives various proposals as to how states in the Central African sub region can reap the benefits of opening up their skies and improving the aviation industry which is critical to the African Union (AU)’s Agenda 2063.

So what is behind all these casualties, and how can the countries in this sub region maximise the potentials enshrined in the air transport sector? In other words, the above facts suggest the need to examine the operating environment to identify factors which are stifling efficient aviation in the Central Africa sub region.

The numerous initiatives and good efforts to benefit from the opportunities of the aviation industry in the Central African sub region have either been too little and/or too slow.  Many reasons can account for the above assertion: inadequate infrastructure and man power, political intervention as well as governments’ control and monopoly over the industry.

A report on the implementation of the air transport policy by the Economic Commission for Africa (ECA) reports that more than any reason, the declarations of intent that Central African states have made regarding cooperation and integration have not been effectively carried out because of their lack of initiative, trust and the financial difficulties most of them are going through. While the studies which have been undertaken could have led to positive results, the cultural and political commitments have not been forthcoming.

It seems the abandonment of the Air CEMAC project by CEMAC Heads of State (Cameroon, Chad, the Central African Republic, Equatorial Guinea, Gabon, and the Republic of Congo) during the 12th Session of Heads of State in Libreville-Gabon has fallen foul of this interference. It should be noted that the community had planned for Air CEMAC to improve connectivity between the neighbouring countries in a region long starved of reliable air services. There were also plans for international routes to major cities such as Johannesburg, Dubai, Frankfurt and London.

These states have not been able to take several initiatives to enter into alliances that would have helped them to achieve the objectives of liberalisation. Because people are afraid of themselves, they refuse to integrate fully and completely.

Another challenge is also attributed to the economic and political situation of Central African countries. Since the early 1990s, these states have been experiencing political, economic and social turmoil. Their governments have not had the time they need to concentrate on developing the air transport sector, more specifically, airline cooperation and integration. They are still distrustful of each other and hesitate to commit themselves to cooperation and integration arrangements.

The 1999 Yamoussoukro Decision was signed by 44 African countries in 1999 as a key enabler for air liberalisation. The air transport sector in the Central African region is hampered by the fact that the implementation of the Yamoussoukro Declaration regionally has now become a political decision, because the airline industries ownership within the Central African sub region are mostly state-owned. It appears that fair play is not always observed, particularly with regard to operational approaches, whereby some airlines have tended to unfairly eliminate other airlines in order to monopolize the market.

The potential dominance and monopoly of some national carriers is a concern for certain governments. Throughout the sub region, a number of countries continue to restrict market access under the pretext that their national airline is not ready to compete in a liberalized market. They view airports as potentially monopolistic enterprises to be regulated and controlled.

Camair-Co is Cameroon’s new national carrier, succeeding Cameroon Airlines which collapsed in 2008 after an unsuccessful privatisation process. The carrier has a monopoly on its domestic routes where it had grown capacity in the past years, including a more than 57% increase on the largest route between the country’s biggest city Douala and the capital Yaoundé. Camair-Co continues to hold a monopoly, but profitability remains elusive.

Speaking at the Aviation Africa Conference in Dubai earlier last month, the chairman of Rwandair and former Ethiopian Airlines CEO Girma Wake said that while the ideas of consolidation always made great sense they fall down on political intervention and individual national protectionism and interests.

The problem is exacerbated by the European Union’s ban on several airlines for safety reasons. A lack of confidence in safety oversight has resulted in some airlines with good safety records being put on the list. Not surprisingly, about 80% of intercontinental traffic to and from Africa is carried by non-African airlines.

Local civil aviation companies in the sub region for instance, are often blacklisted because they do not meet international criteria and this black-listing remains a critical challenge for these countries in achieving international recognition in this regard. For example, the expansion of air traffic in Gabon has been affected by an EU blacklist of several Gabonese carriers, after an audit of the national civil aviation authority conducted in 2007 found insufficient compliance with European safety regulations and standards. As a result, some locally registered airlines are currently unable to land in Europe. The blacklist has prevented partnerships with local operators.

The World Bank’s Africa Infrastructure Country Diagnostics (AICD) study provides analysis of infrastructure gaps, including for aviation, where lack of airline competition and the development of regional airport hubs are noted as important constraints. Inadequate airport and other transport-related infrastructure weigh heavily on the sub region. Many airports are incapable of accommodating large aircraft and tend to have very few runways. For instance, air traffic control at the Douala international airport is seriously deficient; tend to be frequently poorly drained and overdue for resurfacing.

These highlight the failure of a number of governments and airport authorities to invest in infrastructures such as air navigation networks to improve safety standards. The poor infrastructure arises from decades of under investment by governments and neglect that has affected development in the air transport infrastructure.

If the aviation sector is to reach its full potential in the Central African sub region, priority should be given to a number of issues.

Firstly, the issues of state-control can be addressed by fully implementing of the 1999 Yamoussoukro Decision which was signed by 44 African countries in 1999 as a key enabler for air liberalisation. Liberalisation is an effective means to fuel the growth of low-cost competition, as well as removing some of the restrictions on air services. Therefore, collective effort from governments of the Central African sub region will be required to push forward the liberalisation agenda by fast pacing unilateral liberalisation, setting up independent regulatory bodies to reduce government involvement.

Governments should also provide other facilitator assistance, such as implementing global standards in safety, security and regulations, reducing high charges, taxes and fees and removing visa requirements for ease of movement across the sub region.

Improvements in the air transport infrastructure have a key role to play as a facilitator of and complement to policies that aim to improve living standards and alleviate poverty. When it comes to rolling out new projects and revamping existing infrastructure for the purpose of fostering economic development, public-private partnerships are key. Infrastructure allows state authorities to be in control of these projects while the management and maintenance is delegated to external, reputable private partners – companies that have the necessary knowledge, expertise and capacity. Private companies from outside can provide world-class expertise that meets international standards especially when one wants to create and maintain a level of confidence.

The Malabo Airport, used by over 600,000 travellers in 2013, has benefited from a public infrastructure investment that has upgraded all airports in the major islands, as well as the Bata International Airport in the continental region. This investment seeks to transform the capital into an air hub for the sub region and for the continent, with the aviation sector forecasted to be worth USD 860 million by 2020.

The Economist (2003) describes the lack of full liberalisation and the restrictions arising from this as one of the biggest dangers facing the global airline industry. Aviation makes a significant contribution to the global economy. In an increasingly competitive global environment, the Central African sub region can no longer remain isolated, but must pursue measures that make its aviation efficient and capable of withstanding the global challenge.

The conclusion is that Central African states need to reap the benefits of the current trend in the aviation industry, which includes building up an extensive global network to realize economies of scale and density and to meet consumer demands.

Mrs. Sirri Caroline Nfornah is the Public Relations Officer for the Central African Centre for Libertarian Thought and Action (CACLiTA), Cameroon. She is equally a trained diplomat at the Ministry of External Relations, Cameroon. She holds a Masters in diplomacy from the International Relations Institute of Cameroon and is currently an Atlas Leadership Academy participant.

Mrs. Sirri Caroline Nfornah is the Public Relations Officer for the Central African Centre for Libertarian Thought and Action (CACLiTA), Cameroon. She is equally a trained diplomat at the Ministry of External Relations, Cameroon. She holds a Masters in diplomacy from the International Relations Institute of Cameroon and is currently an Atlas Leadership Academy participant.

1 Comment

Posted by on June 18, 2015 in Uncategorized


Tags: , , , ,

Advocating for the envisaged African Free Trade Area, by Chofor Che

In late May 2015, How Africa published an article entitled ‘Africa About to Launch a Free Trade Area Bigger than the EU or NAFTA.’ According to How Africa, this laudable trade area is purported to be greater in population than the European Union (EU). How Africa adds that the big Free Trade Area (FTA) aims at merging Africa’s markets into one common market.  The launching of this project is envisaged to take place during the Tripartite Heads of State and Governments Summit on 10 June 2015 at the Egyptian resort city of Sharm El Sheikh. It is to be named the tripartite free trade area, composing of 26 states. How Africa opines that it will be the largest economic bloc in Africa and the likely pave the way for the creation of the Continental Free Trade Area (CFTA) come 2017. When this project goes operational, it will be the creation of a market of over 600 million people. Having a large FTA is a laudable idea, but are African states ready constitutionally and institutionally for such a large economic bloc? Can African states boast of a peaceful and stable environment to house this large economic bloc?

The US based Brookings Institute opines that 58% of Africa’s economic activity is to be covered by this pact, with over $1 trillion in Gross Domestic Product (GDP).  If successful, such an endeavor is to furnish the free movement of goods, services, people and capital across Africa.

Several Central African states like Chad, Cameroon and Equatorial Guinea are still grappling with issues like the protection of investor’s rights, execution of public contracts, the rule of law and property rights. These are elements very germane for free markets to flourish in Africa. According to the Doing Business Reports for 2014, states in the Central African region like Chad and Cameroon still lag behind with respect to the above mentioned indicators. Statistics from the International Monetary Fund (IMF) show that states like the Central African Republic and South Sudan have poor records with respect to investor’s rights and property rights, reason why certain states may delay the laudable plan of creating the largest economic zone on the continent.

State protectionism remains a problem plaguing free markets in Africa. There are still a lot of trade and tariff barriers hindering the free circulations of goods and services between African states. For instance IMF and World Bank statistics show that states in the Central African region like Chad, Cameroon, Gabon and Equatorial Guinea state harbor rigid trade and tariff barriers within their borders which hinder the free circulation of goods and services. This is indeed a bad omen for the creation of a large FTA in Africa.

States in West and Central Africa are still vulnerable to inflation.  According to the 2014 Doing Business Report, states like Chad and Equatorial Guinea still have a feeble monetary policy and do not guarantee the independence of this monetary policy from political authorities.

Logistical obstacles remain a big issue on the African continent which may retard the realisation of a FTA According to the African Development Bank (ADB), many states like Benin, Mali and The Gambia cannot boast of adequate infrastructure and logistics services. Such deficiencies increase transaction costs and discourage trade.

There is still conflict in South Sudan, some parts of the Democratic Republic of Congo and the Central African Republic.  Recently South Africa witnessed a wave of homophobic attacks. Burundi was recently plunged into turmoil over a presidential term of office broil.  With such squabbles all over the continent, it is hard for a large economic zone to be effectively created.

There is thus need for a change of events. Giving constitutional and legislative importance to property rights, the rule of law and a fluid environment for the execution of contracts in the Central African region would make owners of property to be assured enough to engage in activities of the envisaged large economic zone. Additionally if investor’s rights are protected constitutionally and with sound legislative instruments and local institutions, this will equally make them trust the envisaged large economic zone.

State protectionism needs to be dismantled for free markets to strive in Africa. Trade and tariff barriers need to be lessened to enable the free circulations of goods and services between African states. State intervention in the economy should be restricted by giving more economic freedom to individuals to consume, produce, and exchange.

Redressing the issue of inflation for free trade in Africa is thus important. Hence the need for sound monetary policies and the guarantee of the independence of monetary policies from political authorities is germane.

Several African states have to ensure that there are adequate infrastructure and logistics services in place to make sure the laudable FTA initiative does not fail. States like Mali and Benin need to invest in road infrastructure most especially.

It is vital for the governments to strengthen security and intelligence because this aspect on its own helps to reduce insecurity and insurgency brought about by high level of criminality such as terrorism. Investors will be reluctant to take advantage of a large economic bloc because they do not see how their human and capital resources can be protected. This then acts as a setback in an effective large economic zone for investors.

Chofor Che is an integral part of the Africanliberty’s Voice of Liberty initiative. He is an analyst at and Audace Institut Afrique. He is equally co-founder and chair of the Central African Centre for Libertarian Thought and Action (CACLiTA). This article was originally published at on 8 June 2015.

Chofor Che is an integral part of the Africanliberty’s Voice of Liberty initiative. He is an analyst at and Audace Institut Afrique. He is equally co-founder and chair of the Central African Centre for Libertarian Thought and Action (CACLiTA). This article was originally published at on 8 June 2015.

Leave a comment

Posted by on June 12, 2015 in Uncategorized

%d bloggers like this: