A recent cover story in The Economist described immigrant networks as “a rare bright spot in the world economy. Around that same time. OPIC Executive Vice President Mimi Alemayehou addressed a forum at the World Bank about innovative ways to engage the diaspora, where she outlined why members of diaspora communities often made attractive investors in the developing world.
The text of her September 14, 2011 remarks is attached below.
A few years ago, the word “diaspora,” when applied to Africa, tended to be in the context of a cultural or a political connection. The last several years however have increasingly put “diaspora” and “economic growth” in the same sentence. Several studies by the World Bank, McKinsey and others document the dramatic contribution of remittances to African economies by the African diaspora.
From my standpoint, this has been particularly interesting for OPIC in that while Africa has been a priority region for OPIC for many years, the African Diaspora are now increasingly becoming an important part of our client base.
A little background on OPIC for those of you not familiar with the institution. OPIC is the U.S. government’s development finance institution; we have been around for over 40 years. OPIC has been active in Africa since the early 1970s and has invested almost $7 billion. We currently have over $2.4 billion in our exposure in sub-Saharan Africa.
To achieve all of this, we at OPIC use a number of tools including debt financing, political risk insurance, and support to investment funds.
OPIC is self sustaining, we make money and do not cost any money to the U.S. taxpayer! We do good while making money, how about that?
Now, to the topic of discussion for this panel: can the diaspora provide a sustainable source of financing?
First I think it’s good to clarify that the diaspora investment can complement other Foreign Direct Investment and official ODA.
There are a few reasons why the African Diaspora is becoming an important class of investors and important partners for us at OPIC.
They have a better understanding of the risk assessment capability of their country, which makes them less risk averse to the opportunities that appear very risky to the average investor. Recently we met with a very enthusiastic group of Tunisian professionals in the U.S. who are eager to invest in the new Tunisia, definitely ahead of others.
Their personal attachment and commitment to their country of origin turns them into investors with a longer-term outlook, which often is critical, particularly in infrastructure. Everyone is aware of Celtel’s and Mohammed Ibrahim’s success by investing early in African mobile technology when most others did not think Africans could really afford cell phones.
Once the investment has been made, the diaspora investors have a much easier time developing local relationships and reflexes that are essential to the long-term success of the investment.
In situations where the project faces great difficulties, diaspora investors generally show greater tenacity and resilience.
Don’t get me wrong; we have had lots of success with non-diaspora U.S. investors in Africa and elsewhere.
It is also important to also talk about some of the reasons why the African diaspora are increasingly becoming investors in the continent.
I am sure the issue of “Brain Gain” must have been discussed sometime in earlier sessions because I think what we have witnessed the last couple of years is incredible. The number of African professionals moving back to the continent to set up shop is huge and has greatly contributed to the continent’s development efforts. My own brother moved back a few years ago. The Director of HR at OPIC retired soon after I got there and moved to his home country of Sierra Leone.
There have also been a lot of economic reforms in most countries on the African continent the last decade that has made investing in the continent very attractive. Some of the earlier private equity funds in Africa have had very successful exits.
There is no region that is experiencing the kind of growth that Africa is experiencing. Returns on investment in Africa are among the highest if not the highest. Go to any African city, it is a construction site.
As I mentioned earlier, OPIC is increasingly doing business with members of the African diaspora and the African diaspora are becoming a very important partner for us. I thought I would give you a few examples of recent projects:
In March this year, OPIC approved $250 million in political risk insurance to Belstar Development. Belstar was established by a member of the Ghanaian diaspora to provide medical equipment, services and infrastructure to benefit up to 100 hospitals throughout all the 10 administrative regions of Ghana.
The only investment OPIC currently has in its exposure in Ethiopia is with an Ethiopian-American who moved back to Ethiopia and with OPIC’s financing opened a pharmaceutical plant.
We have supported several Nigerian-Americans who are managing private equity funds and are investing not only in Nigeria but also throughout Sub-Saharan Africa.
At OPIC, we are bullish on the African continent. There are a few things that we have done recently in order to leverage the entrepreneurial spirit of the Diaspora.
OPIC is currently working with the State Department under the Secretary’s International Diaspora Engagement Alliance (IDEA) to spur Diaspora entrepreneurship in Latin America and Caribbean and potentially in the MENA region.
Just like the U.S. Small Business Administration, in order to qualify as a “U.S.“ investor at OPIC, permanent residents (green card holders) are considered “U.S.,” which will allow more of the diaspora tap into our tools in support of their investment.
Let me end by saying that OPIC will be there as a partner to the diaspora investing in Africa. Please come and see us. Thank you.