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

1. Policy recommendations and initiatives to enabling diaspora inflows to the region , African Diaspora Investment WorkshopTranscorp Hilton, Abuja, Nigeria16-17 October 2008

2. 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

3. 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

4. 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)

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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.

12. The AFRICAN DIASPORA INVESTMENT FACILITY (ADIF) Supporting diaspora-led investment

13. 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

14. 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

15. 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)

16. 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

17. 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

18. 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

19. 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.

20. 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.

21. 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

22. 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

23. 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

24. Q&A Session

25. 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

26. 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

27. 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

28. 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