Global crisis threatens vital remittances to Africa

By Jack Kimball - Analysis

KAMPALA (Reuters) - Coins clank softly and Ugandan shillings shuffle their way through counting machines at a foreign exchange bureau in downtown Kampala.

Yet in the last few months, the money-flow has been dwindling, with cash sent from Ugandans abroad via the bureau down by more than half to about $35,000 per day.

"August was the worst month. September was bad, and October is going bad, bad, bad," said Igal Mohamed Ali, managing director of Bicco Forex Bureau, which is a conduit for money from Ugandans living in the United Kingdom.

Remittances to Africa, worth $40 billion a year according to the United Nations, could be an early casualty of the global financial crisis.

Though traditionally resilient even at times of crisis, remittance flows are bound to suffer if Africans working abroad have to tighten their belts or lose their jobs.

"Remittances were keeping a very, very strong anchor under us, but I think we are going to have a dramatic slowdown in remittances because I think the second round effects (of the crisis) are going to mean a lot of lay-offs," Kenyan financial analyst Aly Khan Satchu said.

That could deliver a heavy blow to parts of Africa at a time the continent had been enjoying its fastest growth in decades -- an annual average of over 6 percent for the past five years.

Though it is too early to quantify the impact across Africa, anecdotal evidence from the Bicco bureau in Uganda and elsewhere show some are already feeling the impact of less money coming in from the 30 million of so Africans living abroad.

"We're not talking about investment or profitability here, we're talking about helping your family survive," said Pedro De Vasconcelos, remittance coordinator for the U.N. International Fund for Agriculture Development.

Some families abroad have already warned of less cash.

"They have always had to make sacrifices, holding down at least two jobs to make ends meet," said Zimbabwean Munashe Mujati, a student whose two brothers work in Britain. "Of late ... we've increasingly been told it could be tighter for them."

For the continent as a whole, remittances are estimated to account for only about 2 percent of gross domestic product.

But in some nations like Eritrea, Somalia, Burundi, Liberia and Lesotho, remittances contribute over 20 percent, according to global financial institutions. Money mostly comes from North America, Europe and Asia.

"OUR LIFEBLOOD"

In Zimbabwe's capital Harare, lines outside money transfer agencies have become noticeably shorter.