The Independent (Kampala)

7 December 2012

Uganda: Kyeyo Cash Soars

UN report lauds rising remittances from migrants but decries harmful 'brain drain'

Nelly, a Ugandan neuro-surgeon based in England, is proud to be contributing to the welfare of her family and the development of her country back home. In the last two years, Nelly has sent home more than 35,000 Pounds (about Shs 140m) which her family has used to buy land, put up rental houses, provide medical care and educate orphaned relatives and set up a family business.

At the moment, Nelly sees her family as almost self-sustaining and is now looking for other opportunities for capital investment. Nelly is one of 17,600 Ugandans working in the UK, whose cash is now the mainstay of the Ugandan economy, according to a new report by the United Nations. Money sent from migrant Ugandans working abroad (remittances or 'kyeyo' cash) will continue to play an indispensable role in the economy, having surpassed Foreign Direct Investment in 2010.

According to United Nations Conference on Trade and Development (UNCTAD') report titled, 'The Least Developed Countries Report 2012, Uganda is now one of the leading recipients of 'kyeyo' cash among the least developed countries. The report, which was released Nov.26, notes that nationals of the globe's 48 LDCs sent home some $27 billion in 2011.

Uganda tops in the EAC region and is 16th on the list of 48 least developed countries with the highest remittances - with remittances of $27.36 per capita or $5.37 of GDP per capita, compared to Tanzania's $ 0.55 and $0.11 respectively.

Uganda gets more than 75% of its remittance inflows from three countries - Kenya ($326m), United Kingdom ($176m) and the US ($87.4m). Rwandans living in Uganda send more than $25m back to their motherland every year, which effectively makes Uganda the main source of Rwanda's remittances followed by Belgium. More than 80% of Uganda's remittances are sent by Western Union and Moneygram, but at exorbitant costs to both the senders and recipients, which the report says needs to be addressed.

Remittances sent to LDCs, according to the report, are charged a rate roughly one-third higher than the rate charged for most international money transfers. These fees run as high as 12% of the amount transferred. Remittances sent to sub-Saharan Africa in 2010 could have generated an additional $6 billion for recipients if the costs of sending the money had matched the global average. High costs charged on the remittances are blamed for the increasing use of informal channels and are said to be a burden for African migrants and remittance recipients.

But the high cost of sending money amongst African countries also poses serious challenges. For example, the report notes that sending money from Uganda to Tanzania is the most costly in the world - more expensive than sending from UK to Uganda. However, this could soon change as Western Union is said to be working on modalities with MTN Uganda which will enable senders to remit money directly to a recipient's mobile phone from any of Western Union's agent locations worldwide without having to go through banks and forex bureaus, which deduct high charges.

Research shows that remittances sent home by African migrants are used for investments such as purchasing real estate, education, medical and entrepreneurship. But the report suggests that developing countries should take steps such as improving domestic banking and financial services, so that a greater proportion of remittances is available for investment, small business development, and job creation particularly for urban dwellers.And it recommends that LDC governments should strive to employ these vast and "reliable" resources - which largely go in private transfers directly to families - to improve the breadth and abilities of their economies.

Brain drain crisis:

However, while the report highlights the importance of remittances, it also decries the phenomenon of "brain drain," which it urges LDCs to counteract. The "brain drain" statistics for the world's 48 least developed countries (LDCs) are a little disheartening: among people from LDCs with a university-level education, about one in five leaves for employment elsewhere, as compared with one in 25 in developed countries.

The brain drain rate is highest of all for the LDCs - at about 18% - well above the 10% rate for other developing countries. Uganda is listed as one of 11 LDCs that have more than 30% of their high-skilled labour force living abroad. However, this puts policy makers between a rock and a hard place as high-skilled Ugandan emigrants also have a higher propensity to remit their cash back home than their less qualified counterparts.

Almost half of Uganda's international remitting emigrants are high-skilled, accounting for two-thirds of total remittance inflows. The UK is Uganda's largest recipient of Ugandan skilled workers with some 17,600 Ugandans including Nelly, currently working in UK.

While the report observes that brain drain has to be addressed in the long term as it deprives countries of origin of some of the most qualified persons and reduces the stock of human capital, analysts say it is better for them to go and work abroad to their full potential than be in Uganda to be frustrated due to lack of specialized equipment and proper resources. Remarkably, Uganda is one of the source of remittances for Rwanda, Sudan and Burundi - an indication that there many nationals of those countries working here.

Top Remittance corridors by recipient LDC in Eastern Africa

Recipient country Main source of remittances 2nd main source 3rd main source

Burundi Tanzania Uganda Belgium

Rwanda Uganda Belgium Tanzania

Uganda Kenya United Kingdom USA

Tanzania United Kingdom Canada Kenya

Sudan S.Arabia Uganda US

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