For Enoch Aikins, a political economist who focuses on Africa, the topic of sending money home to relatives is personal.
“I can use myself as an example, as somebody that comes from a typical village with a lot of people or [with] a family that depends on me,” he says.
A researcher with the Institute of Security Studies, now based in Pretoria, South Africa, Enoch grew up in the small town of Agona Kwanyako, about 70 kilometres from the Ghanaian capital Accra.
His job means he can provide a vital source of income for many in his family back home in Ghana, whether it be for his mother’s medical bills or for his cousins’ education.
“Anytime there’s a family problem, they call me and I have to quickly find a way to send money to them to solve an emergency crisis,” he said. “Mostly it is household expenses, things like food, accommodation, school fees or to cover medical expenses.”
Enoch is one of many millions of Africans across the continent and around the world who send remittances, which are financial transfers to their home country or region.
The importance of these financial transfers has come into sharp effect as a result of US President Donald Trump’s tax bill, passed on May 22 by the House of Representatives.
The measure includes a 3.5% tax on remittances made by anyone who is not a US citizen or national.
The original plan was for the tax to be 5% but it was lowered before the vote. The tax is meant to target illegal immigration.
Africans will be significantly affected, according to Enoch Aikins. “We cannot tell them how to go about their fiscal business, but this is going to have a huge impact on African economies.”
World Bank data shows that remittance flows into Africa were more than $92 billion (€81 billion) in 2024, with the United States alone accounting for at least $12 billion in that year.
The US is also the largest origin country for all remittances in the world, accounting for more than $656 billion in 2023.
In Zimbabwe, diaspora remittances hit a record US$2.2 billion, 22% up from $1.8 billion in 2023. In the first four months of this year, diaspora remittances were up 8% to $720 million compared to the same period in 2024.
The bulk of Zimbabwe’s remittances come from South Africa and the UK, although the US is also a key source.
The importance of remittances to Africa
Recent data suggests annual remittances now outweigh both aid and foreign direct investment (FDI) as income flows into the continent.
Aikins says that remittances is the “largest external financial flow into Africa,” at the moment.
“There are no bottlenecks or administrative issues that, for instance, if you are giving aid of about $100 million to an African country or an institution, more than half is gone on administration before it reaches people,” he added.
Then there’s the fact that it’s typically lower-income groups that are most reliant on remittances from relatives or friends working abroad.
World Bank data shows that remittances received as a percentage of GDP is around 20% for Lesotho, Comoros, Somalia, The Gambia and Liberia.
Enoch’s remittances won’t be taxed as they are not coming from the US. Yet he can clearly imagine the real-life consequences for someone in a village like the one he grew up in who is dependent on a relative sending money from the US.
“The tax is going to have a tremendous effect on how people send money to their dependents back home.”
DW (additional: newZWire)
