Institute of Social Studies, Working Paper no 523, May, The Hague, Gracsious Ncube and Georgina Gomez (2011)

Apart from boosting consumption, remittances have also played a positive role in enhancing productive investment in the Tsholotsho district, Zimbabwe but the resulting enterprises are vulnerable in terms of skills and sustainability.

The role of remittances in the receiving economies and its impact in the long-run has been a subject of debate within the academic literature. While international migration has increasingly emerged as a voluntary livelihood diversification strategy for the working population, especially in countries which are experiencing economic stagnation or distress and political conflicts, it has been widely observed that remittances that are ploughed back by migrants do little more than to boost the short-term consumption levels of receiving households in the local rural economies and thereby also exacerbating the intra-community inequalities. In several instances, it has been noted that the impact of remittances on productive activity in the local economy is negative on the balance.

A common phenomenon that has been observed by researchers is the abandoning of local agriculture and other related rural occupations, which are often an arduous occupation in poor developing countries, in the wake of inflow of remittances which help farming families to maintain or even increase consumption levels. In the long run, this is detrimental to agricultural productivity and the self-sufficiency of the local economy and leads to a precarious ‘dependency’ of the local economy on income earned by migrants in foreign economies. However, some commentators have argued in the contrary that suitable economic environment and policies can lead to the utilization of remittances in a more productive manner where money is invested in assets, agricultural and non-agricultural, and also sometimes collectively on public infrastructure. The development of parks, churches, roads and sewers in Phillipines is cited as an example where remittances enhance the productive capacity of local economies, though such instances are rare.

In this context, Ncube and Gomez has conducted a study of the impact of remittances in a village in Tsholotsho district (Village No. 2, Ward No. 19) in Zimbabwe. The objective of the authors is to examine how remittances are used by receiving households and whether there is any evidence contrary to the usual viewpoint that remittances are not eventually helpful for local economy development. The study is based on the ethnographic methodology of ‘follow the money’ with the help of structures and semi-structured interview and group discussions with households in the village. The household sample, which was drawn purposively, comprises of both remittance receiving and non-receiving households.

The study finds that large parts of the remittances are spent on basic consumption goods but there are a few processes that occur due to inflow of remittances that is important for the question that the authors try to investigate. Contrary to remittances causing households to pay lesser attention to agriculture, it was observed that receiving households used significant amounts of money to acquire agricultural equipments and improve their access to water. In the otherwise dryland agriculture that characterized the village, the receiving households are observed to have higher crop productivity on their lands compared to the non-receiving households. This was mainly due to the fact that receiving households mostly owned all the assets and equipments required for agriculture. This in turn has set rolling a process of differentiation, where working members from non-receiving households hired out their labour on the farms of the receiving households.

Also, with male members of receiving households having mostly migrated, these female-run households employ young members of the non-migrant households for different tasks like looking after livestock, fetching firewood and water, etc. Thus, there is some informal job-creation for non-receiving households due to remittances in the village. Overall, there is a social differentiation where, non-receiving households diversify their occupation to a greater degree and frequently find themselves employed by the receiving households. The latter mainly concentrates on agricultural activity on their land with the help of hired-in labour.

Often wages were observed to be paid in a combination of cash and kind.
The other significant use of remittances was in housing. The study clearly located the difference in the housing of receiving and non-receiving households. While the former built brick houses with asbestos roofing, the latter continued to live in mud houses with thatched roofs. These investments of remittances in housing generated a demand for baked bricks and other housing materials. Local youths have come together and started making baked bricks from mud and also engage in mud-mixing required for construction activities. Though, their technique is not so advanced, this has generated some amount of self-employment locally.

Additionally, small enterprises engaged in welding have also emerged in the village as a result of increased construction.

Apart from brick making and welding, new enterprises which are thriving on remittance inflows are grinding mills, restaurants, grocery shops, butcheries, motor servicing, etc. The study, however notes with caution that while it is conclusive that these enterprises depend crucially on remittance inflows for their survival, they are still vulnerable due to lack of entrepreneurial skills in the village. Many of these enterprises have been set up by non-locals who have been attracted by the remittances and local people have only supplied labour power to these enterprises.

The authors reason that with the lack of development of significant entrepreneurial skills within the local economy, comprehensive development of the local economy led by remittances is not sustainable in the long run.

The study concludes that it is not wholly the case in this Zimbabwean village that remittances only boost consumption and hamper productive capacities in the long run. In fact, the remittance receiving households have improved their agricultural yields by acquiring better equipments and also generated demand for local labour in the process. Their demand for housing further triggered the setting up of certain enterprises in recent times. However, policy interventions regarding skill formation and credit facilitation for enterprises are required for making this remittance-led local economic development sustainable.