Ethel Hazelhurst
An estimated 3.3 million migrants from other Southern African Development Community (SADC) countries, working in South Africa, send about R11.2 billion home each year, according to a recent study commissioned by the FinMark Trust and conducted by DNA Economics. Of this, an estimated R7.6bn flows through informal channels, often carried by a bus or taxi driver.
Focus group research revealed that money sent informally is often lost or stolen. FinMark said that this finding implied that, for many, the informal channel choice was the only option rather than a preference.
“An estimated 2.2 million of the 3.3 million SADC migrants currently in South Africa do not have legal migrant status,” it said. “Under immigration legislation in South Africa, it is not possible for those without legal migrant status to access formal financial systems such as banks and money transfer operators, and thus migrants must fall back on informal remitting systems.”
As a result, the bulk of cross-border workers’ remittances to the rest of SADC happened under the regulatory radar screen – “a position that is not desirable from either a financial inclusion or financial integrity policy point of view”, FinMark said.
Research showed that even legal migrants frequently use informal channels.
FinMark’s head of regional financial integration, Brendan Pearce, said regulations to access banks required a great deal of detail including identification and proof of residence which were “onerous for migrants who often don’t have a stable address”.
Moreover, formal channels are often unfamiliar. The report notes: “Western Union and MoneyGram were unknown to most, and thus not commonly used, whereas informal agents were widely used.”
Pearce urged regulators to look at decreasing these regulatory requirements for low-value remittances.
He said: “They are less of a risk in terms of anti-money laundering and funding terrorism. The Reserve Bank has taken this matter on board and is looking at measures to solve some of these problems.”
He identified lack of competition as a problem when it came to pricing.
“Even international money transfer agencies such as MoneyGram need to operate with registered financial institutions and not on their own as they do in other countries.”
FinMark noted that the “sheer volume of cross-border remittance flows and the large proportion sent informally” represented an untapped market opportunity for the formal sector. The study follows research by FinMark in 2005 that estimated remittances to the region were worth R6.1bn. This study excluded Zimbabwe.
The latest study, conducted in Gauteng, Mpumalanga, Limpopo, KwaZulu-Natal and the Free State, showed that Zimbabwe accounted for the bulk of the cross-border remittances market.
An estimated 1.9 million Zimbabweans (59 percent of all SADC migrants) send an estimated R6.7bn (60 percent of total SADC remittances) home each year. Research included 19 focus group discussions held with 114 migrants from different home countries, and discussions with 20 individual drivers involved in remitting.
Respondents were spoken to in the language of their choice; a translator was present where needed. Interviews gave insights into the economics of informal remitting. Respondents reported taxi, bus or truck drivers charged between R10 and R30 per R100 sent, depending mostly on the season – charges are higher in the high-volume Christmas period.
When friends and family were used to remit, respondents usually felt obliged to give some small gift to express gratitude. And respondents said banks’ transaction fees varied between R15 and R30 for each R100 transaction.