With more than R11.2bn flowing annually from SA to neighbouring countries, millions of SADC migrants are feeling the pressure of a volatile rand, as currency fluctuations threaten their ability to support families back home.
With geopolitical tensions between SA and the US seemingly stable at the moment, Samuel Munaku, a Zimbabwean migrant, is hopeful that the coming days remain uneventful and that the dollar-to-rand exchange rate stays stable when he sends money to Harare.
Munaku sends R1,834 which he hopes is enough to cover the $90 (about R1,600) he deposits each week to support his mother and daughter back home.
A weaker rand means the Eastern Cape-based chartered accountant will have to withdraw more to equal the money sent, as well as covering transactional fees.
He is just one of the 3.3 million Southern African Development Community (SADC) migrants living in the country, who send R11.2bn a year in payments to support their families, according to The FinMark Trust.
The report shows that the average cost of cross-border remittances in the SADC, particularly from SA, can range from 7.4% to 12.5%.
Munaku said that challenges related to currency fluctuations and high fees were increasing reliance on alternative remittance channels such as Hawala.
Hawala is an informal funds transfer system that allows for the shifting of money from one person to another without the actual movement of money.
“Everyone has got people here [the Eastern Cape] and people that side,” Munaku said.
“So whenever the opportunity arises, you would rather have people that you know give each other money on that side and pay it back.
“The day I transfer, I have to factor in the exchange rate. That rate changes all the time, and it directly affects how much money reaches my family.
“It also determines what the 10% transaction fee will be in rand terms that week.”
While he does not send money as frequently as he would like to Zimbabwe, Willie Chinyamurindi a professor based in Alice (Dikeni), said arrangements between banks were slowly driving costs down.
“People who come into the country legally for even seasonal work can open accounts, that has made it easier because you can deposit money into that account they opened here and can access it through a bank that side,” he said.
Chinyamurindi said those who did have to send money home regularly, however, still faced significantly high costs.
“A person who is a domestic worker likely has to use merchants like Mukuru. Though they make transactions much easier because you just need a mobile number, the fee remains very high,” he said.
Recognising the importance of cross-border payments in 2020, the G20 endorsed a road map designed to improve co-ordination between the public and private sectors.
Speaking during a panel discussion at the Sanlam Summer School for finance journalists last week, economist Patrick Buthelezi said protectionist measures — such as tariffs and quotas — had been on the rise since the global financial crisis.
“After the global financial crisis, global GDP has been growing at a slower pace.
“In part, it is reflecting the withdrawal of trade.”
Veteran international affairs journalist Peter Fabricius said the jury was still out on the success of SA's agenda and the summit.
Post the panel discussions, the head of Business 20 (B20) secretariat, Anthony Costa, said the advisory task force on trade and investment will instead focus on how the cost of capital flows in the continent can be reduced.
The B20 is the official G20 dialogue forum that connects the global business community with G20 governments.
Costa said that while the forums would explore potential policies to reduce trade barriers, the issue of cross-border payments would not receive detailed attention.
He instead pointed to the African Continental Free Trade Area (AfCFTA).
“The accelerated implementation of the AfCFTA is one such driver of economic growth, with the potential to unlock a $3.4-trillion [R60.4-trillion] market, while also championing open and inclusive global trade.
“Reducing these costs would boost intra-African trade through lower fees that enable small and medium-sized enterprises and informal traders to participate more freely in regional value chains, aligning with the AfCFTA’s goals.
SA is yet to adopt the pan-African Payment and Settlement System (PAPSS) formed to facilitate cross-border payments and remittances through the AfCFTA.
PAPSS is a cross-border payment system designed to facilitate the movement of money across Africa.
“Alternative digital infrastructures like PAPSS or mobile money interoperability can reduce reliance on costly correspondent banking.
“Public-private collaboration to modernise systems without excluding vulnerable users is also needed.
“In a world facing geopolitical fragmentation, we [the B20] are working to restore stability through stronger multilateral co-operation, ensuring fair and predictable rules for businesses and economies alike,” Costa said.
The Herald
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