SA Migration International

News Articles

Leeway for migrants sending money will boost formal channels

Source: by Andiswa Maqutu and Ray Ndlovu,Business Day, 17/06/2015

MIGRANTS are likely to make greater use of formal methods to send
money to their home countries after Finance Minister Nhlanhla Nene
signed the Financial Intelligence Centre Act exemption for low-value
crossborder money transfers this month.

The South African Reserve Bank also gave the green light this month to
Econet Wireless, Zimbabwe`s largest cellphone service provider, for it
to roll out its money transfer service in SA.

The EcoCash service will begin operating at the end of next month,
which will see crossborder cellphone money transfers taking place from
SA to Zimbabwe.

The act requires natural persons conducting crossborder money
transfers to render their full names, dates of birth, identity numbers
and residential address to financial institutions. However, under the
exemption coming into effect on July 1, amounts of less than R3,000 a
day and R10,000 a month will not be subject to these strict
requirements.

About 68% of the value of remittances from SA is channelled through
informal crossborder corridors, according to a FinMark study conducted
in 2012.

The main reason for using informal channels was the "Know Your
Customer" requirements under the act. The exemption would encourage
remitters using informal and "risky" channels to use formal channels
to send money in the main corridors around SA including Zimbabwe,
Mozambique, Lesotho, Swaziland and Malawi, the trust said. The
exemption would also reduce the cost of conducting such transactions.
Sending money from SA to neighbouring countries is the most expensive
remittance channel in the world, with fees higher than 22% charged for
$200, according to the FinMark Trust.

"This exemption will result in a reduction in the cost and less
administrative work on the part of financial institutions. It will
also encourage remitters currently using informal and risky channels
to use formal channels," said the FinMark Trust.

SA is home to an estimated 3-million Zimbabweans and this presents a
lucrative market for Econet Wireless, which has seen dwindling revenue
from voice calls, once its cash cow. It is increasingly looking to
money transfer and data services for revenue.

In its latest financial results, Econet Wireless said revenue from
EcoCash had reached $72.7m in the year to February from $44m last year
— a growth of 32%, which signals the potential in the sector.

Under the recent Bank-licensed dispensation, the EcoCash platform will
enable Zimbabwean citizens living abroad to send money directly back
home.

"The approval allows Zimbabweans living in SA to send money to any
Econet Wireless number anywhere in Zimbabwe using EcoCash," Econet
Wireless said.

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