‘Su­per tax’ on African re­mit­tances hurts de­vel­op­ment

Daily Trust - - REUTERS -

Africans face the high­est re­mit­tance fees glob­ally, reg­u­larly pay­ing a “su­per tax” to send money home at a cost that hurts fam­i­lies and holds back de­vel­op­ment in the world’s poor­est con­ti­nent, a think­tank said on Wed­nes­day.

The Lon­don-based Over­seas De­vel­op­ment In­sti­tute (ODI) said re­duc­ing re­mit­tance charges to global aver­age lev­els would gen­er­ate $1.8 bil­lion, enough to put 14 mil­lion chil­dren through pri­mary school, or pro­vide clean wa­ter to 21 mil­lion people.

The aver­age cost to trans­fer $200 to sub-Sa­ha­ran Africa was about 12 per­cent, com­pared with a global aver­age of 7.8 per­cent, ODI said in its re­port, “Lost in in­ter­me­di­a­tion”, brand­ing the higher fees a “su­per tax”.

“This re­mit­tance su­per tax is di­vert­ing re­sources that fam­i­lies need to in­vest in ed­u­ca­tion, health and a bet­ter fu­ture,” said the re­port’s co-au­thor, Kevin Watkins.

“It is un­der­cut­ting a vi­tal life­line to hun­dreds of thou­sands of poor fam­i­lies in Africa. Africans liv­ing in the UK make huge sac­ri­fices to sup­port their fam­i­lies, yet face charges which are in­de­fen­si­ble in an age of mo­bile bank­ing and in­ter­net trans­fers,” Watkins said in a state­ment.

Weak com­pe­ti­tion, “ex­clu­siv­ity agree­ments” be­tween money trans­fer oper­a­tors, agents and banks, and flawed fi­nan­cial reg­u­la­tion con­trib­uted to push­ing charges higher, ODI said.

The in­sti­tute said two money trans­fer oper­a­tors - Western Union and Money­Gram - ac­counted for two thirds of re­mit­tance trans­fers to Africa.

Western Union said the aver­age global rev­enue it earned from trans­fer­ring money was 5-6 per­cent of the amount sent.

“How­ever, our pric­ing varies be­tween coun­tries depend­ing on a num­ber of fac­tors such as con­sumer pro­tec­tion costs, lo­cal re­mit­tance taxes, mar­ket dis­tri­bu­tion, reg­u­la­tory struc­ture, vol­ume, cur­rency vo­latil­ity, and other mar­ket ef­fi­cien­cies,” it said in a state­ment.

There was no fee for money trans­ferred on­line from Bri­tain for a cash pay­out in Africa when done through the sender’s bank ac­count, it said.

Of­fi­cials from Money­Gram were not im­me­di­ately avail­able for com­ment.

In 2013, re­mit­tances to Africa were val­ued at $32 bil­lion or around 2 per­cent of gross do­mes­tic prod­uct. In 2016, they are pro­jected to rise to more than $41 bil­lion, ODI said.

“With aid set to stag­nate, re­mit­tances are set to emerge as an in­creas­ingly im­por­tant source of ex­ter­nal fi­nance,” it said.

The ODI said there was no ev­i­dence of a fall in fees for Africa’s di­as­pora, even though gov­ern­ments from the G8 and G20 have pledged to re­duce charges to 5 per­cent.

It can be even more ex­pen­sive to trans­fer money within Africa. For ex­am­ple, mi­grant work­ers from Mozam­bique pay charges as high as 20 per­cent to send sav­ings home from South Africa, the re­port said.

ODI called for an in­ves­ti­ga­tion of global money trans­fer oper­a­tors by Euro­pean Union and U.S. an­titrust bod­ies and reg­u­la­tory re­form in Africa to re­voke ex­clu­siv­ity deals be­tween money trans­fer oper­a­tors and banks and agents.

Newspapers in English

Newspapers from Nigeria

© PressReader. All rights reserved.