Technology helps reduce cost of money transfers

WHEN Nyarai Goredema lost her job as a manager with Harare-based Msasa Steel in June, she sold some of her things and put her home on the market. When no one offered to buy it, she turned to her son who works at a bank in South Africa.

“It’s harsh on me and on him,” said the 48-year-old widow, who lives on the $500 (R7100) to $1 000 her son sends her each month. “In all my life it has never been this tough.”

Role of remittances

About 3 million of Zimbabwe’s 13 million people have left the country in the past 15 years as policies pursued by President Robert Mugabe’s government have driven much of the nation to ruin. The money they send to those left behind is playing an increasing role in shoring up an economy plagued by deflation and a jobless rate the National Association of NonGovernmental Organizations estimates to be at 95 percent.

Zimbabweans living abroad were expected to send home $2 billion this year, up from $1.8bn last year, central bank Governor John Mangudya said on August 29. Remittances equated to about 13 percent of gross domestic product last year, outstripping all export income besides minerals, which the Chamber of Mines says earned the country $1.85bn.

A proliferation of smartphones and internet access is driving the increased use of electronic money transfers.

“A substantial percentage of the population would be severely constrained without remittances,” said John Robertson, an independent economist based in Harare. “The irony is that people driven to greener pastures outside the country are the same people, to a significant extent, who keep ordinary Zimbabweans going within the country.”

It is much easier now because my son can send money by phone. He doesn’t need to go to a bank.

While the central bank recorded remittances of $3.5bn entering Zimbabwe between 2009 and last year, its data excludes undeclared cash carried by so-called runners – minibus taxi drivers who ply routes between South Africa and Zimbabwe. Based on a trust system, Zimbabwean migrants hand over cash to be delivered to relatives back home.

The runners, who also ferry groceries, kitchen appliances and other goods, charged fees of between 1 percent and 10 percent, and haggling was standard practice, said Nixon Moyo, who operates between Johannesburg and Harare. While money-transfers have long been dominated by Western Union, MoneyGram International and Mukuru.com, the market is opening up.

More competition

New entrants include Econet Wireless Zimbabwe, the nation’s largest cellphone operator, which in partnership with UK-based transfer service WorldRemit, offers a service enabling Zimbabweans living abroad to send money home through Econet’s 13 000 agents.

Mama Money, a Cape Townbased money transfer company has about 10 000 regular customers who send money to Zimbabwe. It charges 5 percent commission, with all transactions taking place online or using a cellphone.

Sub-Saharan Africa is the world’s most expensive region to send money home, with average commission rates of 9.8 percent comparing with a global norm of 7.5 percent, according to the World Bank.

Increased competition, falling costs and new technology are a boon for Goredema.

“It’s much easier now because my son can send money by phone,” she said. “He doesn’t need to go into a bank.”