This report was commissioned by FinMark Trust and carried out through Genesis to assess the cost of cross-border remittances in South Africa. Using a new approach based on conducting actual cross-border transactions, the report verifies the pricing offered to customers in the market and compares this cost to other studies conducted by the World Bank and Eighty20.
The majority of remittance flows from South Africa (90% of all transfers) are destined for neighbouring Zimbabwe, Mozambique and Lesotho, with 85% of all migrants originating from these countries. Estimates by the FinMark Trust suggest that the bulk (almost 70%) of transfers to these countries are conducted informally and that the high cost of formal money transfers is a major barrier to accessing formal remittance bank and non-bank channels.
According to the World Bank, as at the end of the second quarter of 2016, the global average cost of USD200 remittances was 7.43% of the amount sent by remitting customers. For remittances sent from South Africa, the average cost was 16.71%; more than double the global average. Contrary to World Bank estimates, Genesis found that the total cost of remitting USD200 from South Africa to Zimbabwe, Mozambique and Lesotho is lower than the global average, with an average cost of 6.7% of the amount sent. Previous research has shown that the median value of cross-border remittances from South Africa is USD55, for which Genesis estimated the average cost to be 13.6% of the amount sent, as opposed to previous estimates of 13.3%. Genesis results generally support previous findings that the World Bank statistics over-estimate the average cost of transfers across these corridors.