1. Remittances from South Africa to SADC
Geoff Orpen
26 March 2015

2. About FinMark Trust and its focus areas
Independent trust formed in April 2002
Initial and core funding from the UKAid
Mission: “Making Financial Markets Work for the Poor”
Aim: Facilitating and catalysing development around access to financial services
How: move beyond data production, with an increased focus on being a catalyst to systemic change in financial inclusion by providing support to transformation at a country level
Focus areas
Information and Research Support
Micro-insurance
Consumer Financial Empowerment
Regional Financial Integration
Financial Policy and Regulation
Retail payments systems
Housing Finance
Rural / agricultural finance
Cross cutting themes:
Savings
Credit
SMME access 2

3. Coverage of our regional work

4. Remittances: An Overview
Remittances are defined as
non-reciprocal transfers
from one person to another
across a distance (generally cross-border)
of relatively low value
usually cash to cash
Outcomes of recent Surveys on Remittances:
migrants send money home to service their family’s basis needs, to pay for school fees, rent or transport, or to meet unexpected costs
80% of migrants send cash remittances at least once every three months (frequency depends largely on the remitters’ capacity to save enough money)
average amounts sent home by migrants to be between R500 and R1,000 for each send
only 2% of remittances are sent through official banking channels, almost 70% are sent via buses or taxi drivers, 20% are sent back with visiting family or friends and about 8% through other channels

5. Estimated size of the migrant population
Country of origin
Right to enter – Right to stay & work
No right to enter – Right to stay and work
No right to work
Total SADC immigrants A B C
D=A+B+C
Angola 61
6 125
4 016
10 202
Botswana
7 017 -
45 515
52 533
Dem. Rep. of Congo
797
28 309
52 293
81 399
Lesotho
79 132
Madagascar
Malawi
1 077
70 616
71 693
Mauritius
563
36 898
37 460
Mozambique
81 692
Namibia
163
21 419
21 582
Seychelles
Swaziland
14 473
Tanzania 79
5 187
5 267
Zambia
972
63 755
64 727
Zimbabwe
12 597
Total
Source: DNA calculations, drawing on various sources

6. Estimated remittances from South Africa into SADC (Rm)
Country of origin
Migrant population estimate
% remitting estimate
Total remittances - high end estimate
R million
Total remittances - low end estimate
Total remittances – mid- point estimate
Angola
10 202
40.0%
29.2
20.2
24.7
Botswana
52 533
55.0%
216.0
149.5
182.7
Dem. Rep. of Congo
81 399
35.0%
148.1
102.6
125.4
Lesotho
Madagascar -
Malawi
71 693
146.8
101.6
124.2
Mauritius
37 460
98.0
67.8
82.9
Mozambique
Namibia
21 582
61.7
42.7
52.2
Seychelles
Swaziland
462.3
320.0
391.2
Tanzania
5 267
12.0
8.3
10.1
Zambia
64 727
147.3
101.9
124.6
Zimbabwe
75.0%
Total

7. Remittances per country

8. Cost of Remittances

9. Cost of remittances to Malawi by institution

10. Shoprite Money Transfers The South Africa Case Study
The South African Market (2012)
13 million adults make up the unbanked market segment
R19 billion is the estimated value of cash-to-cash person-to-person money transfers uncaptured by the formal sector (Retailers, Taxis/buses/personal delivery, etc.)
Only 10% (R1.9 billion) is captured by the formal sector (Banks & Post Office)
Shoprite Domestic Money Transfers
Shoprite, in association with eCentric and Capitec Bank, launched the domestic in store remittances service in 2006
By 2010, they manage to capture an estimated R10 billion of the market
Annual volume growth rates are exceeding 25%, despite growing competition
Service used by more than 10 million individuals

11. Lesotho remittances-the impact
Population is 2 million
50% of the population have incomes below poverty line
migrants from Lesotho living in SA
Total remittances from SA to Lesotho is R1.75bn
R1.4bn of the total remittances is remitted informally
Using formal channels the cost to remit money is 16.43% of the value remitted
If all remittances were formalised the cost would amount to R287 million
New remittance corridor cost is R9.99 per transaction up to a max of R5000 per transaction

12. Shoprite - Money Markets
“Money Market” service stations offer a comprehensive range of financial services and products to the Group’s customers through dedicated in-store service counters: •utility bill payments
bus and airline tickets
basic insurance policies
tickets for major sporting and cultural events
travel packages
MONEY TRANSFERS
Shoprite estimates more than 50% of its clients make use of the counter while in the store
Installed 642 new service points to meet demand

13. The Shoprite Money Transfers Model
FUNCTION
CHARACTERISTICS
Primary Service Point and Access Method
Money Market Kiosks
Shoprite, Checkers and Usave Stores
Cash over the Counter
Lowest Compliance Requirement
No bank account required by either sender or recipient
Verify and hold copy of customer ID
Pricing Structure
Sender pays flat fee of R9.99 per transfer
Model
Retailer led model with sponsoring bank providing regulatory cover and carrying risk
Revenue Opportunity
Bank holds trust account and earns interest on float
Share in portion of customer fee
Live Domestic Service Countries
South Africa (April 2006) with Capitec Bank
Zambia (Nov 2013) , Namibia (2014)
CMA Pilot cross-border
Lesotho (March 2015) with Capitec Bank (FinMark Trust)
Domestic and Cross-border under application
Swaziland, with Standard Bank and FinMark Trust
Potential
Angola, Nigeria, Botswana, Ghana, Malawi, Mozambique, Nigeria, Tanzania, Uganda, Zimbabwe with Standard Bank

14. Key areas addressed in the remittances project
Component
Problems Addressed
Solution
Affordability
High fees (on average the cost is 20-25% of the value sent
Shoprite solution is R9.99
Ease of use
Large number of forms to be filled in
Easy to use (5 simple steps)
Awareness and trust
Many people use informal channels because that is all they have known
Shoprite has 20 million customers hence people know and trust the brand
Compliance requirements
People in low income areas cannot generally supply documents required for FICA (no title deed, lack of bills reflecting address)
Due to relatively low values remitted, FICA documentation not required (only need an ID)
Competition
Current players monopolise the remittance space hence can almost charge what they want to.
Market is now more competitive and diversified
Financial Inclusion
Financial sector excludes the poor to a large degree
Migrant families are introduced to financial services

15. Key issues to be addressed
In-country remittances scheduled for piloting in Swaziland (during 2015) Currently operational in Zambia ,RSA, Namibia and Lesotho
Cross Border remittances currently operational in Lesotho (March 2015)
Landscape of remittances is changing as a result of the new product (e.g. people depositing money before they get on a taxi to travel home at the end of a week’s work)
Need to motivate for increased lenience with respect to Exemption 17
Cross Border remittance is currently limited to a remittance between RSA and another country (1 direction)-needs to allow for remittances between all countries in the region

16. Thank you