Money transfer agencies under lock and key. . . as SA banks take the initiative

rbzAS the local economy is still transitioning from the volatile pre-2009 period to growth, there are glaring anomalies in the administration of financial transactions that continue to inconvenience individuals and businesses.
One such anomaly includes regulations that prohibit local money transfer agencies from remitting money outside the country’s borders.

Apart from prejudicing the economy of revenues that might accrue from commissions levied on outbound money transfers, the regulations have created a thriving grey market where “cash mules” have become the lead actors on cross-border transactions.

Since 2004, the Reserve Bank of Zimbabwe (RBZ) has been tightening regulations governing the operations of Money Transfer Agencies (MTAs).

Licensing arrangements under the Exchange Control (Money Transfer Agency Order), Statutory Instrument 77 of 2004 and the accompanying Exchange Control (Money Transfer Agencies Amendment) Order, 2004 (No. 1) saw measures that were meant to influence the administrative, operational and legal framework for the transfer of foreign currency, especially from the Diaspora.

Outbound money transfers were banned in order to curb leakages of foreign currency.
The post-September 11, 2001 dispensation, after attacks on the United States of America, resulted in additional measures targeted at stricter controls on the flow of money in and out of Zimbabwe.

The Bank Use Promotion and Suppression of Money Laundering Act (Chapter 24:24) was subsequently promulgated in 2004.

But over the years the regulations have inadvertently affected the seamless movement of money.
With an estimated three million Zimbabweans living outside Zimbabwe — either working or learning, sending money to them via MTAs is practically impossible.

Locals have had to rely on the Visa and Master Card systems that are offered by banks.
The systems, however, are often plagued by bureaucracy, red tape and unreliable systems.
MTAs leverage on their ability to offer instant money transfers.

“I have been trying in vain to send money to my two children who are based in China through MTAs, but I am always being turned back. I always have to try them because our Visa and Master Card system is not that reliable,” said Mr Tawanda Chitoro of Highfield in Harare.

Questions sent to the RBZ to ascertain the number of MTAs licensed in Zimbabwe could not be obtained by the time of going to print as spokesperson Mr Alson Mfiri claimed that he was working on the inquiries since Tuesday.

Although Western Union and Money Gram have become dominant over time, by the end of 2006 Zimbabwe had more than 16 MTAs – Fedex; POSB; Stanchart; NMB Bank; TransAfrik; Dollarway; CABS; Stanbic; ZIMPOST; I and F; Pacific; Banfords; Currency King (Kingdom); CBZ; Parlovan; and Interfin.

Western Union Zimbabwe franchise holder Mr Fred Mutanda said last week MTAs continue to lobby regulatory authorities to allow outbound money transfers.

“It’s (the ban on outbound transfers) a Reserve Bank issue; we are also waiting for authorisation from them to allow us to send money and we have been asking them why one is allowed to take US$10 000 cash when getting out of the country,” said Mutanda.

What has made the ban more awkward are regulations that allow individuals to take a maximum of US$10 000 per person per trip.

The Zimbabwe Revenue Authority (Zimra) estimates that the country could be losing up to US$3 billion annually due to the unregulated movement of cash across borders following the adoption of the multi-currency regime in 2009.

Monthly caps on the amount of money people are allowed to export are now being considered.
Zimra Commissioner-General Mr Gershem Pasi told a Parliamentary Portfolio Committee on Foreign Affairs last month that the authority will engage the central bank in order to push through the amendments.

“We will be discussing the issue with the central bank and we have submitted our proposal to the ministry (of Finance and Economic Development) on our concern of export of cash. For instance, the current regulations we enforce on behalf of the central bank, one is allowed to take in cash US$10 000 per person per trip,” said Mr Pasi.

It is believed that allowing MTAs to transfer cash will help augment revenue streams to the fiscus.
Last year Government levied a 5 percent levy on all EcoCash transactions in order to try and tap into the burgeoning internal mobile money transfer businesses.

EcoCash is a mobile money service offered by Econet Wireless Zimbabwe, the country’s biggest mobile telecommunication company by assets and subscribers. Telecel and NetOne also operate Telecash and One Wallet respectively.

From January to September last year, an estimated US$1 billion changed hands within the EcoCash ecosystem.
The rigidities spawned by red tape in banks have made mobile money transfers a thriving business.

Estimates suggest that close to five million people or 35,7 percent of the country’s population is registered to a mobile money transfer service.

Conversely, about 70 percent of the country’s 13 million people do not have active bank accounts.
SA banks capitalise on loopholes

Despite establishing a foothold on local money transfer, local mobile telecommunications have not been able to spread their tentacles across borders.

Econet announced late last year that it was considering introducing international remittances as part of their EcoCash mobile money service.

But to date the service has not taken off yet.
While local players have been procrastinating, South African banks have been actively tapping into this market, leveraging on Zimbabweans living and working in South Africa.

One of South Africa’s “big four” banks, First National Bank (FNB), formed a tie-up with retailer OK Zimbabwe Limited in April last year to launch a mobile-based remittance service — FNB Zimbabwe Money Transfer — for people across the Limpopo to send money to Zimbabwe.

The two companies, spurred by research showing there are more than 1,9 million people living and working in South Africa, have seemingly been making rich pickings.

Low value transfers attract steep charges as high as 45 percent, while high-value transactions are levied a modest 4,5 percent of the charge.

Sending between R100 and R1 000 attracts a R45 fee, while sending money between R1 001 and R1 500 costs R70.
Initially, the money was redeemed at two OK branches in Zimbabwe: one in Harare and another one in Bulawayo.
Plans are, however, underway to include all the retail outlet’s 32 branches.

OK has more than 55 branches in Zimbabwe.
FNB’s research showed that Zimbabweans in South Africa send an average R6,7 billion (about US$740 million) to Harare.

This market has remained out of reach for many players in the financial services sector.
OK has also made a similar arrangement with Standard Chartered Bank South Africa through Instant Money International in December 2012.

Fees for transactions offered by this service were pegged at R50 (US$5,7).
Market watchers say mobile companies have the ability to maximise on this untapped market, adding that there are some hygiene issues that need to be considered for the sector to succeed.

Currently, the three players are reluctant to open up their gateways, making interoperability very difficult.
Consumers have to rely on services offered only by their respective operators.

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