Remittances from South Africa to SADC Geoff Orpen 26 March 2015

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

Coverage of our regional work

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

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 79 132 317 938 397 070 Madagascar Malawi 1 077 70 616 71 693 Mauritius 563 36 898 37 460 Mozambique 81 692 160 000 245 147 486 839 Namibia 163 21 419 21 582 Seychelles Swaziland 14 473 103 079 117 552 Tanzania 79 5 187 5 267 Zambia 972 63 755 64 727 Zimbabwe 12 597 646 484 1 250 000 1 909 081 Total 198 624 840 918 2 215 863 3 255 406 Source: DNA calculations, drawing on various sources

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 397 070 1 994.5 1 514.0 1 754.3 Madagascar - Malawi 71 693 146.8 101.6 124.2 Mauritius 37 460 98.0 67.8 82.9 Mozambique 486 839 1 781.8 1 395.4 1 588.6 Namibia 21 582 61.7 42.7 52.2 Seychelles Swaziland 117 552 462.3 320.0 391.2 Tanzania 5 267 12.0 8.3 10.1 Zambia 64 727 147.3 101.9 124.6 Zimbabwe 1 909 081 75.0% 7 910.8 5 476.7 6 693.7 Total 3 255 406 13 008.4 9 300.9 11 154.6

Remittances per country

Cost of Remittances

Cost of remittances to Malawi by institution

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

Lesotho remittances-the impact Population is 2 million 50% of the population have incomes below poverty line 400 000 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

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

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

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

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

Thank you