The United Kingdom, Australia, and the United States are the top three destination countries for South African emigrants. Together, they contribute over 61% of the money sent back home by South Africans in the diaspora. In 2017, South Africa received $898 million, making it the 8th largest African country in remittance inflows.
In the 20th and 21st centuries, close to 4.3 million South Africans emigrated to different countries. Most of them left in search of employment opportunities and have been sending money home through banks, money transfers and other services.
In response to the remittances and other inflows, the remittance market has been undergoing regulatory changes. For instance, through the Exchange Control Circular No 16/2013, the country lifted ownership restrictions to allow foreign participation in money transfer operations.
Sending money to South Africa is now more competitive with the entry of more players into the remittance market. Therefore, it helps to know the different ways to send money to your loved ones in South Africa, the information required when sending and receiving, the benefits of using money transfer operators, and the specific things to consider when sending money. This guide will highlight those and more!
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There are multiple ways to easily send and receive money in South Africa but these will largely depend on the provider you decide to use. Below you will find everything you need to know about sending and receiving money.
The South African Reserve Bank has expanded the crossborder remittance environment in the country through regulation and licencing. Many service providers have been granted approval under the authorised dealers in foreign exchange with limited authority (ADLAs) licencing framework. As a result, senders have many different ways they can remit money to their families and relatives back home.
The following are some of the reliable and safe ways South Africans in the diaspora can use to send money.
South Africa has over 22 registered banks comprising locally-controlled, foreign-controlled, mutual, and cooperative banks. Also, the banking system boasts over 50 branches of foreign banks. Therefore, moving money through the banking system from other countries to South Africa is relatively safe and convenient.
Notwithstanding their extensive network, banks are still grappling with unattractive exchange rates, longer wait times, and intense screening operations. Time zone differences and operating hours can lengthen the time bank transfers take to reach target beneficiaries back home.
Fortunately, money transfer service providers have come in to give South Africans in the diaspora more choices.
Africa is rising. The opportunities across the continent have attracted lots of players into the international money transfer market. Companies like TransferWise, Xoom, MoneyGram, Western Union, Currencies Direct, First Rand, Mukuru, and WorldRemit have positioned themselves to take advantage of the various transfer corridors.
These companies also give favourable exchange rates, lower fees, and faster transfer times. Setting up is very simple. All you need is to sign up for an account and fund it via credit/debit card, bank transfer or cash deposit. Once the account is loaded, you can transfer the money right on the provider’s website, using a mobile application or visiting a store and sending from there. The following are the main sending options.
Bank Transfer – If the person you are sending the money has a bank account or prefers to receive money using this option, bank transfers can be convenient. Apart from safety, bank transfers can handle large amounts with no pressure to withdraw it all at once.
You can transact with the money however you like without necessarily having it in cash.
Cash Pickup- Depending on how close the recipient is to an agent of your chosen provider, you can send cash for pick up. The advantage of this method is that it is fast and very much convenient for small amounts. The recipient gets a voucher number with collection details.
Western Union has partnered with select ABSA branches while TranferWise leverages the Mukuru network for cash pickups. You can access MoneyGram services from FNB ATMs and cellphone banking.
Mobile Wallet- You can choose to send money directly to the recipient's mobile wallet. This method is convenient both for the unbanked in rural South Africa and for recipients in urban areas as well. The money is literally in your hands the moment the transfer is complete. MoneyGram offers this service through Standard Bank.
The South African Postal Service established under the Postal Services Act of 1998 is in charge of both domestic and international money orders. International acceptability and sending limits vary from country to country.
The beauty with money orders is that neither the sender nor the recipient needs an account. Also, money orders are paid for well in advance thus guaranteeing the recipient will get their money. Only senders from participating countries can transfer money using this method.
Whether you are sending to the Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, North West, Northern Cape, or Western Cape, your provider and the method of transfer will determine the details to provide. That said, the following is a list of what is typically required when sending.
On a case by case basis, senders may be asked to give more details on the purpose of the funds.
The unemployment rate in South Africa is currently at 27.2 per cent with 14 million people living in extreme poverty. This trend has led many people to emigrate in search of economic opportunities elsewhere. Looking at the characteristics of the remittances in terms of size and frequency, one can deduce several reasons for the remittances.
The average household size in South Africa is 3.3 people. In terms of the cost of living, the country is the fourth most expensive in Africa. Household living expenses have been rising forcing many families to rely on their loved ones abroad or depend on government support. The main areas of support are food, clothing and personal care.
The education system in South Africa consists of both private and public school systems. Compared to the private school, the public schools in South Africa suffer from poor teacher-student ratios, low quality of teaching, and teacher absenteeism. South Africans in the diaspora looking for quality education for their siblings and relatives enrol them in high-end private schools. The money they send home also caters for higher education.
The cost of property in South Africa is relatively cheaper for South Africans in the diaspora. Mortgage uptake is on the rise with mortgage debt to GDP ratio of 20. Most of the mortgages bear interest rates of about 10% and last for 20-30 years.
The enactment of the National Credit Act 34 of 2005, streamlined access to credit. Small scale borrowers can obtain funds without much red tape. Households with loved ones in the diaspora often take advantage of such opportunities to get quick money and repay once they receive their remittances.
The investment climate in South Africa is more attractive compared to the rest of the continent. South Africans abroad remain true to their country and heavily invest in equity and debts instruments as well as the real estate market.
The investment money is sent alongside other remittances to households or directly to financial institutions. The government through the department of trade and industry has also stepped up its efforts to encourage investments.
Other reasons for remittances include health insurance and related expenses, travelling expenses, and social contributions.
The banking system and the postal service in South Africa have been the bedrock of financial services in the country. However, emerging technologies and the lethargy of slow and expensive remittance systems have made money transfer services to be preferred.
Read along for the top reasons why money transfer services are ruling the airwaves in South Africa.
Before sending to South Africa, there are issues to consider. Think about the widening current account position, weakening commodity prices, above-average inflation rates and the taxation regime.
Sending money to your family, relatives, and friends in South Africa is faster, simpler and cost-effective now than ever before. However, you need to have the right information on the different ways of sending, what to provide when sending and receiving, cross-comparisons of the various benefits providers give, and the factors to consider back home before sending.
The fastest way to send funds is through the faster services offered by companies like Western Union, Xoom, and MoneyGram. These services will all see to it that your money reaches its South African destination in a matter of minutes. The catch is that all these options are very expensive, as they exceed the average costs in the industry.
The cheapest way is through TransferWise. TransferWise specialises in small amounts of money being sent regularly, but their rates are great in general. They charge an upfront fee that works out to a small percentage of the overall transaction. Where you really save is with the hidden conversion fees. Unlike most other money transfer services, TransferWise uses only the current conversion rates. In the end, you are getting better rates if you use TransferWise.
The easiest way to send money is through PayPal. While PayPal is infamous for terrible exchange rates, they are still pretty fast and secure. When it comes to ease of use, which is where PayPal truly shines, PayPal is a great service to use. It has intuitive interfaces and processes that make it very simple to send or receive money.
The current exchange rate for the South African Rand (ZAR) is 14.7219 ZAR per American Dollar (USD), as of the time this was written. The ZAR reached a high of 15.4622 ZAR per USD in the last 90 days, with a low of 14.5707 ZAR per USD. The average exchange rate was 14.9471 ZAR per USD over the last 90 days.
The average volatility of the ZAR against the USD was 0.73% over the last 90 days. This is a rather high volatility, and furthermore, the ZAR has fluctuated significantly over the course of the last few years. Economic conditions inside South Africa will determine future fluctuations in currency exchange rates. You can reasonably expect these fluctuations to continue going forward, barring unforeseen circumstances.
The overall best way to send funds to ZA is through TransferWise. TransferWise offers the most well-rounded deal when to send money to South Africa. Their costs are always the lowest if you are sending a three-figure (USD) amount. Their delivery times are also ok, as they take a day or two to be completed, which is on the better side for wait times. Lastly, TransferWise is an easy and convenient service to use that doesn’t require much thinking or even much action on your part, making it the best way for South Africa.