Supporting Remittances in Southern Africa: Estimating Market Potential and Assessing Regulatory Obstacles

This paper discusses the potential demand for cross-border remittance services in southern Africa and the potential business and technological opportunities in the remittance market. It also presents the:

• Regulatory barriers to doing business;
• Policy and regulatory changes to facilitate the development of the market.

The paper examines:

• Regional migration patterns;
• Size of the remittance market;
• Remittance demand characteristics;
• Money transfer alternatives; and,
• The regulatory environment.

It finds that:

• Short-term economic migration to South Africa dates back to the late 1800s and has continued to the present day;
• Annual cross-border remittances in South Africa are approximately Rand (R) 6.1 billion;
• Post Office is the predominant formal remittance method;
• Formal channels process less than half of remittances in both domestic and cross-border markets;
• New or emerging remittance channels face problems like customer acceptance, regulatory barriers and infrastructure investments;
• Some of the products and channels with the greatest revenue potential also face the greatest number of regulatory barriers.

The paper recommends the following regulatory reforms to assist the development of the formal remittances market:

• Remove exchange control reporting requirements below a R5000 threshold;
• Introduce a limited authorized dealer license for the remittance market;
• Facilitate remittances on presentation of a passport alone.