Leaving their home countries in search of better work opportunities, Africa’s migration story is one of hope and inspiration driven by the desire to create a better life for themselves and their families.
Ruhling Herbst, executive head of Africa business development at BankservAfrica, shares the cross-border payments journey in the Southern African Development region to improve lives and connect economies.
Cross-border transfers are a vital source of income for households and contribute enormously to improving living standards. Additionally, remittances are a significant source of capital for countries and vital for socio-economic development.
The extent of this reliance is reflected in the numbers.
In the Southern African Development Community (SADC) region, the value of authorised outbound remittances from South Africa alone totalled approximately $991-million in 2022, according to FinMark Trust. This amount excludes remittances from informal channels.
However, due to a variety of reasons, Sub-Saharan Africa, which is estimated to have received remittance flows worth a hefty $54 billion in 2023, according to the World Bank, is believed to have some of the world’s most expensive corridors. Estimates show the costs across the region can range from 1.3%-4.5% in the lowest corridors to 17-36% in the highest.
Lowering remittance costs is listed in the United Nations’ Sustainable Development Goal 10 for 2030 for reducing inequalities, stating ‘reducing the cost of remittance transfers can substantially increase disposable income for remittance-receiving families’. The aim is to lower average costs to three per cent globally to allow remittance families to save an additional $20-billion annually.
The challenges of lowering costs are vast. The layers upon layers of fees for forex exchanges in the multi-currency region, combined with the absence of end-to-end accessible digital remittance services, has historically stymied efforts, leaving people with little option but to use the same, expensive channels or resort to informal channels.
Why it’s more than a transaction
The SADC is one of the widest-reaching regional blocs on the continent, brimming with opportunities from the region’s close economic and cultural ties.
With a population spanning almost 400-million people, the SADC region has a rich migration history between member countries. According to Migration Portal Data, ‘industrial developments, the mining sectors in South Africa, Botswana, and Zambia, and the oil wealth of Angola have been magnets for both skilled and unskilled labour migrants from within the region and elsewhere’.
The efficient flow of retail payments across borders is core to supporting migrant workers and their ability to send money home to support their families. Beyond that, a fully functional, interoperable payment system would stimulate trade across borders.
As the case for digital public infrastructure for cross-border payments gains global appeal for driving inclusive economies, facilitating essential services such as payments, and promoting interoperability, the SADC region has already made great strides with the Transactions Cleared on an Immediate Basis (TCIB) Payment Scheme.
Supporting regional integration through multi-lateral agreements between regulators in different jurisdictions and advocated by central banks, banks, and non-banks, the TCIB Payment Scheme unlocks payment corridors in the SADC region and connects payment service providers to ensure the seamless flow of funds.
Reducing the lengthy waits, and removing the payment risks, this service will help to bring down the costs of sending and receiving money.
Where we’re currently at
Owned by the SADC Committee of Central Bank Governors and regulated by the SADC Payment System Oversight Committee, the TCIB Scheme was collaboratively developed and launched in 2021 as a regional retail payments platform and scheme.
Live since 2021, operated and managed by BankservAfrica, this multi-currency-enabled, ISO 20022 platform forms part of the broader SADC payments integration roadmap.
Attracting the interest of payment service providers, the number of participants in the TCIB Scheme has increased significantly, each supporting the goal of deepening cross-border payments across the region.
In late February this year, the Scheme celebrated a success milestone with the opening of the SADC payment corridor between South Africa and Zambia that links Sendhome and SamPay customers in both countries. Preparations are underway to open additional corridors in the coming year in the journey of unlocking all corridors in the region in the long run.