Zim expects increased remittance flows
ZIMBABWE is expected to see a surge in remittance flows following a move by Econet and Sasai Money Transfer to eliminate transaction charges, analysts have said.
According to the Reserve Bank of Zimbabwe, diaspora remittances channelled through official means surged to US$1,873 billion in 2023, marking a notable 16% increase from the US$1,617 billion recorded in 2022. This upward trend continued into 2024, with remittances rising by 18% in the first quarter alone, getting to US$494 million compared to US$420 million during the same period last year.
"The measure of lowering transaction costs by Econet creates pockets of competitive advantage in the remittances market," Enock Rukarwa, a research analyst with FBC Securities, said.
"Remittances are now a significant foreign currency source for the economy. The government, financial institutions, and the private sector need to incentivise this market by enhancing financial inclusion, improving financial infrastructure and cultivating diaspora engagement."
In May this year, Econet partnered with its sister company, Sasai Money Transfer, to enable individuals and companies in the United Kingdom and South Africa to send money to Zimbabwe free of charge. Recipients can also cash out from their Ecocash wallet for free.
This initiative marks a significant departure from the 15% charge previously applied to international remittances, with recipients also being charged 3% when cashing out.
Econet Wireless Zimbabwe chief executive Douglas Mboweni explained that the decision was intended to help Zimbabweans weather the acute challenges caused by the ongoing drought. The country recently declared a national disaster due to the drought triggered by the El Niño climate event, which has left more than 2,7 million people in need of food aid.
"We hope Zimbabweans in the diaspora will use the savings to send more money home to their families," Mboweni said.
Econet's extensive Ecocash agent network ensures that even people in remote rural areas have access to low-cost financial services, reducing the need for recipients to travel long distances to collect cash. The move is expected to bolster financial inclusion and provide much-needed support to families affected by the drought. Financial analysts have hailed the partnership between Econet and Sasai Money Transfer as a strategic move that could significantly boost Zimbabwe's foreign currency reserves.
"By removing transaction fees, Econet is not only making remittances more affordable but also encouraging more frequent transactions, which can have a positive ripple effect on the economy," Claudina Chiwara, an independent financial consultant, said.
"This initiative could set a precedent for other financial institutions to follow, ultimately benefiting the entire remittances ecosystem."
Bulawayo-based analyst Effie Ncube said the development by the country’s leading telco and technology company is set to alleviate the challenges faced by the poor ahead of the impending drought.
“This is a welcome development that is going to help alleviate income challenges among the most vulnerable communities. We are hoping that all other companies will follow suit and remove charges. That will help improve remittances,” he said.
Another analyst, George Nhepera, said the importance of remittances to Zimbabwe's economy cannot be overstated.
“Remittances are vital for household consumption and investment in education, healthcare, and small businesses. The removal of transaction fees can significantly increase the amount of money flowing into the country, improving the living standards of many families," he said.
Nhepera added that increased international remittances can increase Zimbabwe’s aggregate demand for goods and services resulting in the country’s manufacturing sector increasing production. — Staff Reporter.