Money transfers are a crucial source of financial funding for households in South Africa.
According to a study conducted by World Bank in the last years, South Africa remains to be one of the leading recipients of cross border remittances in Africa.
However, despite the high remittance inflows in South Africa, the cost of sending money to the country has been extremely high compared to other regions globally. For instance, on average, sending 200 USD to a friend or family in South Africa will see you pay up to 12% of the amount, which is against the global threshold of 7%.
Also, the exchange control regulations issued by the South African Reserve Bank (SARB) regulates the remittance process and how much money should be transferred.
This has made a money transfer abroad to South Africa a daunting experience, keeping in mind that the transfer can take for as long as 7 days or more.
This article highlights everything that you should know about sending money to South Africa with a recommendation to the ideal transfer methods.
A Look into South Africa’s Money Transfer System
Sending or receiving money from overseas in South Africa is tougher now than ever before.
This is due to the outdated money transfer system that is dependent on high street banks, coupled with strict exchange regulations and unfavourable exchange rates.
Here are some facets that describe the remittance system of South Africa.
1. The Exchange Control Regulations
Before you consider sending money to South Africa, you must understand the strict regulations that govern how your money will get home. The following points are a brief outline of what the regulations entail:
- The regulations affect the transfer of any transaction regardless of its size.
- Money is held in the recipient’s account until they personally clear the funds with the Reserve Bank. Unfortunately, if the recipient is not in a capacity to clear the funds, the receiving bank is authorised to reverse the transaction to the sender.
- Local banks must report all remittance inflows from a foreign country before releasing the funds. This prolongs the duration within which recipients get access to the sent money.
- A currency transfer can only be effected by authorised dealers.
- Money transfer can only be done for permissible reasons, as stipulated by the Reserve Bank through the authorised dealers.
- Permissible reasons for remittance include monetary gifts, loans, donations, maintenance transfers, travel allowances, study allowances, foreign capital allowance, and the individual capital allowance.
2. Need for a Bank Account
To receive or send money in South Africa, one must have a bank account with any of the South African banks.
The bank opening process can be tedious sometimes. However, it is the only option one has to get access to money remittance services.
Banking apps are not independent options, as they require onboarding to be functional. Onboarding refers to having an initial bank account with a high street bank.
It is also vital to note that most banks come with withdrawal restrictions, annual fees, and other transaction costs.
3 Ways to Transfer Money to South Africa
With the entrance of more players in the remittance industry, money transfer to South Africa could only get better.
There are several ways through which South Africans living overseas can send money back home with ease.
The Reserve Bank, through its authorised dealers, approves several remittance service providers to operate in the foreign exchange landscape using the SARB’s licensing framework.
1. Online Money Transfers
Online money transfer service providers such as WorldRemit, Xoom, CurrencyFair, TransferWise, Azimo, and Western Union are now bridging the gaps that have existed in the remittance corridors of South Africa.
By choosing any of these service providers, you subscribe to faster transfer durations, low fees, and favourable exchange rates.
All you need is to open an account with your service provider, load your account with money, and eventually make your transfer. Loading an account can be done via cash deposit, bank transfer, or via a credit/debit card.
The transfer is done through a physical store, mobile application, or website provided by the service provider.
Here are some important highlights to note about online money transfers.
- Mobile Wallets
Once you set up your personal account with a service provider, you get access to a mobile wallet. A mobile wallet is a savings facility within your account that allows you to keep money awaiting withdraw.
You can have your recipient set up an account with your service provider as well. This way, you can transfer money to their mobile wallet directly.
This platform is convenient, especially for individuals living in the rural areas of South Africa.
Urban residents can also use mobile wallets. An example of banks with this service is Standard Bank under MoneyGram.
- Cash Pickups
A cash pickup service allows a South African expat to send money to an agent of their service provider, from whom the recipient collects the money. The recipient is issued with documents indicating the collection details.
2. Bank Wire Transfers
Bank wire transfer is the movement of money from one country to another through the available banking systems.
Fortunately, South Africa’s banking system is safe and secure.
You can, therefore, wire money to your recipient’s account using the wire transfer service.
South Africa hosts over 22 banks that are registered locally and internationally.
The only challenge with this method is long waiting times, unfavourable exchange rates, and strict screening operations.
The fact that you are dealing with banks directly means that your transfer will be affected by holidays, operating hours, and time zone differences.
3. Money Orders
This is probably the easiest method you can adopt to send money to South Africa.
This is because neither you nor your recipient requires an account to use a money order service.
This method is favourable for you if the country you reside in mutually participates with South Africa in money order services.
International and domestic money order services in South Africa are regulated by the South African Postal Service.
5 Reasons Why You Should Use Money Transfer Services
Postal services and the old-fashioned money transfer system have been the only avenues of money movement in South Africa.
These methods, however, were slow and less convenient to both the sender and the recipient.
With mobile money transfer services taking over the remittance space, South Africans living abroad have something that they can boast about today.
Here are the benefits of using money transfer services.
• Quick Transfers
When it comes to money transfer, speed is always a fundamental factor to consider.
With the traditional money transfer method taking up to over 7 days for the money to reach the recipient, money transfer services are here to give you relief.
With online transfers, for example, money can get to your recipient as soon as 10 minutes.
• Reasonable Transaction Costs
The transaction costs linked to money transfer services only come in two formats, including the bank charges and the provider’s fees.
Remittance service providers are interested in large transactions to earn an income as opposed to the traditional system that charges highly per transaction.
With online money transfer services, you can wire funds to your recipient at the comfort of your office or house.
You do not have to walk down the street to process your transfer in a bank.
This gives you the convenience of sending money back home at any time, from wherever you are.
• Better Exchange Rates
How favourable exchange rates are influences how much your recipient receives in the South African Rand.
This is where money transfer service providers get a win against the traditional transfer methods.
They offer better exchange rates than the conventional transfer methods that were previously used.
• Easy Set-up
Setting up a money transfer account with your service provider is fast and straightforward.
All you need is signup to their website or application and load it with the required amount to activate it.
Once activated, your account is ready for transfers.
Setting up an account takes minutes.
You can use your account as soon as you finish the setup process.
What You Need to Send Money to South Africa
Details and documents needed to send money to South Africa from the USA or any other country vary from one service provider to the other.
However, most of the providers will require details that prove your identity and that of your recipient. Here are some of the required details:
• Photo Identity Card
• Card number (if you are using a credit/debit card to transfer money)
• The recipient’s full name. The name must be as it appears on their official documents. Any error identified may invalidate the transfer.
• Account details of the recipient.
• The recipient’s phone number and addresses.
• Routing number, bank name, and SWIFT code. These are necessary if you are using the bank wire transfer method.
Why I would use WorldRemit to send money to South Africa
My personal favorite money transfer app is WorldRemit.
The advantages of WorldRemit are:
- It's easy to set up
- It's instant
- It's secure
- It's transparent and low-fee
- The first 3 transfers are free!
You can send money to South Africa as bank transfer within the same day, as cash pickup within minutes or as airtime top up within minutes.
E.g. if you send 200 USD to South Africa, your recipient gets 3,024 ZAR, incluidng a 3.99 USD fee. And the first three transfers are free!
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