Justin Arenstein The worlds largest international money transfer company, Western Union, suspended all services in South Africa this week following local cash-flow and foreign exchange problems. The freeze on payments totalling an estimated R100-million a month is expected to hit migrant miners and workers hardest. Migrant workers and South African expatriates use Western Union to send money home to support their often impoverished families. Thousands of these families now face a bleak Christmas, while South Africans expecting income from offshore relatives will have to wait until the end of January to be paid.
Western Union Southern African regional director Mathias Luft confirmed on Thursday that all 16 remaining distribution offices, which are operated by Western Unions local agent, Union Africa Money Transfer (UAMT), had been closed. This follows the Reserve Banks closure of 130 smaller rural distribution agencies in October after undercover police and Reserve Bank officials allegedly convinced UAMT/Western Union officials to violate foreign exchange regulations in at least three separate incidents. The latest closures became necessary “because UAMT has been experiencing difficulties with its settlement process, resulting in the unavailability of funds to pay incoming money transfers to consumers”, said Luft. “Rather than frustrate consumers by not paying their money transfers in cash, we opted to suspend the service altogether.” Luft stressed the suspension of services is not due to Reserve Bank action, but follows UAMTs failure to automate its back-office financial systems fast enough to comply with the Reserve Banks recently amended foreign exchange regulations.
“These regulations prohibit UAMT from net settling transactions, meaning that they are not allowed to use proceeds from outgoing money transfers to pay out incoming money transfers,” said Luft. The prohibition created a backlog, which in turn led to a cash-flow crisis that prevented UAMT from honouring some of its locally issued cheques. An estimated 66% of Western Union transactions are inbound, or people sending money to acquaintances in South Africa. “We have, today, organised bank guarantees for all Western Union cheques, so this is no longer an issue. Customer dissatisfaction had, however, risen to an unacceptable level, so we decided to rather suspend our entire service,” he said. Luft acknowledged that the crisis was the second involving UAMT in three months but insisted Western Union did not intend severing relations with its agent.
However, “we are speaking with local institutions to expand our services as part of our global multi-agency strategy”, said Luft. He declined to name the institutions, or comment on speculation that Standard Bank had been lobbying to be appointed sole South African agent. Luft also denied that the freeze on incoming money transfers would affect foreign exchange levels within South Africa or the countrys already shaky currency. He was unable to say when transfers will resume. Contact UAMTs call centre on 0860-100-031 for assistance. African Eye News Service