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10 Jul 2015 00:00
Raphael Grojnowski says there are plans to launch Mama Money in Johannesburg following its success in Cape Town. (Oupa Nkosi, M&G)
South Africa is one of the most expensive remittance corridors in the world, claiming three of the top five spots.
Sending money to Zambia from South Africa is the most pricey, costing individuals almost 20% of the value of the transaction, according to the World Bank. Money sent to Malawi is the second most expensive at almost 18% of a transaction, and in fifth place is money to Botswana at slightly more than 17%.
But a small start-up is on a mission to change that.
Mama Money provides services that transfer money from South Africa to Zimbabwe and charges about 5% per transaction.
It has been launched just ahead of efforts by South Africa’s finance ministry to reduce the costs of low-value remittances.
“We are the world’s first social business money transfer operator,” says its cofounder and director, Raphael Grojnowski.
“The whole point of why we started Mama Money was to help bring down remittance costs.
Part of the reason Mama Money can keep its costs low is it because is a cashless service, according to Grojnowski.
But senders from South Africa do need a bank account to register with Mama Money. Customers can register with its network of agents, and can then send money using cellphone banking, via Mama Money, to the recipient’s cellphone. Mama Money has a partnership with CABS bank in Zimbabwe and recipients can transact using the CABS Textacash mobile banking platform.
Grojnowski, who hails from Germany, says he and his South African business partner, Mathieu Coquillon, targeted the Zimbabwe corridor because of high demand and because it is one of the most expensive.
Mama Money has been in operation for almost six months and was the cheapest service along this corridor for the past two quarters, according to data from the World Bank tracking the global flow of remittances.
In the second quarter of 2015, the overall average cost to send $200 to Zimbabwe was 13.3%, the average bank cost was 18.35% and the average money transfer operator cost was 11.17%.
But hot on Mama Money’s heels is FNB, which offers services through its online ewallet at slightly more than 7%. Mama Money, which serves 5 000 people and operates primarily in Cape Town, is planning to launch in Johannesburg in August.
To market the company, it has used social media platforms such as Facebook and also real social networks that include nongovernmental organisations and churches. Grojnowski says they are looking to expand into Malawi, Mozambique and Zambia.
A self-confessed optimist, Grojnowski says the firm is premised on the idea of a “social business”. The company has been established specifically to address a social problem – the high cost of remittances.
The “100% self-funded bootstrap start-up” has yet to break even, but as soon as it is does Mama Money intends to reduce its commission fees even further, he says.
Back-of-the-envelope calculations done by Mama Money suggest that, if all remittance fees to Zimbabwe could be lowered to 5%, this could raise the country’s gross domestic product by 2.7%. Lowering charges is in South Africa’s interests, he argues, because it means more financial stability for neighbouring countries and the region.
Last month Finance Minister Nhlanhla Nene took steps to address the issue of remittance costs. He introduced a long-awaited exemption from the Financial Intelligence Centre Act, or Fica, for low-value remittances. The move is expected not only to drive down costs but also to encourage people to move from informal to formal financial channels.
Figures on the actual number of migrants living in South Africa are notoriously illusive but Africa Check estimates the number of undocumented foreigners living here to be 1.7-million. Many of these people are still sending money to their families in other countries through informal channels.
According to 2012 research from the FinMark Trust, about 28% of the remittance flow from South Africa went through formal channels, such as banks, and the rest was sent by taxi or bus services or through family and friends.
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