Why South Africa is the most expensive country for international money transfers

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In global terms, that’s not particularly exceptional. The same is true for most countries around the world. What South African individuals and businesses might not realise, however, is that they’re paying more for those transfers than anyone else in the world.

According to the World Bank’s Remittance Prices Worldwide report, the average cost of sending $200 from South Africa is 13.18%, up from 12.82% in Q4 2023. While that’s a marked improvement from a decade ago, when average international money transfers were more than 20%, it’s still nearly double that of the next most expensive G20 nation, Japan.

Given the relative weakness of the rand against other major currencies, such high costs mean that South African individuals and businesses are doubly penalised.

But why are these costs so high for South Africans and what, if anything, can they do to ensure that they’re getting the best possible price on their international money transfers?

Swift fees play a role, but bank fees are the bigger problem

A part of the reason why South Africans pay more, particularly when it comes to smaller transfers, is because the country has higher Swift fees than its G20 counterparts.

As the secure messaging network that’s used to send money internationally, Swift charges banks a network fee so that they can access it. This money is used to maintain the network and is typically passed on to the banks’ customers.

Further compounding the Swift fees charged by South African banks are the country’s rigorous exchange-control reporting requirements.

These requirements mean that the banks end up with additional administrative and compliance costs, which are then passed on to the customer. They’re unfortunate, but there’s nothing banks or customers can do to change the situation.

It’s also worth pointing out that most banks charge between R500 and R1000 for Swift fees. That’s a lot when you’re sending the equivalent of $200 (approximately R3,542), as per the World Bank report. It’s much less of an issue if you’re transferring hundreds of thousands of rands for a property investment or for an order of imported goods.

Far more dangerous to people and businesses moving large sums abroad, is the lack of transparency displayed by banks when it comes to their international money transfer fees. This lack of transparency is especially evident in the spread, which is the difference between the price at which a bank buys and sells currency.

Most banks are happy to tell their customers about Swift and transaction fees but won’t mention the spread.

As a result, customers can end up paying tens of thousands of rands more than they should on each transaction. As transfer sizes become larger, the spread fee increases in rand terms and can add up substantially, so much so that the Swift fee suddenly isn’t the culprit anymore.

Here’s what that might look like practically: let’s say you’re sending R1,000 000 to the US. If the spot rate is R18 to $1, the bank might charge you R18.36 to $1 and pocket the 36c for each dollar, which equates to 2% of the transaction value.

While this doesn’t seem significant at a first glance, it means the bank is charging you R20,000 in addition to their admin or processing fees. No matter what reason an individual or business has for making an international money transfer, that’s not a cost they should have to shoulder.

Choosing the right provider

Knowing all this, how can South Africans bring certainty to their international money transfers and ensure that they’re getting the fairest possible price?

A good place to start is by choosing the right international money transfer provider. Rather than using a bank, which is understandably most people’s first choice, businesses and individuals should look for a dedicated international money transfer provider which has transparency and expert-led customer service as its foundational principles.

Price transparency means that they’ll always know what they’re paying on any transaction, giving them certainty and allowing them to make clearer financial decisions.

It also allows them to better plan their international transactions and reduces the risks of complications during the international money-transfer process.

A focus on expert-led customer service, meanwhile, means that any other complications can be quickly dealt with. The right international money provider should also assist with any required Sars and Sarb approvals at no extra cost, while helping submit the correct Balance of Payment (BoP) codes and any other supporting documents.

This further reduces the risks of a transaction dragging on and encountering additional costs or complications that weren’t bargained for.

Don’t hold your breath for change

Of course, making international money transfers from South Africa shouldn’t be as expensive as it is. It’s clear that change, particularly within the broader banking industry is needed. That’s especially true when you consider the potential benefits to the country were costs to be reduced.

That change will take a long time to implement, however. As such, South African businesses and individuals should do everything in their power to ensure that they’re getting the best possible price on their international money transfers. And choosing the right international money transfer provider is key to that.