Some quick math on social media suggested that Mukuru and how charges were inconsistent for domestic remittances. In the post, the math went something like this.
1/ Stolen…. A) Sending US$450 via Mukuru from Harare to Chipinge you are charged US$23. And the maximum you can send is US$450. That means if I were to send US$1500 I need to pay close to US$100 in Mukuru transfer charges.Alistar Nyamarai Chibanda’s Twitter thread
To cut on costs he used his UK Mukuru account to send money which worked out cheaper than using a domestic account. 8 Pounds or around US$10 vs US$23 for the same amount. So there are a couple of things we need to make clear on. Domestic remittance taxes that are unique to Zimbabwe (4% IMTT), remittance charges of the operator, and the government of Zimbabwe encouraging inflows of forex via remittances.
2/6 B) Sending US$1500 from UK to Zimbabwe (Chipinge) you are charged only £8 ( approx US$10). PLEASE NOTE: it’s same company charging different transfer charges to send money to the same destination, depending on where you send from.Alistar Nyamarai Chibanda’s Twitter thread
4% IMTT Tax. A Zimbabwean Tax
Mukuru has its operations in a number of regions. It’s an international money transfer business and each region, it operates in has guidelines it’s supposed to comply with. In Zimbabwe, one such guideline is a 4% IMTT tax placed on all domestic foreign currency money transfer services. This means before money transfer agencies take away a single dime, 4% of the amount you are sending goes to the Zimbabwean government. InnBucks charges are 5% with 80% of that going to the government.
This affects all money transfer agents locally. So in his example, US$18 of the US$23 in transfer charges is just the 4% IMTT with Mukuru taking home (roughly 1%) US$5. Which is actually less than the £8 he is being charged when using his UK Mukuru account. Again these percentages vary especially if the sending currency is different from the receiving currency or if the origin of the transaction is a different country from the destination. You can see for yourself in this Mukuru WhatsApp bot.
It must be easy for forex to make its way into Zim
If you think about it it’s playing into the hand of the government. For those with international accounts, their balances are technically money outside of the country regardless of where they physically are. So him sending money from a UK account to a Zim account simply means on the Mukuru system money has left the UK and come to Zim.
The government wants that transaction to be as cheap as possible so that it’s easier to bring that desirable forex into the country. I’m sure the finance minister has a big smile on his face seeing that the resolution she made, in the end, was probably an unforeseen trait of the 4% tax they may have not taken into account. More remittances mean more revenue from the tax and the citizen’s eternal pursuit to preserve value and reduce cash erosion means more inflows of forex through these said remittances. Genius.
As for the US$450 limit. It’s actually an RBZ directive under SI 124 of 2015 which limits daily forex transactions to US$500, monthly limit to US$5 000, and yearly limits to US$20 000. For amounts beyond that, you’ll need to open an FCA account.
Exchange Control (Authorised Dealers with Limited Authority) Order, 2015SI 124 of 2015
(2) Every authorised dealer with limited authority referred in section 3(1)(a) shall observe the following limits for senders—
(a) five hundred United States dollars per day;
(b) five thousand United States dollars per month; and
(c) twenty thousand United States dollars per annum.
Zim is very expensive for transactions and it’s not the Money Transfer Agent’s fault
Before Money Transfer Agents were a thing, money was moved around the country physically. It would literally be put on the bus. What money transfer agents then came in to solve was the aspect of reliability and security of this movement of funds. But they have to do this in a cost-effective way if they are to be a viable option for potential customers.
That is what they are trying to do. The 4% IMTT affected them big time. It’s for example double the IMTT on ZW$ transactions (2%). So for Money transfer agents to remain a viable option for you and me they have had to take a hit on their cut to the point where most of the money transfer agents including City Hopper, Access Forex, and NBS InstaCash are taking home less than what the government is. Just 3%.
Not only that. There are annual licensing fees they have to also pay to the RBZ on top of this 4% tax and it’s all in forex. Making it a delicate balancing act between providing a convenient service to you and me and keeping the lights on.
(7) Every authorised dealer with limited authority shall pay to the Reserve Bank the following annual licensing fees—SI 124 of 2015
(i) one thousand United States dollars for its head office; and
(ii) four hundred United States dollars for each branch.
(8) Every authorised dealer with limited authority shall pay to the Reserve Bank the following annual licensing renewal fees—
(i) eight hundred United States dollars for its head office; and
(ii) two hundred United States dollars for each branch.
It seems pretty unfair that the cut the government is taking is higher than the cut the actual service provider is getting. And it’s even more restrictive to the flow of cash in official channels. Almost feels like a get-rich-quick scheme. So yes money transfer services are expensive. More than they should be. But it’s not their fault.