Big change to EFT payments in South Africa

South Africans should prepare for an upcoming change in how money can be transferred electronically between South Africa, Lesotho, Eswatini, and Namibia.

Regulators from the Common Monetary Area (CMA) decided to discontinue processing electronic fund transfer (EFT) payments and collections within the CMA from April 2024.

On 3 April 2024, the Bank of Namibia decided to extend the effective date to 30 September 2024. After careful consideration, the regulators have decided to extend this deadline.

The Payments Association of South Africa is responsible for coordinating South Africa’s efforts to meet this deadline. The CMA consists of South Africa, Namibia, Lesotho and Eswatini.

Therefore, Monday, 9 September 2024, is set to be the last day of processing domestic EFT credit payments and EFT debit collections to and from Lesotho, Eswatini and Namibia.

Due to these changes, and aligned with the effective dates for payments and collections to the relevant CMA country, South Africans will no longer be able to –

• Make EFTs to accountholders in other CMA countries
• Receive EFTs from other CMA countries unless they are initiated on a global banking channel
• Receive EFT collections from CMA countries

If South Africans want to continue making and receiving payments or collections to beneficiaries in a CMA country after September 2024, they can use a global payment platform to make and receive these payments.

In the future, debit order collection processing will only be supported in-country, and debit orders collected from accounts within the CMA will have to be initiated from an account domiciled in Namibia, Lesotho, or Eswatini. 

This will require access to an in-country banking service to submit debit order collections and the receivables and billing processing accounts. 

Alternatively, these debtors can initiate payments from the respective CMA countries to you using a cross-border service.

Developments in Africa’s remittance network

Many fintechs have attempted to enter and disrupt remittance payments in Africa.

A 2023 Finmark Trust study found that many families throughout the Southern African Development Community region are dependent on income received via cross-border remittance.

“Cross-border remittances provide these people access to essential services and contribute to micro-economies in many SADC communities, thereby fostering regional socio-economic development,” the report said.

In 2022, formal outbound remittances from South Africa via authorised dealers or authorised dealers with limited authority totalled approximately $991 million (approximately R18.56 billion). 

The value of informal remittances is estimated to be about equal to this amount.

It found that the number of formal remittance transactions outbound from South Africa has steadily risen by 3% month over month between January 2016 and 2023.

In 2016, Zimbabwe received around 79% of formal outbound remittances, while Malawi accounted for nearly 17%. In 2022, Zimbabwe’s share was 48%, and Malawi’s increased to 20%.

The chart below shows the total volume of formal remittances from South Africa outbound to Eswatini, Lesotho, Malawi, Mozambique and Zimbabwe between 2016 and 2022.

The report also found that fully digital transactions accounted for 16% of the total formal volumes sent in 2022, up from 17% in 2021. 

“Non-banks have untapped potential to drive digitalisation at the first and last mile, which could be a catalyst for a decrease in remittance prices,” it said.

MTN MoMo is one of the biggest players in this space, having recently expanded its remittance network by adding 25 new wallet corridors across 10 African countries.

This move took its total remittance network in Africa to 200 million wallets across 24 countries.

TechCentral reported that this move is especially beneficial for migrant communities in South Africa who send money home to Mozambique, Malawi and the Democratic Republic of Congo.

“South Africa is a net sender, with about 90% outbound and 10% inbound. We will be launching inbound by the end of 2024 to address the remaining 10%,” the publication reported.