According to a recent report, Africans are being handed the short end of the hammer by paying higher charges for overseas money transfer. Meanwhile, the two money transfer companies, MoneyGram and Western Union, have denied the allegation, Bukola Afolabi reports
In the fallout of the research conducted by two organisations, Overseas Development Institute (ODI) and Charity Comic Relief, it was discovered that Africans living overseas and wishes to send money to their family back home are being charged higher fees compared with amount charged nationals from other continents.
ODI director, Kevin Watkins, said the virtual duopoly operated by Western Union and MoneyGram in Africa was stifling competition. Although the ODI report did not allege price collusion between Western Union and MoneyGram, it said it was concerned by the uniformly high fees across countries in Africa, irrespective of underlying market conditions.
Mr. Watkins added: “Migrants sending $200 home can expect to pay 12% in charges, which is almost double the global average. While the governments of the G8 and the G20 have pledged to reduce charges to 5%, there is no evidence of any decline in the fees incurred by Africa’s diaspora.
“There is no justification for the high charges incurred by African migrants. The $1.8bn lost through the super tax could put 14 million children in school; deliver clean water to 21 million and sanitation to 8million people.”
Recent World Bank figures show that remittances from foreign workers are expected to rise to $436bn this year but ODI said the cost of sending money back to Africa was far higher than the global average. International remittances are expected to rise to $516bn in 2016, with the likes of MoneyGram and Western Union expected to profit immensely from this.
According to the outcome of the research, for every $200 sent home, the sender is charged 12% of the amount which is twice the global average of charges expected other nationals are charged.
It is a known fact that many Africans living abroad work hard under extreme cold condition and are under constant financial demands from their families back home who expect them to attune to their demands anytime such requests are made.
Western Union had claimed that various factors were responsible for the increase in charges, one of which is the higher taxes paid by the company in African countries. The company also claimed that because it offers efficient services, therefore increase in charges was inevitable.
“We deliver much needed services to individuals and the fees were set according to factors such as local taxes,” the company stated.
ODI further said its findings revealed that the two companies are enjoying less competition as they are the only major money transfer companies on the continent, adding that the companies capitalised on the monopoly they enjoy to increase their charges.
According to Siddo Deva of Charity Comic Relief, the high charge is a burden on Africans abroad who are working hard to earn a living. “Imposing such high remittance fees from hard-earned income is hurting the African Diaspora and more importantly, their families and communities in the countries of origin.”
However, a spokesman for Moneygram said the ODI had got its figures wrong. “We don’t recognise those numbers at all. There is no Africa premium.”
He said Moneygram was offering a competitive service for people shunned by high street banks and that someone sending £200 from the UK to Africa would pay a charge of 5.1 per cent, including foreign exchange fees, against a global average of 4.9 per cent.
Giving more reasons for the increase, an official of Western Union had also claimed that the cost of delivering cash to recipient in Africa is higher than what is obtained in other continents, adding that the company is spending much on security in Africa. “Cash has to be delivered and picked up with armoured cars. The reality is we are providing a very competitive service, a fairly priced service, based on speed, reliability, security of the money arriving. The average global revenue earned by Western Union from transferring money (including fee and FX) is 5.6 per cent of the amount being sent. However, our pricing varies between countries depending on a number of factors such as consumer protection costs, local remittance taxes, market distribution, regulatory structure, volume, currency volatility, and other market efficiencies. These factors can impact the fees and foreign exchange rates offered.”
With the latest development, Nigerians in Diaspora as well as their families back home are already feeling the heat of the new charges.
Titi Adetunji whose sister, Nike, lives in Surrey, United Kingdom told The Nation that for every 500 Pounds her sister sent home, she pays 60 Pounds as charge.
“It is discouraging and she now finds it hard to send home money. She prefers to buy goods and send them home for us to sell which even generates more money. I think the charge has to be reviewed. I wonder why Africans have to pay more than other foreigners whereas we have more Africans in Europe than any other nationals.”
Mr. Femi Oladeji, whose brother lives in New York, United States, also shares the same sentiment. He is of the view that emergence of more money transfer companies would reduce the monopoly enjoyed by Money Gram and Western Union.
“Until we have new companies involved in money transfer, Africans would continue to be shortchanged by these companies (Western Union and Money Gram). With all the money they have made in Africa, they have not given anything back to the continent. For every $200 (N31, 000) my brother sends home, we are charged $24 (N3, 720). So you can imagine the amount these companies are making. Are they saying Africans in Diaspora makes more money abroad than immigrants from other countries like Asia, Europe or Middle East which makes them to increase the charge? It is just a way of maltreating us. Even the tax they claim they pay, do they really pay those taxes?”
He added, “Africans have contributed immensely to the growth of the economy of these countries but it sad that we are not appreciated.”
A financial expert, Mr. Joseph George also blamed the attitudes of the companies on lack of competition.
“To me, it seems there are deliberate attempts by the companies and even banks to make sure that there is no competition. They try to stifle out competitions. I agree that they have made their names over the years but that should not prevent competitors from coming into the business. They have made so (much) money in Africa over the years but they are not giving it back to the society,” he said.
He added: “If they are increasing the charge, there should be positive impact of the extra fees on the economy of the continent but what we are seeing is that instead of making people to benefit from it, they take it back to their country to develop their economy. I will implore them to re-consider the fee most especially for the benefit of those living in Diaspora.”
Carl Scheible, MoneyGram’s executive vice president of UK and Africa operations, said that the company’s strategy in Africa and globally is all about helping to drive money flow and positively impacting the lives of its customers. He pointed out that ODI’s figures were unrepresentative of the facts.
Mr. Scheible added: “MoneyGram provides a fast, safe, cost effective and very convenient service to the citizens of the world. Specifically responding to the reports claims, we want to be very clear that at MoneyGram, there is no Africa premium as we offer a competitive service for people shunned by high street banks.
“For example, someone sending £200 from the UK to Africa would pay a charge of 5.1%, including foreign exchange fees, against a global average of 4.9%. We can provide more details on how these costs are arrived at, including compliance and technology components, plus the ecosystem built around this service including businesses within Africa if that is of interest.”
A Western Union spokesman added: “The average global revenue earned by Western Union from transferring money including fee and foreign exchange is 5% to 6% of the amount being sent. However, our pricing varies between countries depending on a number of factors such as consumer protection costs, local remittance taxes, market distribution, regulatory structure, volume, currency volatility, and other market efficiencies and these factors can impact the fees and foreign exchange rates offered.”
Latest World Bank figures show that remittances from foreign workers are expected to rise to $436 billion this year, more than three times what poor countries receive in overseas aid, but the ODI said the cost of sending money back to Africa was far higher than the global average.
The expected increase in remittances to developing countries this year, according to the World Bank, will be maintained in the next few years despite deportations of international migrants from some host countries, adding that remittances will rise to $516 billion in 2016.
Around $5bn was remitted to Africa from Britain alone in 2012 and ODI said that reducing remittance costs to the global average would increase transfers by $85m, rising to $225m if charges were lowered to 5%. For sub-Saharan Africa, remittance flows grew by 3.5% in 2013 to reach $32bn, with Nigeria accounting for about $21bn or 65.6% such of transfers.
African remittances from Britain are forecast to rise to $41bn in 2016. These large sums have encouraged finance minister Ngozi Okonjo-Iweala to plan a Diaspora bond to mobilise savings and boost financing for development.
