A Path to Fairer Remittances: Reforming the South Africa–Zimbabwe Payment Corridor

The IMF–World Bank report finds that remittances from South Africa to Zimbabwe remain extremely costly due to heavy reliance on USD cash, complex regulations, limited digital uptake, and barriers facing migrants. It recommends coordinated reforms to modernise payment systems, expand digital access, streamline regulations, and shift users from informal to more affordable formal channels.

The joint International Monetary Fund (IMF) and World Bank Group (WBG) diagnostic report on the South Africa–Zimbabwe remittance corridor provides a vivid and incisive look at one of the region’s most important but persistently expensive financial lifelines. Despite global commitments, especially the G20 push to make cross-border payments cheaper, faster, and more transparent by 2027, the corridor stands out for its exceptionally high average cost: sending just USD 200 from South Africa to Zimbabwe costs 12.7 percent in early 2024, far above the global target of 3 percent. Given Zimbabwe’s heavy reliance on remittances, which constitute nearly 10 percent of its GDP, the stakes could not be higher.

Cash Dependence at the Core

The report identifies Zimbabwe’s deep dependence on USD cash as the chief driver of remittance costs. Years of currency instability have eroded trust in the local dollar, pushing households to demand physical notes. But moving cash across borders is expensive: remittance operators must fly in dollars, transport them securely to rural payout locations, hire cash-in-transit firms, maintain safes, and conduct constant audits. These logistical demands mean that cash-related expenses make up more than half of total operating costs, a burden ultimately carried by migrants sending money home.

Regulatory Maze and Compliance Pressures

South Africa’s regulatory environment adds another layer of friction. A complex web of exchange control rules, AML/CFT obligations, banking laws, and immigration enforcement duties creates heavy compliance costs for remittance providers. Under the Immigration Act, financial institutions must verify and report clients’ citizenship or residence status, which deters many undocumented Zimbabweans from using formal services. Without acceptable documents, they cannot open bank accounts or e-wallets, pushing large volumes of remittances into informal channels and suppressing the scale needed to reduce costs.

Banks often intensify these pressures. While regulators consider this corridor low-risk for money laundering and terrorist financing, many South African banks still treat ADLAs, the main remittance service providers, as high-risk clients. This perception, amplified by overseas correspondent banking expectations, leads several banks to avoid serving ADLAs altogether, forcing them into more expensive operational arrangements.

Digital Systems Held Back by Structural Barriers

Though digital systems could transform the corridor, adoption remains weak. The regional fast-payment platform, TCIB, offers near-instant transfers, but onboarding is cumbersome, and ADLAs must obtain bank sponsorship to participate. On the customer side, many migrants are paid in cash, lack documentation, live far from banking infrastructure, or are wary of being reported to immigration authorities. On the Zimbabwean side, the Intermediated Money Transfer Tax (IMTT) makes digital transactions more expensive, reinforcing consumers’ preference for cash. As a result, even where digital options exist, they remain underused.

Limited Access and High Consumer Burden

Geographic and infrastructural realities further constrain access. Banks have a limited presence in South African townships and Zimbabwe’s rural districts, leaving millions dependent on ADLAs or informal intermediaries. For many, collecting remittances requires costly travel, increasing both the time and risk associated with receiving money. While transparency around fees is relatively strong, most providers clearly disclose charges, the report stresses that consumers lack tools such as independent price comparison platforms that could help them find more affordable options and stimulate market competition.

A Pathway to Modernisation

The IMF and World Bank outline a comprehensive reform agenda aimed at reducing costs and modernising the corridor. Key proposals include enabling non-bank providers to offer e-wallets, expanding QR-based payments, improving pricing structures for fast-payment systems, and accelerating regulatory reforms that would allow ADLAs direct access to national payment systems. Policymakers are encouraged to clarify AML/CFT expectations, particularly around simplified due diligence for low-risk remittances, to align risk perceptions across the market. The report also urges a re-evaluation of immigration-related barriers that prevent migrants from accessing financial services.

Further recommendations include phasing out distortionary taxes like the IMTT, building digital ID systems, strengthening financial literacy programs, and designing products tailored specifically to migrants and remittance-receiving households. Together, these measures could shift millions of users from informal channels into safer, faster, and more affordable formal systems.