HomeComment‘Remittances contribute up to 40% of Zim GDP’

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South African advocacy group People Against Suffering, Oppression and Poverty (Passop) says the remittances were one of the most important sources of foreign currency inflows for Zimbabwe.

Passop’s findings, which were submitted to the South African Reserve Bank and Department of International Development and Cooperation on Wednesday, showed that Zimbabwe imported mainly minerals and fuel worth about R14,5 billion (US$1,8 billion), while exports to South Africa amounted to R2,9 billion (US$361,3 million).

“Taking into account that an estimated two million Zimbabweans migrated to South Africa in the past decade, about R6,8 billion (about US$847 million) was remitted in 2011, making remittances one of the most important sources of foreign currency inflows for Zimbabwe,” Passop says.

Passop notes the remittances made up between 11% and 15% of Zimbabwe’s gross domestic product (GDP). However, it has also pointed out that the mass deportations being carried out by the South African government posed a serious threat to the livelihoods of up to two-thirds of the Zimbabwean population.

“South Africa’s renewed practice of mass deportations is therefore a serious threat to the livelihoods of thousands of families in Zimbabwe who are dependent on remittances,” it says.

According to Passop findings, three quarters of migrants preferred using informal channels such as cross-border bus drivers and friends to remit money, rather than through formal channels.

Only 15% of surveyed migrants said they used primarily formal remittance channels, such as official money transfer operators (7%), postal orders (7,5%) and bank transfers (0,5%).

The Passop report says calculating the ratio of remittance inflows to GDP and based on the International Monetary Fund (IMF)’s GDP projections, this meant worldwide remittance flows to Zimbabwe currently amounted to between 28% and 40% of Zimbabwe’s GDP. The report says in the South Africa-Zimbabwe corridor, remittance flows are considerable, in large part due to the big number of Zimbabwean migrants in the neighbouring country.

“The most commonly used approach in the existing literature estimates remittance flows as a product of the stock of migrants abroad, the percentage of these migrants that remit, and the average annual amount that they remit. Given this simple framework, the assumptions for each parameter can be deduced from survey results and estimations,” the report says.

“The total number of Zimbabweans living in South Africa is estimated to be between 1,5 million and two million. Based on this and other studies done, we assume that 85% of Zimbabwean migrants in South Africa remit. Finally, estimations based on this and other survey data suggest that the average annual amount remitted, including both cash and the value of goods, is about R4000. Given these assumptions, the rough estimate of the likely size of remittance flows from South Africa to Zimbabwe last year amounts to between R5,1 billion to R6,8 billion or equivalent to between US$680 million to US$905 million.”

Taking into account that at least a third of Zimbabwean migrants live in other foreign countries, predominantly the United Kingdom and Botswana, according to the United Nations Development Programme (UNDP), the total remittance flows into Zimbabwe are likely to be between R7,5 billion to R11,3 billion (US$1 billion to US$1,5 billion).

This estimate is supported by a working paper published by the UNDP, which put the figure at US$1,4 billion.

The IMF forecast for private cash transfers, which includes an estimate of informal flows but excludes in-kind transfers, was US$971 million for 2009.

Given that slightly over 40% of flows are likely to be in-kind transfers, the IMF prediction falls well within this range.

“Finally, considering that a recent study of remittance behaviour of Zimbabweans living in northern England, it is estimated that US$940 million was sent from the UK alone in 2007. This rough estimate of the overall volume of remittance flows to Zimbabwe might still be on the conservative side.”

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