Undefeated: Why Mukuru dominates Zimbabwe’s foreign remittances market?

Zimbabwe is said to have more than 3 million people living in South Africa. It is just a number thumb-sucked by someone years ago and it has stuck. The actual number is unknown as many of these are undocumented. The actual number could be more than 3 million.

Most of these people send money home on a regular basis. It’s a big market. The Reserve Bank of Zimbabwe Feb 2020 Monetary Policy gave us a figure of USD 635 million that flowed into the country in 2019, up from USD 619m in 2018. The market is growing, as more people leave Zimbabwe to find a place in a functional economy elsewhere.

Of course, the actual size of the market is way more than reported because of leakages, under-reporting, and misrepresentation. For simplicity, If we consider Zimbabweans in South Africa as the only foreign remitters, we obtain a figure higher than USD 635m.

If we use the purported 3 million Zimbabweans in SA and say 30% of these send money home on a monthly basis with each person sending on average R1,000 every month we get a figure of R900m sent home every month which annualizes to R10.8 billion rands that converts to USD720m using a 2019 average rate of 15 rands per each dollar.

The calculation is shown below.

Back of the envelope market size estimate

This is a very conservative estimate of the SA market alone before we consider UK, US, Australia and Botswana remittances. Its conservative because the 3 million figure is understated, the participation rate of 30% is also understated, and the average monthly transaction value is also grossly understated.

Let’s tune just one parameter upwards: the participation rate.

Back of the envelope market size estimate revised upwards

The size of the SA market balloons to R18bn which translates to 1.2 billion United States Dollars. The true size of the market is apparently huge.

Using SA remittances figures and squaring them up against the central bank’s figures we observe leakages of $85m, that could go up to $565m. Because so many variables are unreported, the true size of the market and the size of the leakage is unknown.

The South African government does not know how many Zimbabweans are in the country. Neither does the Zimbabwean government. Passports are supposed to tell us who is inside and who is outside, and who traveled to where but in this case there are a lot of people that traveled without passports around 2007/2008 and the systems are riddled with corruption and inefficiencies.

Money Transfer companies for this market charge between 5% and 10% commission. The market to be shared by money transfer companies could be between $36m to $60m for the South African portion alone.

This is hard currency not Zimbabwean dollars. The business is merely a basic software (piece of code), banking arrangements and branch networks. It takes energy to set up but once that is done , it becomes very easy to scale.

This is the reason why several players are jumping into the market to get even the smallest piece of the pie.

Here is a list of the common ones:

Who is Eating?

Sticking to the South African market alone, Mukuru is apparently eating a big slice of the pie. It dominates the market. It is undefeated. The title is theirs. Year-in, year-out, they are the defending champions. Mama Money and Hello Paisa are contending but for now their offerings are not yet widely accepted as serious options by the market.

Historically, this market has always been in the hands of banks. Banks were overtaken and eventually partnered with MoneyGram due to bureaucracy and high bank charges associated with banks. Western Union then came along with a better understanding of Africa than MoneyGram. When Mukuru entered the market, it had a better understanding of the Zimbabwean market. The offering is spot-on, so they charge a high commission for it.

Mukuru has some sort of first-mover advantage over Mama Money and Hello Paisa but that is not the main reason why it has a strangle-hold on the market.

Why Mukuru Dominates?

Mukuru’s product offering has three key areas that separate it from other players.

  1. The currency that the recipient gets
  2. Convenience for the recipient
  3. Convenience for the sender

They have perfected the delivery with regards to these metrics. Here is a table depicting how good they fare versus competition

Money Transfer Companies Performance Metrics

The ratings in the above table are my personal views based on various market intelligence. It might help to explore each of these three metrics. Like how Zimbabweans in South Africa are behaving, we can ignore the percentage commission metric for now, it will only matter when there is a competitor that matches Mukuru on those three other metrics.

Recipient Currency

Currency matters because of the monetary mess Zimbabwe is in. This is what some companies fail to understand. It is as basic as it gets. People prefer to send hard currency, which means currency that is not likely to depreciate or fluctuate greatly in value. The various manifestations of the Zimbabwean dollar we have witnessed over the years are all soft currencies.The harder it is the better. The greenback is harder than the rand.

  • The rand is sweet, it is “nice” for recipients to collect rands
  • The US Dollar is sweeter, people want that currency
  • The soft currency should be avoided, by any means necessary
  • A money transfer company that includes a soft currency as a currency that recipients receive incurs a depreciation of trust by the market. Any mention of a variation of the Zimbabwean dollar on websites, pamphlets, publications, and word-of-mouth regarding Zimbabwean remittances is an abomination.

Sender’s Convenience

It should be very easy for a person to complete the send money transaction. The vast majority of Zimbabweans in South Africa are unbanked. They do not have bank accounts. The issue of convenience is very much tied to the bank accounts issue.

  • Convenience to the market under analysis means cash. Paying cash at the nearest supermarket to get the transaction done.
  • Convenience ends the moment a Zimbabwean enters a bank, home and abroad. In South Africa, Zimbabweans who have bank accounts prefer not to repeatedly deal with banks.
  • Pay-in points that accept cash are a jewel, the more they are, the better
  • Convenience also means very little paperwork and digital processes for the sender
  • Mukuru beats all the other players on this metric
  • Sender’s convenience is an area where MoneyGram, Western Union and World Remit are very poor at. Mama Money is good. It has several pay-in points, but it damaged its reputation when it initially entered the market demanding a strict use of bank transfers to FNB, Nedbank and Standard Bank as a pay-in method.

Recipient’s Convenience

It should be very easy for the recipient to collect the money. Once again, this is as basic as it gets but some companies fail to properly digest what this means. Convenience and Bank do not go together in Zimbabwe. People do not want to go to the bank unless if they really have to. If there is an option that avoids the bank, they will take that one. Just the mention of collecting money at a bank is enough to dishearten a Zimbabwean.

This is a nation that is still recovering from the trauma of bank queues, physical abuse by bank security guards and emotional abuse by suit-wearing bank tellers who, through the fake smile, exhibit a “we-are-better-than-you attitude” towards customers. The bank offers a clean and legit environment but its still not very friendly to Zimbabweans. There is a huge trust deficit. The relationship broke down many years ago. “Kungogarira Vana”.

A Money Transfer company that informs people about the option to collect money at a bank is doing itself a disservice. It is essentially acquiring the badwill involved with dealing with a bank whilst under the illusion that they are increasing the options for the recipients. Senders who left Harare years ago might want the recipients to go and collect at a bank but recipients in Harare know what that means and prefer to collect in Supermarkets and Money Transfer Agent offices.

  • Convenience, first and foremost, means avoiding long queues
  • Convenience ends the moment a Zimbabwean enters a bank, home and abroad.
  • Pay-out points that are owned and operated by the Money Transfer agent are a jewel, the more the better
  • Mukuru beats all the other players on this metric
  • Recipient’s convenience is an area where MoneyGram and Western Union are very poor at because they involve a bank. The same goes for Mama Money and Hello Paisa. The new father on the block, World Remit, appears to be mulling use of its own pay-out points as well as Mukuru’s.

Other Metrics That Should Matter

Commission Rate

  • This should matter a lot. All factors being equal, this would be the only distinguishing factor. But all factors are not equal for now. By factors I mean the 3 metrics discussed above.
  • Mukuru manages to levy a very high fee because it leads on the three very basic factors. 10% is an exorbitant fee for a simple money transfer transaction. Most salespersons do not even get such a commission level after investing time and energy in closing a lead. 10% for a transaction fee is simply extortionary.
  • The title contenders should know that having a lower transaction fee alone does not result in swinging the market share to your side without ticking the basics first.

Exchange Rates

  • The exchange rate that matters is the USD/ZAR. The exchange rate between Forex and ZWL is a post-transaction personal matter for a recipient who received hard currency
  • All other things being equal, the differentiation criteria would be the exchange rate used.
  • Mukuru has been criticized for applying very wide spreads on the ZAR/USD rate.
  • To test the various exchange rates used at the same time, on 11/06/2020 at 1357 hours, I obtained a rate quotes for sending USD 100 to Zimbabwe from South Africa from 4 websites. The screenshot below, though not very clear, shows the results.
  • The results are quite shocking. Mama Money hedges itself using a very high spread to the disadvantage of the customers.
  • The results are summarized below
Exchange Rates used by 3 leading Money Transfer companies
  • Mukuru and HelloPaisa’s exchange rates were not far off the rate prevailing in all global markets as shown by Bloomberg.
  • The difference in the amount to pay for the sender is not that significant at the USD100 level, which partly explains why the market values convenience that much.

Enter a New Father on the Block: World Remit

World Remit might be new to Zimbabwe, but it is not a kid in the remittance arena. It is an international player with experience of carrying out Fin-Tech money transfer revolutions in over 50 countries. Can it knock Mukuru off its perch?

World Remit Offices in Harare

For now, it has gone for collaboration by partnering with Mukuru as a collection point. Collaboration is usually better than competition. It will give them time to learn the strange Zimbabwe market and apply a solution that is specific and unique to Zimbabwe.

World Remit has a business model and operational modalities that they have been applying in other countries. If they try to replicate these in Zimbabwe, they will highly-likely fail, and fail dismally because Zimbabwe is a strange land with a messy, tiered, and ever-changing monetary system.

For example, World Remit boasts this:

“On the sending side World Remit is 100% digital (cashless), increasing convenience and enhancing security. For those receiving money, the company offers a wide range of options including bank deposit, cash collection, mobile airtime top-up and mobile money.

If they apply their sending side cashless model to the 3 million Zimbabweans in South Africa, they will fail, not because people do not like digital products , but because the majority are deemed illegal immigrants and as such are excluded from digital products. Foreigners use cash.

Digital products in other countries normally use banking services on the back end, whilst deploying bank-less efficiencies on the customer-facing front-end. In Zimbabwe, once a transaction involves banks on the back-end , the money becomes polluted and the adventure becomes a story that you live to tell another day. For example, the identity of the true digital US dollar is constantly changing.

Capping Off

Mukuru is still undefeated but nothing lasts forever. Sooner or later, a daring competitor will properly figure things out and knock Mukuru of its perch.


Financial Analyst, Cloud Accountant, Citizen Data Scientist, FPL Boss