A 33 percent drop in remittances from Malawians working or living abroad to their friends or relatives back home has resulted in negative consequences to about 80 percent of the country’s households, Nyasa Times has learnt.
In the last five months the Reserve Bank of Malawi (RBM) states that remittances have dropped to US$78.96 million from US$118.03 million—received during the same period last year.
Remittances are funds, often times, private savings of migrants working in a foreign country that are transferred to the home country for food, clothing and other expenditures, and which drive the economy, according to Dilip Ratha, head of the Global Knowledge Partnership on Migration and Development and lead economist, migration and remittances, in the World Bank.
For instance, Gogo Bernadetta Nyaukandawire, 76, of Ekwendeni, Traditional Authority (T/A) Mtwalo in Mzimba says her grandson who lives and works in South Africa has been unable “to send enough money,” a development which, to her, is surprising.
“Now, Vitumbiko [name of grandson] only sends MK19 800 (about R330) a month; and yet he usually sends MK50 000 (about R833),” says Gogo Nyaukandawire.
And, Nyaukandawire is not alone. She told Nyasa Times that, at first, she thought Vitumbiko had “become like the others who lose their focus and start doing women and drugs and alcohol.”
However, she says when her friend who has two sons in Cape Town complained of reduced income about a month ago, she tells me there could be a big problem.
According to statistics, there are nearly 87 000 Malawians in South Africa most of who work in shops, factories and as domestic workers or gardeners.
Why remittances drop
A recent report by the World Bank shows that Sub-Saharan Africa remains the most expensive region to send money to where sending $200 [MK158 000] cost an average of 8.2 percent in the fourth quarter of 2020.
According to available figures for May 2021 Migration and Development Brief 34 of the Bank titled Resilience Covid-19 Crisis Through a Migration Lens, 80.6 per cent of households in the rural areas and 81.6 percent of households in the urban area in sub-Saharan Africa experienced a decrease in remittances in 2020.
“Within the region which experiences high intra-regional migration, it is expensive to send money from South Africa to Botswana [19.6 percent], to Zimbabwe [14 percent] and to Malawi [16 percent]. This is more than the United Nations Sustainable Development Goal target of three percent,” reads the report in part.
The report also indicates remittance declines for households experienced in Nigeria (72 percent), Mali (80.1 percent), Zimbabwe (67.7 percent), Ethiopia (54.6) and Somalia (94. 6 percent).
An accompanying statement to the report by World Bank social protection global director, Michal Rutkowski, observes that as Covid-19 devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable.
“Supportive policy responses, together with national social protection systems should continue to be inclusive of all communities, including migrants,” says Rutkowski.
RBM spokesperson Onelie Nkuna is on record having attributed the drop in remittancs to the “global crisis brought about by the Covid-19 pandemic” which triggered a fall in the wages and employment of migrant workers.
Malawi University of Business and Applied Sciences (MUBAS) economics professor, Betchani Tchereni, has said the drop in money transfers is a missed opportunity for the country’s economy.
“Remittances change the landscape of our country and contributes to some transformation. For example, many families are able to send kids to school because of remittances, others are able to build decent houses in rural areas.
“At the national level, remittances assist us to improve the strength of our currency. When people send small remittances, our kwacha gains some strength which is good for the country,” Professor Tchereni is quoted as saying by The Nation.
How remittance works
According to Ratha, a typical remittance transaction takes place in three steps in which the migrant sender pays the remittance to the sending agent using cash, check, money order, credit card, debit card, or a debit instruction sent by e-mail, phone, or through the Internet; then the sending agency instructs its agent in the recipient’s country to deliver the remittance, and eventually the paying agent makes the payment to the beneficiary.
In poorer households, remittances may buy basic consumption goods, housing, and children’s education and health care while in richer households, they may provide capital for small businesses and entrepreneurial activities.
“They help pay for imports and external debt service; in some countries, banks have raised overseas financing using future remittances as collateral,” says World Bank’s Ratha.Follow and Subscribe Nyasa TV :