The remittance market in South Africa is growing rapidly. Ever since COVID-19, people have relied increasingly on digital remittance platforms to send money to loved ones, both locally and across borders.
This growth trend is set to continue over the coming years, driven partly by the increasing ubiquity of smartphones and an increase in online money transfer platforms.
In fact, remittances are growing so rapidly that governments worldwide are looking to them as serious contributors to their economies – South Africa included.
Let’s take a look at why remittances are so important for the economy.
Financial Support Amidst High Unemployment
With South Africa suffering high unemployment, many people are forced to rely on others for financial support. As of the third quarter of 2023, the latest official unemployment is 31.9%. That’s almost a third of the working population. This doesn’t factor in those who are not included in that category, such as the elderly and children.
Remittances provide a crucial means of supporting those loved ones who cannot support themselves, thereby contributing to an improved standard of living for many and stimulating the economy by providing more people with cash to spend on goods and services.
This alleviates poverty in the country, allowing loved ones to find a way out of their situation and live more fulfilling lives.
Stimulating Local Economies
When money is sent home from abroad, it provides a crucial source of foreign exchange and external income for the local economy.
In 2022, remittances received in South Africa reached more than $872-million, which is about R16.4-billion. It is anticipated that this number will continue to rise in the upcoming years. All of this money is either flowing into the country from external sources or flowing locally from metropolitan areas into rural areas where loved ones live and require support.
Therefore, this funding serves to support and stimulate the South African economy at large, as well as local community economies. It provides individuals with cash to participate in the economy, thereby leading to an increase in employment opportunities as demand for goods and services goes up.
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