Today, I turned $136.48 USD (United States Dollars) into R950 ZAR (South African Rand). That might sound really great, but in fact that’s not a very good deal. This blog is the story of my money on the move.
I must pay for the South African Qualifications Authority to verify my undergraduate credentials (specifically, a 1996 University of Arkansas Bachelor’s of Science with a major in Biology and minor in Computer Science). The fee for this document verification is 950 rand. The rand was named after the Witwatersrand ridge upon which Johannesburg is built and in which most of South Africa’s gold deposits have been found. Today, this currency can be used in South Africa, Lesotho, Botswana, and Namibia. At the time of the first democratic elections in South Africa (1994), one could buy R3.60 for $1.00 USD. Those times are long past, though. Today, one can buy R12.16 for $1.00 USD. At first blush, it might appear that I need to pay $78.11 to SAQA for this verification.
In reality, though, many problems complicate this transfer. SAQA cannot do an electronic bank transfer from my account across international boundaries, and their ability to charge credit cards is limited to particular types of verifications. In addition, my money is denominated in dollars, not rand. The answer to this conundrum is the international interbank wire transfer. SAQA provides a SWIFT code that is specific for their particular bank along with an account number. I initiate the wire by going to my local bank branch and providing the target information from SAQA along with the amount to transfer.
The international wire transfer, however, is a pretty expensive process, and it may take multiple days for the transfer to be complete (especially since I started it on a Friday). We start with a fee charged by my local bank. Mine charges me $50 USD for the transfer, regardless of the amount of money being exchanged. That’s a pretty steep penalty in this case, since I already calculated that SAQA needed the equivalent of $78.11.
The next step is that the currency must be exchanged from USD to ZAR. The exchange rate I was given today was 0.0843, via ABSA Bank of Johannesburg. We can take its reciprocal to see that this is the equivalent of R11.85 per $1.00 USD; the bank is not giving me a very good rate of exchange.
Even though my neighborhood bank has already charged me a wire transfer fee, the receiving bank also tacks on their own wire transfer fee, in this case R75 (around $6.16 USD). The problematic piece was that the R75 fee was not visible before we created the first draft of the transfer attempt. If I hadn’t spotted the R75 fee on the paperwork, then SAQA wouldn’t have received the full amount that I intended to pay.
The bank in Johannesburg is not the target bank where SAQA keeps its account, though. ABSA Bank first transfers the money over to Standard Bank of South Africa in Johannesburg. Standard Bank, in turn, can then pass the monies to its Pretoria branch, specifically in the account for SAQA.
How much of what I paid today actually went to the fee that I was attempting to pay? The gold wedge in the accompanying pie chart is the money I was trying to pay SAQA. The orange section reflects the gap between today’s USD/ZAR transfer rate and what the banks gave, while the gray section represents the transfer fee from the receiving bank. The blue behemoth, though, represents money I paid to my neighborhood bank for the privilege of sending an international wire. For all we hear about the efficiency of business in the United States, my local bank was easily the biggest drain on my wallet in this transaction.