Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
Evasive single payment platform slows down continental business
Truck drivers wait near their parked vehicles at the Namanga one stop border crossing point between Kenya and Tanzania in Namanga, Kenya on May 12, 2020.
The lack of a singular payment platform has slowed down growth in regional business as intra-continental trade in Africa sets off to a slow start despite the 2019 charter liberalising commerce between countries.
Analysts at Standard Chartered say different markets have adopted diverse payment systems, retaining bottlenecks on cross-border payments.
“We have seen different markets adopting different approaches. Some have for instance embraced a central bank led framework while others have frameworks led by commercial banks,” Makabelo Malumane Head of Transactional Banking for Kenya and East Africa at Standard Chartered noted.
“The Nigeria-Ghana corridor seems to be making quicker progress with West Africa generally being the first movers while East and Southern Africa are still catching up.”
The Pan-African Payment and Settlement System (Papss) had been widely seen as the experimental framework to support continental commerce by allowing companies in Africa to pay for Intra-African trade transactions in their local currency.
Outside of this system, continental firms and their local banks have used correspondent banks, mostly outside Africa to settle payments in a third external currency- mostly dollars or euros, creating foreign exchange requirements for individual African central banks.
Papps is a flagship initiative developed by the Africa Export Import Bank (Afrexim) in collaboration with the African Union and has membership from 13 central banks and 114 commercial banks.
Standard Chartered says it is now working with the Africa Free Continental Trade Area (AfCTA) secretariat to build an improved real-time payment system to support settlements from intra-Africa trade.
“We are in engagements as a bank with the AfCTA secretariat and the Afrexim bank who are looking to build a single platform to facilitate payment flows, make it more time efficient and lower the cost of cross-border transactions,” added Ms Malumane.
Intra-Africa trade has grown modestly since the coming into force of the AfCTA pact in May 2019 amid macro challenges affecting several countries and the deceleration of global growth.
The value of Intra-Africa trade increased by 3.2 percent in 2023 to Sh24.8 trillion ($192.2 billion).
The share of Africa trade reached 14.9 percent of the continent's total deals in 2023, from a lower 13.6 percent in 2022.
“This uptrend reflects the concerted efforts across the continent, including the ongoing implementation of AfCTA aimed at bolstering intra-Africa trade,” Afrexim says in its 2024 Africa Trade Report.
Standard Chartered has noted increased interest among its clients on intra-continental trade opportunities, terming this a marker of progress to lifting trade among African nations.
“The traction we are seeing in the share of intra-Africa trade shows some level of progress. AfCTA has also begun to be part of the conversation with our clients, two years ago, you wouldn’t see this,” said Ms Malumane.
