Intra-African Trade Fair 2023 Business Roadshow – Cross Border Payments.
The African Export-Import Bank (Afreximbank) has pointed out that the continent is benefitting from the use of local currencies when engaging in intra-African trade because global currencies, such as the US dollar which is traditionally used for cross-border trade, are currently in short supply on the continent. Afreximbank is promoting the Pan-African Payment and Settlement Service (PAPSS) which allows payments in local currencies. Afreximbank has shown that the use of local currencies has numerous advantages including the fact that it limits the possibility of extraterritorial sanctions by the owners of the third-party currencies and boosts trade among African countries because dollars are only required to settle net differences in trade. In last month’s Newsletter we reported on the agreements PAPSS is making across the continent with major banks.
In other payments news, Afreximbank has started reviewing Kenya’s bid to host a Pan-African settlement house for intra-African trade under the PAPSS system. Afreximbank has also benefited from a loan facility of $400 bn over 7 years with the China Development Bank (CDB), which will be used to resource African SMEs.
Mastercard has collaborated with the Zanzibar’s e-Government Agency (eGAZ) to support and accelerate the regional government’s ambitious digital transformation journey. This will allow different sectors across Zanzibar such as tourism to digitise payments which will significantly contribute to economic growth.
Visa is going to launch its contactless payments system in Kenya. The digital payments market in Kenya is projected to grow by 14.10% (2023-2027). Kenya has witnessed significant improvements in payment systems, particularly with mobile money technology. Meanwhile, opposition to Kenya’s Digital Asset Tax (DAT), is growing. The DAT was introduced by the Finance Act 2023 and will impose a 3% tax on the gross value of any transfer or exchange of digital assets, including cryptocurrencies, NFTs, loyalty points, e-tickets, and other assets with value. It is due to go into effect in September 2023.
Meanwhile, East Africa’s payments market, primarily in Kenya and Uganda, is estimated to grow by 20% annually until 2025, according to a report by McKinsey & Co. published last September. West Africa, including Nigeria, Ghana and Ivory Coast, is the fastest-growing sub-region at 35%. On the continent, the financial sector is forecast to reach $40bn by 2025, from $16bn in 2020.
According to payments provider Pesapal Ltd, East Africa buyers are preferring to pay online instead of using physical debit or credit cards, Already, the company points out, the typical ecommerce basket is about $36, while a basket settled using a point-of-sale terminal averages 5,117 shillings ($35.10). Pesapal forecasts East African ecommerce basket values will increase by as much as 18% in the next 2 years.
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