Cross-Border Payments in Africa and Concerns Over the Quantity of US Dollars Available for African Trade

On Friday 8 December at 10.00 EFA will host a session at the UNCTAD eWeek on Cross-border Payments and Creating a Regional Common Currency (see above). We are holding this session against the back-ground of shortages of foreign currency, most notably the US dollar, needed to pay for imports for intra-country trade across Africa. The latest Standard Bank Africa Trade Barometer (ATB) shows that this shortage has been caused by the depreciation of local currencies, higher interest rates and capital flight in the continent’s developed markets. The barometer concentrates on 10 countries – Angola, Ghana, Kenya, Mozambique, Namibia, Nigeria, SA, Tanzania, Uganda and Zambia.

An issue we will be covering in our panel will be the integration of cryptocurrencies through fintechs, such as Hurupay which is a crypto wallet from West Africa that enables users to access stablecoins, which are non-volatile cryptocurrencies pegged to the value of the US dollar at a ratio of 1:1. The platform is designed to help SMEs and individuals mitigate the negative impacts of depreciating local currencies against the dollar on their income and growth, by providing a more stable and reliable payment method. Currently, Hurupay is running on a US$21,000 grant it received from Prezenti Grants in partnership with the Celo blockchain. The startup monetises via a 2% fee charged on off-ramping, as well as a 0.5% fee on payments to SMEs.

Meanwhile, PAPSS continue to  grow. The primary participants in the PAPSS’ system are central banks, which will serve as regulators and clearance agents, commercial banks, fintech companies, payment service providers, and their customers, including businesses operating throughout the region. PAPSS now incorporates 11 African Central Banks as well as individual banks, one of which is Standard Bank (see last Newsletter).

Standard Bank is Africa’s biggest lender and has expressed ambitions to increase investment in the DRC and Zambia. Both countries have emerged as crucial African markets because of the abundance of natural resources that are essential to the production of green technologies. The DRC is home to almost half of the world’s cobalt, for example, which is a critical mineral for electric vehicle batteries. Both the DRC and Zambia are also in the top 5 largest exporters of copper in the world. It is likely there will be higher demand for the commodity in the years to come as it is central to the production of renewable energy systems. Zambia is also a source of silicon, making it a natural place to manufacture semiconductor chips: a market dominated by China and the USA.