Written by Denkan Meriri
NAIROBI (Reuters) – Payment of local currency payments systems – a little more ambitious – make tangible gains, bringing the promise with less expensive trade to a long continent through dollar transactions that get resources.
But the efforts made to move away from the dollar face a strong opposition and the threat of revenge against US president Donald Trump, who is determined to maintain it as a dominant currency of global trade.
This step by Africa to create payment systems that do not depend on the opposite of Greenback reflects a batch of China to develop financial systems independent of Western institutions. Countries like Russia, which face economic sanctions, are also keen on an alternative to the dollar.
But while this movement gained a sense of urgency due to the transformation of trade patterns and geopolitical enemies after President Trump returned to the White House, African defenders of alternatives to payment make their case based on costs.
“Our goal is, contrary to what people might think, not to get rid of fading,” said Mike Oagalo, CEO of the system of payments and settlement of all Africa, who allows the parties to deal directly with local currencies, bypassing the dollar.
“If you look at the African economies, you will find that they are struggling with the availability of global currencies from the third party to settle transactions,” he said.
Commercial banks in Africa usually depend on their counterparts abroad, through the so -called correspondence banking relations, to facilitate international payments settlements. This includes payments between African neighbors.
This greatly adds to the costs of transactions that, along with other factors such as weak transport infrastructure, have made a 50 % trade in Africa, according to the United Nations Trade and Development Agency.
It is also among the reasons that make a lot of Africa trade – 84 %, according to a McB -based MCB report – with external partners and not between African countries.
“The current dollar -dependent financial network has become less effective for Africa, and more expensive,” said Daniel McDawell, a professor at the University of Sirachews in New York, a specialist in international financing.
Local systems
According to the data collected by PAPSS, according to the current system of correspondence banks, the cost of a $ 200 million trade is estimated at two parties in different African countries at a cost of 10 % to 30 % of the value of the deal.
The shift to local payment systems can reduce the cost of that treatment to only 1 %.
Systems such as PAPSS allow a company in a country, for example, Zambia, to pay the price of goods from another like Kenya, where both the buyer and the seller receive the payments with their operations instead of converting them into dollars to complete the transaction.
Oagalo told Reuters that the use of currencies such as Nigerian brightness, Ghanaian CEDI or Rand South Africa for commercial payments inside Africa could provide the continent worth $ 5 billion annually in hard currency.
PAPSS was launched in January 2022 with only 10 participating commercial banks, operating today in 15 countries including Zambia, Malawi, Kenya and Tunisia, and now has 150 commercial banks in its network.
“We have also seen a very significant growth in our transactions,” said Ualo.
Meanwhile, the International Finance Corporation, the lending arm in the private sector of the World Bank, has started issuing loans to African companies in local currencies.
Ethiopis Tavara, Vice President of Africa, said that the key is seen as necessary for their growth, and reduces the currency risks to borrowing in dollars.
“If they are not born a hard currency, the hard -line loan imposes a burden that makes it difficult for them to succeed,” he said.
Political geography and Trump worker
Africa’s campaign to enhance regional payments systems has found a platform in a group of 20 major economies, as South Africa leads this charge as a holder of the head of the G20.
At least one session on the strengthening of regional payments systems when South Africa hosted a meeting of the Group of 20 and the central bank’s financial ministers. South Africa wants to follow the conversation with concrete actions. The next meeting of G20 financial officials is scheduled to be held in mid -July.
“Some of the most expensive corridors of the cross -border payments on the African continent,” Letiga Kanyago, the ruler of the Central Bank of South Africa, told Reuters at a meeting of the Group of Twenty in Cape Town in February.
“To work as a continent, it is important to start trading and settlement in our own currencies.”
However, talking about moving away from the dollar – either for trade or as a backup currency – has drew aggressive reactions from President Trump.
After Brix – a group of countries including Russia, China, India and Brazil, along with Africans such as South Africa, Egypt and Ethiopia – weighing reducing dependence on the dollar and creating a common currency, Trump responded with the threats of customs tariffs by 100 %.
“There is no chance for the PRICS to replace the US dollar in international trade, or anywhere else, and any country trying to say hello to the definitions, goodbye to America!” , Written the social fact in January.
In the months that followed, Trump showed his willingness to use the customs tariff for pressure and punish allies and enemies alike, a strategy that raised world trade and political geography.
Regardless of its intentions to move to more local currency transactions, McDawell at the University of Sirkios said that Africa will struggle to stay away from efforts to get rid of getting rid of political motives, such as those led by China and Russia.
“The perception is likely to be that this is about political geography,” he said.
(He participated in the reports of Dunkan Merry in Nairobi and Andy Bruce in London; he participated in additional reports by Cobano Gombe and Coleen Goku in Johannesburg; edited by Karen Strock and Joe Bavier)
