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A payment system that eliminates the dollar in cross-border African transactions can save the continent as much as USD 5 billion in processing costs, the head of business and commercial banking at the Standard Bank Group said.
Having to clear transactions through US or European banks burdens African businesses with delays and expenses, said Tunde Macaulay of Standard Bank Group. A unified payment system under the new African Continental Free Trade Area pact looks set to improve this, according to the banker who has worked across the continent for 25 years.
The so-called Pan-African Payments and Settlements System, launched in 2022, also has the potential to bring about USD 50 billion of informal trade into the official economy, Macaulay said.
More than 80% of cross-border payments from African banks are still routed offshore for clearing, typically through Europe or the US, a 2022 report from the Africa Export-Import Bank found. With only 16% of Africa’s trade happening within the continent — compared with more than 60% in the European Union — the stakes are high.
About 47 countries have ratified the AfCFTA, which aims to fully integrate the region into a single market. The area has a potential market of 1.3 billion people with a combined gross domestic product of USD 3.4 trillion, and could be the world’s biggest free-trade zone by area when the treaty becomes fully operational by 2030.
An expanded pilot that went into force this year includes a pan-African payments and settlement system using local currencies to overcome the continent’s foreign exchange shortages and convertibility limitations. The continent has 42 monetary units.
Already, 115 commercial banks, 13 central banks, and 10 switching-service providers have joined the system, but scaling it will require a coordinated “network effect” — and it’s far from guaranteed. Macaulay said.
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AfCFTA’s USD1 billion Adjustment Fund will also be crucial in this effort, providing support to governments and businesses facing revenue losses from tariff cuts. The African Union aims to grow this fund to USD 10 billion by 2033, allowing countries to participate in the free-trade zone without risking economic strain.
Eskom is, at last, moving forward with plans to build a new pumped storage scheme in the Elias Motsoaledi Local Municipality, based in Groblersdal in Limpopo. It will be implemented through the public-private partnership (PPP) model.
This comes against the backdrop of a rapid increase in renewable generation capacity connected to the national grid expected over the next few years, while an increasing number of coal-fired power stations that supply base-load energy will be decommissioned.
