Africa is a continent bursting with potential. In its favour are abundant resources, strong demographic fundamentals and a rising, well-educated middle class. Yet, the challenge for Africa’s policy-makers, business community and citizens alike has been translating this potential into meaningful development. A lack of financial services infrastructure has been a key impediment in this process, blighting the continent’s economic growth by making business more costly and suppressing the development of intra-African trade.
Encouragingly, positive steps are now being taken to address this ‘soft’ infrastructure shortfall. With the requisite political will and technological know-how, communities across the continent, from the South African Development Community (SADC) to the West African Monetary Zone, are now pushing ahead with respective regional payments systems. In particular, the success of the SADC Integrated Regional Electronic Settlement System (Siress) is a standout example of African regional integration.
Operating across nine countries in sub-Saharan Africa and with more than 70 commercial banks active on the system, Siress is transforming the way business is conducted on the continent. Historically, cross-border transactions between African businesses would be settled in dollars via a clearing bank in New York, ultimately increasing the cost of the transaction. With the introduction of Siress, which settles transactions in South African rand, and similar systems elsewhere on the continent, these types of transactions can be easily and cost-effectively settled by participating institutions.
For Africa, the development of this type of financial infrastructure offers innumerable benefits. In particular, it will change the way trade is conducted in a region that, as a result of its colonial past, has evolved physical infrastructure and commercial relationships based around the export of raw commodities. The advent of regional payments will therefore offer a considerable boost to intra-African trade, in turn boosting business, and economic growth and employment opportunities.
Data from Swift suggests that most African countries execute only about 23% of their trade with one another. This figure is shockingly low. The advent of regional payments systems will go a long way to addressing this shortfall and in turn help the continent to translate its abundant potential into lasting and sustainable growth.
