1. SWIFT data shows more goods and services bought and sold within Africa 

A new white paper from SWIFT, mapping commercial payment flows against financial flows in Africa, reveals that that intra-Africa payments and clearing is increasing in importance. It also points to an increase in the use of African currencies for cross-border payments.

The white paper, published at the SWIFT African Regional Conference in Kigali, Rwanda, aims to help policy makers, banks and other financial institutions better understand the movement of financial flows and goods, develop the right policies to connect the continent’s markets, deepen regional integration and adopt reforms that enhance competitiveness.

SWIFT data highlights a significant increase in intra-African commercial payments, with almost 20% of all cross-border commercial payments being credited to an African beneficiary. This indicates that more goods and services are being bought and sold within Africa. This is up from 16.7% in 2013. Intra-African clearing of payments has also increased, from 10.2% in 2013 to 12.3% in 2017. This indicates that an increasing number of payments are being routed through Africa instead of via a clearing bank outside of Africa.


While North America remains the main payment route of financial flows from Africa, its dominance is declining. Banks in North America (mainly the United States) now receive 39.5% of all payments sent by Africa, down from 41.7% in 2013. Use of the US dollar has also decreased as a share of payments originating in Africa from more than 50% in 2013 to 45.1% in 2017.

The use of local currencies such as the West African franc and South African rand is increasing. Use of the franc for cross-border payments has overtaken the rand and the British pound, accounting for 7.3% of payments in 2017, up from 4.4% in 2013. The rand has seen a smaller increase in cross-border payments from 6.3% to 7.2%.


Meanwhile, Europe’s significance as a clearing and trading partner for Africa is increasing. Commercial flows directed to clients based in Europe have increased from 26.4% in 2013 to 28.6% in 2017. In contrast, SWIFT data suggests that both the British pound and UK clearing banks are losing share of African imports with commercial flows dropping to from 10.4% in 2013 to 9% in 2017 and financial flows from 11.7% to 9.3%. Financial flows do not reflect the magnitude of commercial flows between Africa and the Asia Pacific region. While 21.7% of commercial flows are destined for Asia Pacific, only 5% of financial flows are routed through the region.

Since 2013, almost all African regions have experienced a significant drop in the number of foreign correspondent banking relationships. The Maghreb region has seen the largest reduction, of 47.25%, since 2013, while the East African Community is the only region to see an increase in relationships.

The paper also looks at the environmental factors driving change in cross-border transactions flows, re-shaping cross-border banking in Africa and further boosting intra-African trade. Read the full paper here.  

2. What’s driving change in African cross-border payments? 

According to a new white paper by SWIFT examining Africa’s cross-border payment landscape, intra-Africa payments and clearing is increasing in importance and there is a rise in the use of African currencies for cross-border payments.

Africa’s trading relationships are evolving. Over the past decade, trade has begun to move away from developed countries and towards other emerging economies including India, Indonesia, Russia and Turkey. However, boosting intra-African trade will provide the greatest potential for building sustainable development and is a key goal of policymakers across the continent.

There are several environmental factors driving the change in cross-border transactions flows, and leading to more intra-African trade.


Political will for regional integration and harmonisation

Regional harmonisation is and will continue to be a significant driver of economic transformation in Africa. This will impact all types of industrial and commercial activity across the continent, and consequently payment flows. Policy makers have recognised the need to build sound financial marketplaces with the appropriate legal framework and technological infrastructure. Regional harmonisation projects are a major catalyst for the evolution of cross-border trade and banking in Africa and are driving the increased use of local currencies across the region.

The demand side of the African market is expanding and evolving

Political will to achieve harmonisation across the continent is driving agreements that enable free trade, such as the African Union’s Continental Free Trade Area (CFTA). This is facilitating corporate growth across Africa, which, in turn, is leading to change in cross-border transactions.

The development of Africa’s financial infrastructure

African countries are investing in financial market infrastructures (FMIs), many at a regional level. Policy makers recognise that payments systems and other infrastructures are an enabler for economic growth and quickly repay their investment. The development of strong and secure FMIs has also been important in helping to drive more cross-border trade within Africa and with the rest of the world.

Regulatory pressure in financial markets

Transaction patterns are being shaped by international regulations that impose strong prudential controls. Such regulations operate a close to zero-tolerance approach to potential money-laundering and terrorist financing exposure. It is becoming increasingly difficult for global transaction banks to do business with smaller African banks that cannot easily demonstrate strong Know Your Customer, anti-money laundering and counter-terrorist financing processes. This has led many global transaction banks to review and rationalise their correspondent banking relationships. In turn, this has led to a reduction in the number of foreign correspondent banking relationships in Africa.

Africa continues to be a continent of growth and opportunity despite challenging global economic conditions over the last five years. Understanding Africa’s trade flows in terms of scale and composition will be crucial in determining the right policies and processes to support further growth on the continent. Read the full paper here

3. What will African transaction banking look like in the future?

In June 2018, SWIFT published a white paper exploring the trends in transaction banking in Africa. The paper reveals that cross-border banking has evolved over the last five years, with intra-Africa payments and clearing increasing and the use of regional currencies rising.

The paper looks at what is driving change in African transaction banking and also provides six scenarios that could impact banking in Africa in the years to come. 

Fewer but bigger African players

Over the last five years the number and strength of pan-African banks operating across the continent has increased and this trend looks set to continue. This is because African banks are today better positioned in terms of their balance sheets, local market understanding and risk appetite to capture growth across the continent. They are therefore attractive partners for foreign banks interested in doing cross-border business with Africa.

Additionally, banks are refocusing their business and risk management strategies. Global transaction banks are reviewing and rationalising their correspondent banking relationships in Africa as a result of ever increasing compliance obligations, and pan-African banks are taking the opportunity to expand.

A slight shift towards regional currency denomination 

SWIFT data shows that the share of the US dollar in cross-border payments from Africa has fallen. However, it still accounts for 45% of all payments leaving the continent. For inter-continental transactions and for transactions between less well-known trading partners, it is unlikely that the hegemony of the dollar will be challenged soon.

However, SWIFT data also suggests that for a substantial and growing proportion of intra-Africa trade, we could expect increased use of regional currencies. The further development of regional payments systems denominated in local currencies will support this shift. Equally, African central bankers will continue to promote the use of their local currencies.

Simultaneously, across the continent, access to the US dollar is becoming increasingly difficult for smaller players, principally because of tighter anti-money laundering and Know Your Customer requirements. This could further drive the use of regional currencies.

Interlinkage of regional payments systems

While regional payment systems are being successfully deployed across the continent, several regions are looking at how these could be interconnected to allow payments to flow from one system to another and provide pan-regional settlement capability. One example is the ‘Tripartite Free Trade Area’ between the East African Community, the Southern African Development Community and the Common Market for Eastern and Southern Africa.

Increased intra-African trade as a result of regional economic transformation

Commodity-based African economies remain vulnerable to external shocks and fluctuations in the price of oil. As a result, African policy makers and international financial institutions such as the African Development Bank are focused on economic diversification and the capability to add value to raw commodities through processing and manufacturing, as a way to increase economic resilience.

Diversification is supporting the growth of intra-Africa trade, where manufactured goods are beginning to dominate regional trade, accounting for 60% of total regional trade. In turn, higher levels of regional trade are helping to boost cross-border banking across Africa.

The emergence of an African multi-currency clearing centre

As growth and greater integration generate more transaction volumes, the economics of setting up multicurrency clearing infrastructures that include the euro and dollar alongside regional currencies are becoming more persuasive, and strong and reputable international financial centres are emerging. In Africa, SIRESS is moving towards this solution with the planned introduction of the US dollar in late 2018. This is expected to improve the settlement of transactions within the region and bring more transactions onto SIRESS that were previously settled through correspondent banking arrangements using US dollar clearers.

Digital transformation 

Financial technology (FinTech) is driving the digital transformation of financial services across Africa. In the retail space, many markets have embraced mobile payments, notably East Africa. Banks are also rolling out new products and services across digital channels to grow their customer-base. They are partnering with telcos and FinTechs to deliver new and cheaper financial services to their customers. Technology is helping frictionless payments and borderless financial services to become a reality.

Historically, innovations started in wholesale markets and then found their way into retail markets. Now, innovation increasingly starts in retail markets and sets the standard elsewhere. With the pace of change quicker than ever and the borders between countries and market segments becoming increasingly blurred, it will be interesting to observe how digitisation and technological innovation will impact cross-border and high-value payments moving forward.

Macro-economic and political forces will continue to shape Africa’s banking sector as they have over the last five years. Digitisation and technological innovation will also play an increasingly important role. To be a successful pan-African player will require careful monitoring of these forces so that business can be positioned to benefit from potential shifts. Read the full paper here.

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