The Common Market for Eastern and Southern Africa has launched a digital payments system to cut transaction costs by allowing businesses to settle deals in local currencies, it said on Thursday.
COMESA, which has 21 member states including Egypt, Kenya and Ethiopia, joins efforts by the African continent to push for local currency payments systems to cut trade costs by eliminating the need to convert local currencies into hard currencies, mostly US dollars, for cross-border payments.
The new platform, known as the Digital Retail Payments Platform, is starting off with trials between Malawi and Zambia, COMESA said in a statement.
It is being rolled out in partnership with two digital financial services providers and a foreign exchange provider, the bloc said without naming the partners.
‘Game-changer’
“For the first time, cross-border trade within COMESA can be settled directly in local currencies,” said Kenya’s Trade Minister Lee Kinyanjui. “This is a game-changer.”
The initiative seeks to assist medium, small and micro enterprises, who account for 80% of business and 60% of employment in member states, but have to deal with “cumbersome, insecure and expensive” cross-border payments systems, he said.
“We are demonstrating how traders can exchange value seamlessly without relying on scarce foreign currency,” he said.
The payments platform will aim to keep costs under 3% of the value of the transaction, the minister said. Kenya’s President William Ruto, who took over the chairmanship of COMESA from his Burundian counterpart, called for increased integration to boost trade.
Home-grown multilateral financial institutions
Kenya has increased its shareholding in regional trade finance banks TDB and Afreximbank, by $100 million and $50 million respectively, Ruto said, as a sign of its commitment to deepening trade integration.
“One of the most viable pathways for Africa, and for regional economic blocs like COMESA, is to strengthen our home-grown multilateral financial institutions,” he said.
SOURCE:Reuters