Steady growth in cross-border payments activity across African domestic and intra-regional business – as one of the region’s biggest participants Standard Bank has recorded an increase of nearly 15% this year compared with 2015 – is helping sustain the continent’s attractive growth levels, despite a slowdown in global investment flows and commodity exports.
Lower commodity prices and reduced Chinese consumption has resulted in a reduction in international investment and Chinese intergovernmental flows to Africa, while seeing many global banks reconsider their commitment to the continent as perceptions of increased risk outweigh visible investment opportunities.
A more detailed view of business activity in Africa, however, reveals that even as global investment has decreased, daily transactional activity within and between African economies is continuing, and even increasing. Standard Bank’s data shows that over 50% of transfers sent from Africa are ultimately routed back to the continent, while the percentage of transfers routed back to Southern Africa is even higher.
Banks without an established transactional capability on the ground across the continent have not been able to support, and benefit from this ongoing – and increasing – business and cross-border activity.
Intra-African trade relies on cross-border payments. In a multiple local currency region with trade flows denominated in US dollars (USD), currency volatility and liquidity constraints hold the potential to challenge, delay and increase the costs of cross-border payments.
A continent-wide footprint
Standard Bank helps clients in Africa manage the challenges in two ways. Firstly, its long- standing relationship with African legislators and regional bodies is helping evolve globally-compliant legislation that promotes regional integration and efficient intra-African trade.
This includes working closely with bodies like the Gaborne, Botswana-based inter-governmental organisation the Southern African Development Community (SADC) and the East African Community (EAC) to develop and implement efficient, internationally-compliant regional payment systems promoting safe and efficient cross-border payments. Headquartered in Arusha, Tanzania, the EAC acts as the regional intergovernmental organisation of six republics: Kenya, Uganda, South Sudan, Tanzania, Burundi and Rwanda
Secondly, as the world’s leading African currency liquidity provider, the bank is able to leverage liquidity from its South African home base across a wide geographic footprint supporting client growth across the continent.
Its large footprint – combined with technology platforms, systems and partners – means that it effectively acts as an intra-African financial network able to move, control, deploy and track cash and other functions across the continent. It is among the reasons that many other banks use Standard Bank as ‘a corridor’ correspondent into and across Africa.
Looking forward, ongoing investment in African infrastructure, young populations and increased urbanisation is creating new growth opportunities independent of commodity extraction and export. As the continent’s growing middle class begins consuming the goods services associated with increased urbanisation and improved earnings, companies from across the globe, including China, will begin relocating less sophisticated, more labour-intensive manufacturing capacity to Africa. This will act as a catalyst to deepen regional integration, increasing the incentive to address cross-border and other intra-regional trade restrictions and bottle necks.
From a Chinese perspective, increased utilisation of renminbi (RMB)-based, cross-border cash and trade management systems will be required to effect this industrial investment. Standard Bank’s partnership with the Industrial and Commercial Bank of China (ICBC), which was first established in 2008, provides the financial infrastructure to manage Chinese industrial investment into the continent. Once established, the growth in export and trade activity driven by widespread industrial production in Africa will see a rapid expansion in Africa’s cross-border transaction landscape and capabilities.
The bank is well-placed to build on its existing cross-border transactional platforms and capabilities to support this next phase of the African growth story. After all, Africa is our home, and we drive her growth.
The BoE launching digital currency on blockchain tech would be international payments ‘game changer’
The Bank of England may be the first major central bank to put its currency on a blockchain which would be a ... read more
From corporates investing in Asia to small and medium enterprise (SME) suppliers wanting to make sure they get paid, companies are trying to discern whether countries and counterparties in Asia are actually risky.
Having shown remarkable resilience in the face of last year’s geo-political turbulence, and with investor demand bolstered by continued ECB appetite, the ... read more
With the 19th National Congress of the Communist Party of China having just concluded, market watchers are intensely interested in what will happen next with the economy and the Renminbi (RMB). The New Renminbi Reality Forum organised by Bloomberg Live and ANZ Bank provided timely insights from the experts.