THE secretary-general of the African Continental Free Trade Area (AfCFTA’s) announced that the continent will soon have its own uniform payments and settlement platform to ease the burden of doing business in 42 currencies.
Wamkele Mene revealed the plans at a webinar organised by the ruling South African ANC’s Progressive Business Forum on the AfCFTA on Friday.
‘Working with the Afreximbank [the African Export–Import Bank established to finance, promote and expand intra-African and extra-African trade] we are developing a pan-African payments and settlement platform to overcome this challenge of a multiplicity of currencies on the African continent,’ Mene said.
According to Mene, if one is in Ghana and wants to trade with someone in South Africa, they first have to convert the Ghanaian cedi into the US dollar and the recipient will then convert the US dollar into the rand.
‘That is costly, it actually contributes also to inefficient trade patterns on the African continent,’ he explained.
There are 42 currencies in Africa but Mene is confident that through this platform for payments and settlements and in the absence of a common currency some of the present challenges will be overcome.
He said he expected Africa to become a monetary union but that this will take time.
‘In the absence of that, this is the best tool that we have that we can offer businesses, investors, facilitating ease of doing business and overcoming this challenge of multiplicity of currencies,’ said Mene.
Digital platforms contribute to more efficient trade as well as make trade less costly and efficient, according to Mene.
He also addressed the weaknesses exposed by the outbreak of Covid-19.
‘If you look at the last 15 months or so with the onset of Covid-19 it becomes very, very clear that Africa’s over-reliance on global supply chains did harm us because our capacity to produce personal protective equipment (PPE), the germ-killing products that we need to fight the pandemic, our capacity for all of that was undermined by the shallow productive capacity of Africa and the shallow industrial development capacity of Africa,’ Mene said.
He said the result was that when the rest of the world was imposing export restrictions on these very important PPE and germ-killing products Africa suffered.
‘This points to the fact that we have to accelerate Africa’s industrial development, we have to ensure that Africa becomes more self sufficient from an industrial development point of view without disconnecting completely from the rest of the world, from the global economy and from global value chains. We have to confront Africa’s industrial development capacity,’ he explained.
Mene believes that the AfCFTA offers the continent a unique opportunity to establish regional value chains that will make an impact on national economies, create jobs and push back the frontiers of poverty.
South Africa’s deputy trade, industry and economic development minister Fikile Majola said African countries are engaged in a battle to restore their economies in the midst of an ongoing onslaught from the Covid-19 pandemic that has destroyed lives and livelihoods.
‘One of the instructive lessons learnt from this crisis is that economic resilience is critical, it is critical to build up industrial capabilities, trade and supply chains across African countries, greater supply chain resilience needs to include efforts to spread risk by enabling the greater geographic spread of manufacturing,’ said Majola.