Africa: intra-regional trade to boost ecommerce growth

Tuesday 19 August 2014 14:41 CET | News

The countries of Africa undergo nearly 23% of their cross-border trade, according to the “Africa Payments: Insights into African transaction flows” report issued by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), reports.

The figure is higher than the 15% estimate by the World Bank and African Development Bank (AfDB).

However, Hugo Smith, SWIFT head of Africa South, argues that the level of intra-African trade is relatively low, as compared to other regions. For example, around 70% of the EU’s trade happens within its borders.

The same report highlights that improved cross-border payment systems could facilitate intra-regional trade and regions across the continent are beginning to work on greater intra-continent trade. Although intra-regional trade is determined by economic fundamentals of supply and demand, the report notes that the lack of efficient regional payment systems could add significant costs to intra-regional trade.

In terms of actions undertaken to facilitate trade, The East African Community (EAC), which includes the Republics of Burundi, Kenya, Rwanda, the United Republic of Tanzania, and the Republic of Uganda and Tanzania, is working towards a deeper economic, political, social and culture integration in order to improve the quality of life of the people of East Africa through increased competitiveness, value added production, trade and investments.

Customs Union, Common Market and Monetary Union are three important policy agreements aimed at making the dreams of the bloc come true.

Under the Common Market Protocol, partner states agreed to remove all barriers and restrictions on the movement, sale, investment and payments of capital. As such, Kenya, Tanzania and Uganda have implemented a multi-currency regional payment system interlinking the domestic payment systems in each of the three countries, thereby facilitating cross-border fund transfers within the block and supporting increase of free movement of goods, labour and services.

The Southern African Development Community (SADC) is also developing its regional payment system and launched an electronic payments platform for the block in 2013. The system which was designed to enable transactions among banks in member countries to be settled in real time and without the need for the funds to flow through third-party clearing banks was named the SADC Integrated Regional Electronic Settlement System (SIRESS).

Nearly 40 commercial banks across Southern Africa have been using the payment system and a large volume of trade-related transactions are completed via the new system.

Still, the service is not available in all SADC member countries yet, as only 7 have joined so far. Three more are scheduled to join by the end of 2014.

Retail transactions, such as remittances, will also be accommodated in SIRESS and this is scheduled to be implemented by the end of September 2014.

Check out our Cross-border Ecommerce Research section here for more info on country-specific ecommerce facts and figures, preferred payment methods, risk and fraud, as well as ecommerce legislation and regulation for mature and emerging markets.

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Keywords: Africa, intra-regional, trade, cross-border, ecommerce, growth, online sales, online payments, money transactions
Categories: Payments & Commerce
Countries: World
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