African Continental Free Trade Area (AfCFTA), which began in 2018, most African countries are coming together to create a unified market. This agreement is the largest free trade area in the world by the number of member states, right after the World Trade Organization (WTO). But it’s not just about eliminating trade barriers; a new game-changing payment system is at the heart of this transformation.
Right now, African businesses have to use US or European banks to process payments, which means extra costs and delays. This system costs Africa billions every year. According to Tunde Macaulay, head of business banking at Standard Bank, Africa could save up to $5 billion just by eliminating the need to use foreign banks for these transactions.
The new payment system will allow African businesses to use their local currencies for cross-border transactions. This change could help make payments faster, cheaper, and more transparent. Imagine a system where businesses no longer have to wait days or even weeks for payments to be processed through foreign banks. Instead, payments can flow quickly and directly within the continent.
But that’s not all. This system is expected to bring huge benefits by bringing $50 billion worth of informal trade into the official economy. Right now, much of Africa’s trade happens outside the official system, making it harder to track and manage. By creating a unified and easy-to-use payment system, AfCFTA aims to encourage businesses to formalize their transactions, which will increase trade within Africa.
Macauley also emphasizes that it’s not just about building a payment system; it’s about creating an environment where small businesses can thrive. By reducing trade barriers and easing financial processes, small businesses will have more opportunities to expand, which will benefit the entire continent. However, success depends on the widespread adoption of this system. It’s like a network effect— the more businesses and banks that join, the better the system becomes.
On top of this, AfCFTA is also rolling out a $1 billion Adjustment Fund, with plans to grow it to $10 billion by 2033. This fund will support African governments and businesses during the transition to a more connected and integrated economy, helping them overcome challenges and making the process smoother.
In short, the AfCFTA’s payment system could be a game-changer for Africa. It has the potential to not only save billions of dollars but also open up new trade opportunities, boost local businesses, and bring Africa closer to becoming a major global economic player. This is a historic moment, and as more banks and businesses join the effort, the value of this system will only grow. The future of Africa’s trade is bright—and it’s happening now.
