Vice-President Mahamudu Bawumia has said that by working together to offer the necessary integrated payments infrastructures and systems, Africa is now in a better position to eliminate trade informality.
According to him, the existence of informal trade in Sub-Sahara Africa is due to a lack of trade-related infrastructure on the African continent, as well as underdeveloped cross-border payment and settlement systems and settlement in foreign currency.
“As you are all aware, the underlying motive behind our integration scheme is the expectation that, through collaborative efforts, participating countries in the integration programmes will generate maximum socio-economic benefits for their citizens in the sub-region,” the Vice-President said at the commercial launch of the Pan-African Payment and Settlement System (PAPSS) in Accra.
He said that regional integration is an effective technique for overcoming the limitations imposed by the structure and size of particular national markets.
“It has been realised that if production of goods and services is carried out in an enlarged regional economic space, there is a greater chance of achieving substantial economic benefit,” he said.
Dr. Bawumia, who decried the lack of intra-African commerce, stated that available trade statistics from the African Union’s Annual Trade Report for 2020 showed that intra-African trade remained at an average of 13 percent for intra-imports and 20 percent for intra-exports during the last seven years.
Despite the fact that the share of intra-exports commerce climbed slightly from 18.2 percent in 2013 to 19.6 percent in 2019, the value of overall intra-African exports fell over the same period, according to him.
“These trade payments and relationships are also characterised by settlement involving foreign exchange use which sometimes put pressure on African currencies coupled with issues relating to speed of transactions, convenience and high cost of these transactions,” he said.
“Africa has some 54 countries, 42 currencies, and four exchange rate systems in operation. Most of the currencies are characterised by illiquidity and lack of convertibility and this discourages intra African trade. It is this reality that has resulted in a call for a common African currency since 1963 to facilitate trade inter alia,” the Vice-President added.
Dr. Bawumia, on the other hand, observed that cross-border or intra-African payments had received less attention, noting that, despite their importance, intra-African payments faced a number of issues, including cost, access, speed, and transparency.
Taking his turn, the Chief Executive Officer of PAPSS, Mike Ogbalu, said that a prosperous continent was one that traded and developed prosperity from its commodities and services.
Governments, businesses, and individuals, according to him, consumed things and services gained in exchange for value, and payments were the primary way through which value was exchanged or traded.
“The more efficient payment systems are, the higher the velocity of value exchange, and consequently, the higher the volume and value of trade and our subsequent prosperity,” he said.
Mr. Ogbalu stated that establishing an efficient payment infrastructure that would facilitate transactions from Cape Town to Cairo and Dakar to Dar-es-Salaam on a continental level would go a long way toward eliminating the artificial borders that have divided the continent and robbed individual countries of their shared prosperity.
He acknowledged that payment infrastructure had existed for some time at both national and sub-regional levels, but added that “these systems, however, lack interoperability, fragmented national and regional payment systems cannot stimulate Pan-African economic development and intra-African trade at the rate required to significantly increase the percentage of trade among African countries.”
“While these national and regional payment systems have made a good start, bringing about significant modernisation within their jurisdictions, it is paramount that we now integrate all of Africa financially to hasten the pace of economic growth in the continent,” he asserted.