Under shadow of Trump warning, Africa pioneers non-dollar payments systems
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Kenyan currency notes are pictured inside a cashier's booth at an Equity Bank branch as Equity Group Holdings release its 2023 quarter one results in Nairobi, Kenya, May 16 2023. — Reuters
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Nairobi: Africa’s pressure for a local currency payment system-once more than a desire, is finally taking advantage of the concrete, which has brought a promise of less expensive trade to the continent, which is due to the long-term dollar transactions to provide resources.
But efforts to get away from the dollar are strongly opposed and the threat of US President Donald Trump’s retaliation, which is committed to protecting global trade as a currency.
Africa’s steps to form a payment system, which do not rely on greenbacks, are mirrors from China to develop a free financial system from Western institutions. Countries like Russia, which face economic sanctions, also want to replace the dollar.
But although President Trump’s return to the White House, trade samples and geographical political restorations have immediately realized the movement, but those who advocate African advocates for alternatives are making their case on the basis of costs.
“Our goal, contrary to people’s view, is not,” said Mike Ogblo, chief executive of the pan African payments and settlements system.
“If you look at the African economies, you will know that they struggle with the availability of global currencies of the third party to determine the transaction,” he said.
Africa’s commercial banks usually rely on foreign counterparts through so -called representatives of banking relations, to facilitate international payments. This includes payment between African neighbors.
According to the United Nations Trade and Development Agency, it increases the cost of transactions significantly, as well as other factors such as poor transport infrastructure, trade in Africa has increased 50 % more expensive than the global average.
According to a report by the MCB Group based in Mauritius, according to a report between African countries, it is also one of the many reasons for Africa’s trade.
“The current financial network, which is based on a large -scale dollar, has become less effective for Africa and expensive,” said Daniel McDell, a professor at the University of New York, who specializes in international finance.
Homegone system
According to data compiled by Peps, under the current representative systems, the $ 200 million trade between two parties in different African countries is estimated at 10 % to 30 percent, with a cost of 30 percent.
Changes in the homegone payment system can reduce the cost of this transaction by just 1.0 %.
Systems such as Pips allow business in a country, Zambia, for example, allowing goods from others like Kenya, in which both buyers and sellers receive payments in their own currencies instead of converting them into a dollar to complete the transaction.
Ogbulo told Reuters that the continent could save $ 5 billion a year for intra -Africa trade payments using currencies like Nigeria Nira, Ghana CD or South Africa.
Launched with only 10 co -commercial banks in January 2022, pips are operating today in 15 countries, including Zambia, Malawi, Kenya and Tunisia, and now there are 150 commercial banks in the network.
“We have seen a lot of growth in our transactions as well,” Ogblo said without providing data. “
The World Bank’s private sector lending ARM, the International Finance Corporation, has begun issuing loans to African businesses in local currencies.
Africa’s IFC vice president Ethiopus Tafara said it made the switch a mandatory essential for their development, and relieves them of the dollar’s dollar currency risk.
“If they are not producing severe currency, hard currency debt puts a burden, which makes it difficult for them to succeed,” he said.
GeoPolitics and Trump Factor
The African campaign has found a platform in a group of 20 largest economies to promote regional payment systems, while South Africa is leading the accusation for holding the G20 presidency.
It conducted at least one session on promoting the regional payment system when South Africa hosted a meeting of the G20 finance ministers and the central bank governors. And South Africa wants to follow the conversation with concrete steps. The next meeting of G20 finance officials is scheduled in mid -July.
“Some of some of the most expensive passages for cross -border payments are actually found on the African continent,” South Africa’s central bank governor, Leh Kagigigigo, told Reuters during a G20 meeting in Cape Town in February.
“It is important for us to work as a continent, it is important that we trade and settled in our own currencies.”
However, talk of being removed from the dollar – either for trade or as a reserve currency – has caused aggressive reactions from President Trump.
After the BRICS – along with countries such as Russia, China, India and Brazil, along with Africans such as South Africa, Egypt and Ethiopia – after reducing the dollar dependence and producing joint currency, Trump responded to 100 % risks.
He wrote on the truth in January, “There is no possibility that the BRICS will replace international trade, or anywhere the US dollar, and that whatever country tries should say goodbye to the prices, and say goodbye to the United States.”
In the subsequent months, Trump has shown his consent for the use of taxes to punish allies and enemies the same, a strategy that has promoted global trade and geopolitics.
It does not matter that the intent to move to more local currency transactions, McDews of the University of Sacrays, said that Africa, under the leadership of China and Russia, would strive to remove itself from politically encouraged efforts. “The idea is that it is about geopolitics,” he said.
