5TH GHANA INTERNATIONAL TRADE & FINANCE CONFERENCE
The sustainability of the AfCFTA will be highly dependent on the cross-country payment system, thereby the need to elaborate on its importance with regard to the AfCFTA at the 5th Ghana Conference on Trade & Finance (GITFIC). Cross-country payments simply are transactions where the payee and the recipient are both residing in different countries.
The smooth run of this system will facilitate trade between two or more countries. Africa is also on the rise such that its economies have shown improved resilience in the face of uncertain global economic conditions over the last couple of years.
Real performance is rising at a faster rate than expected and the same as Capital Expenditure. If free movement of goods and services is critical for boosting intra-African trade then financial flows across countries are also critical. According to a Forrester survey in 2017, cross-border e-commerce will cover at least 29 countries in Europe, North America, Latin America, Africa, Middle East, and the Asia Pacific by 2022 and we at GITFIC believe that the COVID Pandemic may cause this to delay at least 3 – 4 years more due to the several uncertainties and havoc the pandemic has caused within Global Trade.
Gradually Africa is on the rise in the use of cross-country payment system. In a recent one on one Panel Discussion at a Conference organized by the Ghana Telecoms Chamber under the auspices of the Vice of President of Ghana; Dr. Bawumia, I (CEO of GITFiC) predicted that the rate of penetration of a Single Digital Continental Payment System may take up to 5years. I cited the ongoing ‘’test-implementation ‘’ by WAMZ (West African Monetary Zone) under the supervision of Afrexim as a good step in the right direction and if successful; should ignite a swift adaptation on the Continent.
In furtherance to my submission, I noted that; A system that allows a Small Trader in Ghana to freely import goods from Gambia using the Cedi without thinking of his/her ability to buy a 3rd currency including cost of settlement and worrying about the length of time it takes to arrive is what have lead our regulators on the Continent to arrive at the PAPSS (Pan-African Payment and Settlement System) ie; Creating a new financial Inflows and successfully facilitating Trade and other Economic activities amongst African States.
The role of the financial institution and its Modus Operandi is imperative for the smooth run of the AfCFTA. GITFiC has since its inception supported the agenda for the creation of a Single Continental Payment platform where all financial transaction will be carried out on the AfCFTA platform however; we are strongly concerned that our Central Banks are not the institutions carrying out this Single Payment System but rather Afri-Exim Bank. We do acknowledge the fact that, the shares structure of Afrexim Bank is categorized A, B, C and D. We fully understand the share-ownership structure however; share-category B, C and D has the private sector not only on the Continent but the world involved. These shareholders are certainly not charities so therefore expect dividends. The issues of Exploitation are bound to happen. This, we at GITFIC believes have the likely tendencies of inflating transactional cost hence bringing us back to where we were.
The Real Macroeconomics Issues
The concept of a Single Window can be overviewed in relation to the creation of a single payment platform where all financial obligations regarding AfCFTA’s trading activities can be done. A Single Window is a government-mandated platform that enables economic operators and government authorities to exchange information in order to meet regulatory requirements. Since the pros of the single window system outweigh the cons, we at GITFiC strongly advance the cause to capitalize on the Single Window Platform where all financial payment can be made across countries for easy and fast transaction; this we at GITFIC again believes is already in the advance stages and in some cases already at the implementation stage. Addressing the issue of a single system where all financial transactions can take place, raises another important subject i.e. currency convertibility.
The commonly traded currency on the international trade market in most countries is the greenback ie; the US Dollar. For effective run of the single payment system, there is the need for a single currency convertibility whiles moving forward, Africa will have to use one currency and this is non-negotiable at this very crucial time considering the AfCFTA.
We need to put in place some stringent Continental Monetary Policies to run this agenda. Considering these policies, there would also have to be one body formed that will act as a central bank as in AN AFRICA CENTRAL BANK which we know is in the making and proposed to be Headquarters in Nigeria if not done already.
Price levels are another key factor that needs to be considered for an effective continental trade platform. Since AfCFTA is going to create a type of market structure called ‘the perfect competition’, for a profitable trade amongst Member States, the issue of price levels must be highly considered in order to unify about 90% of the profit margins respectively.
One of the ways a country is able to build her economy is through the revenues it generates. High productivity affects a country’s economy positively and one of the major ways to get productivity boosted is through a country’s Fiscal Policies. Government uses budget which includes spending and levied taxies to achieve this goal. The area of fiscal budget in an economy must be well explored with research findings before coming up with policies that will boost productivity which we think Central Banks and Finance Ministers on the Continent are in full gear with.
Another factor that boosts productivity is easy access to loans with lower interest rates so as to make it possible for traders to secure Financing for Trade. Since AfCFTA brings on board different countries on a single trading platform, the issue of money laundering is bound to happen. This may be as a result of certain factors and good conditions not put in place to make it easier for traders from different countries to easily move money from one country to another. In order to avoid the issue of money laundering, there’s the call to create a single platform where all financial obligations can be made whiles also considering currency convertibility!
In all of these topical discussions, the Role of our Commercial Banks and other Financial Institutions will not be cut off but will still remain a major player in achieving these goals. That is to say; the adjustments in achieving a Single Continental Payment Platform should be well designed and engineered not to neglect the Key Roles played by our Banks and other Financial Institutions. For example synchronizing a single open platform where all Banks can have access to transactions in terms of sending or receiving. This is why we are GITFiC believes Banks in Africa and out of Africa can easily partake in AfCFTA.
The Theme for the 5th Ghana International Trade and Finance Conference – GITFiC is comparatively defined from the above write up ie; Facilitating Trade in AfCFTA; The Role of the Financial Services Sector.
The sub-theme is: Creating an enabling Macroeconomic Environment for AfCFTA; The Role of the Central Banks in Africa.