As the much-talked-about African Continental Free Trade Area (AfCFTA) agreement nears launch mode, preparations are getting into full gear. And as part of preparations, central banks throughout Africa are now working towards linking the major cross-border payment systems on the continent.
The Association of African Central Banks has since formed a working group who are now looking at ways of linking up the technology which runs the Southern African Development Community Real Time Gross Settlement System, which is operated by the South African Reserve Bank, with payments systems in east and west Africa.
Lesetja Kganyago, Governor of the South African Reserve Bank, made this known today at the ongoing World Economic Forum on Africa in Cape Town, South Africa.
“It is a race to the top,” he said. “Thinking that we would wait and have some big continental payment system? No, you’ve got to get the payments systems there to connect with each other.”
The Governor affirmed that connecting the systems will help to prop up the African Continental Free Trade Agreement. He also reiterated that such a move will facilitate intra-regional payments and eliminate some of the costs associated with resorting to settling such payments via banks in the U.S. and in Europe.
In July this year, Nigeria and Benin became the 53rd and 54th African nations, respectively, to sign the much-anticipated agreement that will see the African continent become the largest free trade area in the world.
The AfCFTA agreement is aimed at boosting trade between African nations by transforming the continent into one big market devoid of tariffs, duties, and other barriers to entry.
Once fully operational, the trade agreement, an African Union-led initiative, would cover a market of 1.2 billion people with a combined gross domestic product (GDP) of USD 2.5 Tn. The African Development Bank (AfDB) recently tipped trade within the new free trade area to eclipse USD 3 Tn.
At the moment, Eritrea is the only African country that is yet to put pen to paper on the new free trade agreement. The terms of the agreement are to be negotiated in phases and full implementation is expected to take about a decade.
Featured Image Courtesy: Egypt Today