When the CFA Franc and the Rand are preferred to the Dollar

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Published on July 4, SWIFT’s report, Payments in Africa: Overview of African Trade Flows, reveals that payment clearing and commercial transactions are growing across the continent.

The report compares commercial payment flows with financial flows, showing an increase in the use of African currencies for cross-border payments and a decline in the predominance of North American clearing banks and the use of the US dollar.

Over the period, there is a decrease in the number of foreign correspondent banks in most African regions. The report also identifies the factors behind this change and their impact on the banks represented in Africa.

SWIFT data highlights a significant increase in commercial payments within Africa, with around 20% of all cross-border payments being credited to an African beneficiary. This shows that more products and services are being bought and sold in Africa. This percentage is up from 16.7% in 2013. Payment clearing within Africa has also increased, from 10.2% in 2013 to 12.3% in 2017. This means that a number payments are transiting through Africa rather than through a counter-settlement bank outside the continent.

While North America remains the main route of payment for financial flows from Africa, its predominance is declining. Banks in North America (mainly in the United States) now receive 39.5% of all payments sent by Africa, compared to 41.7% in 2013. The use of the US dollar has also declined as a share of payments from Africa, from more than 50% in 2013 to 45.1% in 2017.

The use of local currencies such as the West African franc and the South African rand is increasing. The use of the franc for cross-border payments exceeded the rand and the British pound, accounting for 7.3% of payments in 2017 compared to 4.4% in 2013. The rand recorded a more limited increase in cross-border payments, of 6 , 3% to 7.2%.

At the same time, the importance of Europe as Africa’s partner for trade compensation and trade is growing. Trade flows to customers based in Europe increased from 26.4% in 2013 to 28.6% in 2017. Conversely, SWIFT data indicate that the UK pound and the UK’s United Kingdom are losing a share of African imports, trade flows declining from 10.4% in 2013 to 9% in 2017, and financial flows from 11.7% to 9.3%. Financial flows do not reflect the magnitude of trade flows between Africa and the Asia-Pacific region. While 21.7% of trade flows are destined for the Asia-Pacific, only 5% of financial flows pass through the region.

Since 2013, virtually all African regions have experienced a significant decline in the number of foreign correspondent banks. It is in the Maghreb region that this decline is the largest, 47.25% since 2013, while the East African Community is the only region where the number of relationships is increasing.

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