Business Chat Podcast – Cross Border Payments in Africa

Unlocking Africa’s Potential: The Future of Cross-Border Payments

Imagine a bustling marketplace in Africa, where traders from different countries exchange goods and services seamlessly. Yet, behind the scenes, cross-border payments remain a complex challenge. In this post, we delve into the intricacies of cross-border payments in Africa and explore how innovative solutions are paving the way for a more connected continent.

The Current Landscape: Cornelius Coetzee, the country director for Verto South Africa, spoke to Business Tech Africa and highlighted the immense size of the cross-border payments market in Africa. With trillions moving across borders, the market is both vast and under-reported due to informal trade. The lack of infrastructure and reliance on legacy systems create significant barriers for businesses, leading to high costs and delays.

Challenges and Opportunities:

The volatility of African currencies and the cost of transferring money are major hurdles. Businesses often face long wait times and fluctuating exchange rates, which can erode profits. However, companies like Verto are working to improve these systems, advocating for better policies and partnerships to facilitate smoother transactions.

Listen to the Podcast Here:

Key Quotes from Cornelius Coetzee – CEO of Verto

The massive Size of Cross Border Payment Market in Africa:

“If you think about South Africa, from a B2B perspective, it’s close to about 300 to 400 billion that moves in and out of the country on an annual basis”.

‘But from an Africa perspective, there’s a few trillion that actually moves across the borders in Africa and from Africa to the rest of the world. So it’s an immense, immense, immense market, and I think it’s wildly under-reported, purely because there’s still a very strong informal trade, especially in the West Africa corridors, especially in East Africa”.

Money Moving Challenges for Investors looking to Invest in Africa:

“Getting your hands on liquidity is probably not as difficult as getting your hands on hard currency from those highly liquid markets. So it sort of creates an environment where there’s other parallel plays”. “Less so South Africa, but very much in the SADC region, there’s this ecosystem of a parallel market just to gain access to hard currency”.

“But the businesses were still left with institutional banking, legacy channels, and it sort of creates that backlog of difficulty to trade into the continent itself”.
“So now you’ve got this ecosystem where individuals can trade freely.Businesses still need to use legacy systems, but legacy systems don’t really focus on unlocking that real value into the markets that we want to trade into”

Cost and time of Payments in Africa Prohibitive:

“I think speed of transacting and the cost associated with it is probably the two most important factors to consider. I know that the World Bank wants to bring down the cost of remittances to 3 to 5 % for individuals. think currently the average cost for a transaction out of South Africa for individuals is about 10%”
“Individuals again have got the ability to instantly receive funds. Businesses on the other hand have got a far more complex use case because now you have supporting documentation that you need to provide. And then, that needs to be cleared by the central bank”.

Africa Needs its Own Solutions and Good Policies

“So being an advocate for policy, I’m a very strong advocate for financial inclusion in a way that it’s done responsibly. So really speaking to various stakeholders at various central banks and sort of be an advocate for the ability to trade within Africa. And I think it’s become more evident now where we see the sort of the aftershock of Trump tariffs, where there’s this whole reliance on G3 currency markets, so Europe, UK and the US. And essentially, that’s where we put all our eggs in a basket and we say happy days, let’s as a continent rely heavily on the West. But ultimately, we’ve got a continent of a billion people”

“We’ve got so much to offer our own continent and at the same time, really doubling down on efforts within the Middle East and Asia and sort of getting that ability or sort of policies in place to make sure that we are able to really shift our mindset into the continent itself and to the East would greatly benefit us”.