African central banks are working together to link major cross-border payment systems, hoping to use technology to connect what already exists rather than build an entirely new system for all of Africa.
Linking the payment systems is designed to help build momentum for the new African Continental Free Trade Agreement which was launched on May 30 after years of negotiations. It is expected to be the world’s largest free-trade zone.
The pan-African trade zone aims to cut tariffs on 90 percent of goods across a market of 1.2 billion people with a combined GDP of $2.5 trillion, FT reports.
The trading bloc will have headquarters in Accra, Ghana, and has been signed by 54 of 55 African countries. Only Eritrea has not signed but may do so in the future.
Linking African central bank payment systems could simplify payments between regions and remove some of the costs associated with having to settle payments through U.S. and European banks.
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A working group of the Association of African Central Banks is exploring ways to connect the technology behind the South African Reserve Bank’s payment system with payment systems in East and West Africa, according to Weetracker.
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The South African central bank uses the Southern African Development Community Real Time Gross Settlement System.
Lesetja Kganyago, governor of the South African Reserve Bank, said he believes it’s necessary to use technology to connect what already exists rather than build an entirely new system for all of Africa.
“It is a race to the top,” Kganyago said, according to Bloomberg. “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.”
Full implementation is expected to take 10 years.