The Common Market for Eastern and Southern Africa (COMESA) has launched a digital payments system aimed at reducing transaction costs and allowing businesses to conduct operations in local currencies, the organization announced on Thursday (9).
COMESA — which includes 21 member states, among them Egypt, Kenya, and Ethiopia — joins the continent’s wider push to promote local currency payment systems, seeking to cut trade costs by eliminating the need to convert local currencies into hard currencies, mainly U.S. dollars, for cross-border transactions.
According to the bloc, the new system, known as the Retail Digital Payments Platform, is currently being piloted between Malawi and Zambia, in partnership with two digital financial service providers and one foreign exchange service provider.
“For the first time, cross-border trade within the Common Market for Eastern and Southern Africa can be settled directly in local currencies,” said Kenya’s Trade Minister Lee Kinyanjui, adding, “This is a revolutionary change.”
The initiative aims to support small, medium, and micro enterprises, which account for 80% of businesses and 60% of employment in member states, but currently struggle with “cumbersome, insecure, and costly” cross-border payment systems, the minister noted.
“We are demonstrating how traders can exchange value seamlessly without relying on scarce foreign currencies,” he emphasized.
The platform’s goal is to keep transaction costs below 3% of the transaction value, Kinyanjui added.
Kenyan President William Ruto, who assumed the chairmanship of COMESA from his Burundian counterpart, called for greater regional integration to strengthen trade.
Ruto also announced that Kenya has increased its participation in two regional trade finance banks — the Trade and Development Bank and Afreximbank — by $100 million and $50 million, respectively, as a sign of the country’s commitment to deepening trade integration.
“One of the most viable paths for Africa and for regional economic blocs like COMESA is to strengthen our local multilateral financial institutions,” Ruto concluded.
Source: Reuters
