By Khulile Thwala
The African Continental Free Trade Area (AfCFTA) is striving for the usage of local currencies in trade among countries in the continent.
Secretary General of the AfCFTA Wamkele Mene has previously been quoted as having said that the cost of currency convertibility due to the use of United States dollars in trade among African countries is close to five billion dollars annually, which he says is expensive.
“That is expensive and so we have rolled out the pan-Africa payment and settlement system that enables trading in local currencies.”
On the sidelines of a recent trade forum in Kenya, Mene mentioned that cross-border trading among countries in the Economic Community of West African States is already happening through the use of local currencies instead of the use of US dollars.
“We now want to expand to other regional blocs including the East African Community which is in talks with the African Export-Import Bank,” Mene said.
Trading under AfCFTA commenced on January 1, 2021, and it aims at creating the largest free trade area in the world in terms of the number of participating countries with a combined population of 1.3 billion.
Mene noted that the payment and settlement platform is currently being piloted amongst six African countries and was rolled out across the continent at the end of 2021.
“The aim is to deal with the administrative burden cost of converting local currencies,” Mene added.
According to the AfCFTA Secretariat, there are 42 currencies in the continent and this remains a constraint to intra-Africa trade due to the need to use international currencies for trade.
Mene observed that so far 36 state parties have deposited the instruments of ratification meaning that they have expressed willingness to be legally bound by the rules of AfCFTA.
“They have also committed to opening up their markets to other African countries and establishing a level playing field by treating imports from the continent as their own products,” he added.