The African Continental Free Trade Area (AfCFTA) will promote the use of local currencies in order to boost trade amongst African countries
The African Continental Free Trade Area (AfCFTA) on Tuesday said it will promote the use of local currencies in order to boost trade amongst African countries.
Prudence Sebahizi, the Chief Technical Advisor at the AfCFTA Secretariat told journalists in Nairobi, the capital of Kenya that currently most intra-Africa trade is settled using the U.S. dollars.
“With the use of local currencies, the number of financial transactions will increase while the time it takes to make payments will reduce thereby boosting trade amongst African states,” Sebahizi said during the EABC-Trade Mark East Africa regional private sector consultative meeting on the African Continental Free Trade Area (AfCFTA) and Tripartite Free Trade Area (TFTA), Xinhua reported.
Trading under AfCFTA which commenced in January 2021 aims at creating the largest free trade area in the world in terms of the number of participating countries with a combined population of about 1.3 billion. So far 43 countries out of 55 African countries have ratified the continental trade pact.
Sebahizi said that the trading bloc has partnered with the African Export and Import Bank (Afreximbank) to establish the pan African payment system to facilitate the use of local currencies in intra-Africa trade.
He revealed that piloting for the use of local currencies for trade amongst African countries began with six countries in West Africa.
“The pilot test worked well and in total 20 African countries have made commitments to join the pan African payment system in order to facilitate the use of local currencies,” he added.
Sebahizi observed that use of local currencies for trading will also encourage small and medium size enterprises to engage in intra-Africa trade.
“Most small firms are not familiar with international financial systems that rely on foreign currencies. The use of local currencies for intra-Africa trade will allow small companies to make payments and receive payments in their domestic currencies,” he said.
War hits East Africa
The Russia-Ukraine conflict is hurting the performance of East Africa’s business community due to the rising prices of key commodities, the regional apex lobby said.
John Bosco Kalisa, the chief executive officer of the East African Business Council (EABC), told journalists in Nairobi, the capital of Kenya, that the crisis has disrupted global supply chains and has been devastating given the substantial amount of products that are imported from the two nations.
“The financial performance of businesses has been negatively affected given that we are net importers of wheat and edible oils from Russia and Ukraine which are key inputs for businesses,” Kalisa said during the EABC-Trade Mark East Africa regional private sector consultative meeting on the African Continental Free Trade Area (AfCFTA) and Tripartite Free Trade Area (TFTA).
He observed that the transmission mechanism of the impact of the Russia-Ukraine crisis has manifested in the form of skyrocketing prices of most household and commercial goods.
“The conflict has also impacted the level of trade, investment flows into the East African region as potential investors adopt a wait and see approach,” he said. He urged governments in the region to implement duty waivers to counter the rising costs of imports.
As a result of the Russia-Ukraine conflict, the EABC is mapping out products from the two countries that can be manufactured or grown locally in order to cushion domestic businesses.
While saying that the conflict has led to the rising cost of basic goods, which means that households have less disposable income to spend on local businesses, Kalisa added that businesses in the region dependent on imports from Russia and Ukraine are seeking alternative sources countries for their imports in order to maintain business continuity.