SWIFT traffic data shows disconnect between financial flows and commercial flows. The dollar is still the most important cross-border trading currency, but there are indications that change may be coming
Johannesburg, 10 September 2013 – SWIFT, the financial messaging provider for more than 10,000 banks, securities institutions and corporate customers in 212 countries and territories, today published a white paper, “Africa Payments: Insights into African transaction flows. Based on analysis of SWIFT traffic, it offers unique insights into transaction flows between African countries, and between Africa and other regions. The paper identifies environmental factors that may drive change in cross-border transaction flows, which could reshape pan-African banking, lead to shifts in currency usage and create opportunities for multi-currency clearing in Africa.
SWIFT data highlights that ‘financial’ flows do not reflect ‘commercial’ flows, demonstrating a disconnect between payment routes and the movement of goods and services, particularly between Africa and Asia.
This means that, while Asia Pacific countries are the fastest growing trading partners for most African countries, representing 22% of all commercial flows from Africa, only 5% of financial flows are sent directly to banks in the Asia Pacific region. Conversely, while banks in North America, receive almost 40% of the payments sent by Africa, only 9% of the commercial flows are destined for the North American region. In total, more than 80% of the transactions from Africa to the United States have their financial beneficiary in another region.
There are plenty of factors that could influence the direction of payment flows – and SWIFT data shows that the impact can be significant. For example, in the West and Central African economic regions, where they share common currencies and common clearing and settlement infrastructures for payments, only 2% of trade settlement involves a financial intermediary outside of Africa – compared to 48% of intra-Africa trade settlement overall.
Christian Sarafidis, Head of Western Europe, Middle East & Africa, SWIFT, said: “Existing projects in Western and Central Africa demonstrate the potentially disruptive power of regional harmonization, and there is significant political will for similar initiatives on the African continent. Other factors could also play a powerful role in driving change in Africa, such as an evolving corporate sector, regulatory pressure in developed markets and new financial market infrastructure.”
Thierry Chilosi, Head of Banking Initiatives, EMEA, SWIFT, and co- author of the report, said: “The scenarios outlined in this paper will depend on a variety of different macro-economic factors, but it seems likely that, over time, so many converging forces are likely to drive significant change in banking in Africa and banking with Africa. The banks that will be well positioned to grow their business in Africa going forward, are probably those that are already monitoring these trends.”
The paper features contributions from the Southern Africa Development Community Banking Association, Nedbank Capital and Ecobank on relevant topics. It opens with a foreword by the African Development Bank.
Moono Mupotola, Manager, Regional Integration & Trade Division, African Development Bank, said: “Boosting intra-African trade is an important goal for the AfDB and will play a major role in extending the continent’s growth story and promoting inclusive growth. As part of this effort, we must look at ways to cut cost and eliminate risk for African businesses. Papers such as this one, which increase understanding about financial and commercial flows, are an important part of the debate.”
Please read here: Africa Payments: Insights into African transaction flows (.pdf Acrobat Reader)
About SWIFT Business Intelligence
The SWIFT Africa Payments White Paper is based on unique data and analysis from SWIFT Business Intelligence. This portfolio of tools, including analytics, insights and economic indicators, provides granular detail on SWIFT traffic across a variety of metrics, including currency, product type and value, and enables users to track market evolution. This helps financial institutions to make fact-based business decisions and more efficient use of their resources, and to identify market trends. For more information on SWIFT Business Intelligence and other services, please go to SWIFT.com.
SWIFT is a member-owned cooperative that provides the communications platform, products and services to connect more than 10,000 financial institutions and corporations in 212 countries and territories. SWIFT enables its users to exchange automated, standardised financial information securely and reliably, thereby lowering costs, reducing operational risk and eliminating operational inefficiencies. SWIFT also brings the financial community together to work collaboratively to shape market practice, define standards and debate issues of mutual interest.