Connect with us


Lack Of Instant Payment Systems Is Failing Intra-African Commerce




Even as the African continent eyes increased commerce and investment from a free trade area, one of the biggest challenges affecting trading within the region is the high cost of transacting payments from one region to another.

Through the Africa Continental Free Trade Area (AfCFTA), intra-Africa trade is projected to grow by 81% and the export volume by 29%. Additionally, over 60 million Africans will be lifted from extreme poverty.

Generally, these will raise the continent’s real income by 7% to $450 billion by 2035.

In East Africa, the United Nations Economic Commission for Africa (UNECA) has projected that AfCFTA will create at least eight million new jobs. Nevertheless, these will yield an estimated $35 billion in welfare gains.

However, the high cost of cross-border transactions may hump the prospects of the continental trade agreement, adding to the agitation of partial implementation of the terms of the same. There are also persisting non-tariff barriers which highly affect the intra-continental trade.

High cross-border payment rates compared to global rates

According to a pan-African organisation that advocates for financial inclusion, AfricaNenda, the average cost of cross-border payments in Africa is about 12-18 % of the transaction value. The rate is against a global average of 6-7%.

A quick one: Kenya’s Scheme To Seize LPG Lucrative From Tanzania

According to Benedict Oramah, President of the African Export-Import Bank, Cumbersome transactions cost Africa about $5 billion in money transfer charges each year. This is so, despite Africa being home to at least 576 financial technology (Fintech) companies, according to Statista.

Furthermore, 11 of the 50 fastest growing companies in Africa in 2022, were fintech and financial services firms. This is as per the Financial Times ranking.

New Startups

New start-ups are cropping up almost every month, with aims to solve different problems of financial inclusion, from high costs of transactions to inaccessibility to credit and digital wallets.

Also Read: Instant payment systems are key for cross-Africa commerce.

Between 2017 and September 2021, these start-ups raised over $4.5 billion in funding. This figure is more than twice the amount raised by budding companies in any other sector in the period.


Nevertheless, interoperability — the ability of payment systems in different regions to exchange and make use of information — has remained an elephant in the room for these fintechs.

What makes it difficult for African fintechs to develop a solution for the interoperability problem threatening Africa’s trade integration?

Dr Robert Ochola, AfricaNenda’s CEO, said that although Africa is making significant strides towards creating a continent-wide interoperable payment system, there are still great challenges across regions that impede these efforts.

“Fintech companies alone cannot solve this problem without the regulatory framework that creates an interoperable layer of payment system for them to plug into,” Said Dr Ochola.

“Continental interoperability can only be achieved if the regional economic communities (RECs) in the continent develop functional inclusive payment systems, which will then provide a layer for fintech companies to enable cheaper cross-regional payments,” he added.

Also Read: Kenya’s economy to slow to 5.5% from 7.5%. World bank says.

Papps, the Pan-African Payment and Settlement System seek to enable payment transactions in local currencies between countries across Africa. The payment will happen instantly for cross-border transactions without the need for currency conversion. This will increase transparency on cross-border trade activity.

“There are security and monetary risks involved that must be effectively mitigated. Also, there are high costs and limited human capacity and knowledge sharing that slow the process,” he said.

Low average GDP per capita

According to AfricaNenda, low average GDP per capita (lower value of transactions ) makes instant payments per dollar more expensive and is among the key threats to developing interoperable instant payment systems on the continent.

“Ideally, transaction costs should be less than 1% to make cross-border trade even easier and increase financial inclusion,” Dr Ochola said.

Inclusive instant payment system.

The East African Community, West African Economic and Monetary Union, South African Development Community and the Common Market for Eastern and Southern Africa are currently working on an inclusive instant payment system.

Finally, a relatively low smartphone adoption, unaffordability of data, low access to electricity and comparably smaller markets are other challenges affecting the advancement in the payment system.

Continue Reading


Three Global Firms Signed By Nairobi Financial Hub On Its Launch




Three companies were signed by Nairobi’s international financial centre on the day of its launch. The three include Prudential plc, ARC Ride Kenya and AirCarbon Exchange (ACX).

The Nairobi International Financial Centre (NIFC) is a special economic zone for financial firms.

Prudential, one of the world’s biggest insurers and asset managers, became the first firm to formally join the NIFC.

Singapore-based global carbon exchange ACX came along with Prudential. It seeks to set up a carbon exchange in Kenya.

Check out: Why Buyers Are Now Running Away From Popular Used Toyota Cars

NIFC has also admitted ARC Ride Kenya. It is a new start-up that is going to establish an electric vehicle assembly plant in Nairobi. The plant will produce two and three-wheeled electric bikes and scooters.

Also, the Financial Centre is determined to bolster the manufacturing sector in the country. It has signed an MoU with the Kenya Association of Manufacturers (KAM), to help increase financing and investment in the sector.

NIFC authority has hinted at being in discussion with other participants seeking to join it and will give official news soon.

“Last year Prudential Plc, one of the world’s biggest insurers and asset managers, made a commitment to relocating their Africa headquarters from London to Nairobi and join the Centre. Today we are proud to announce that Prudential becomes the first firm to formally join the Nairobi International Financial Centre,” Vincent Rague, Chairman NIFC Authority.

After many years of waiting, the hub will eye large foreign firms, boosting capital flows to Kenya and the region.

The authority has singled-out four sectors that it will prioritise for growth: financial technology, green finance, investment funds, and becoming a hub for regional multinationals.

The NIFC general regulations have been enacted, as the initial set of tax incentive proposals have been passed.

Also read: The Ultimate Guide to Digital PR

Certification from the NIFC Authority must be applied by Firms considering conducting business through the NIFC.

A 15% corporate tax will benefit firms operating a carbon market exchange or emission trading system under the NIFC. The 15% advantage will happen for the first 10 years of operation.

Companies certified by the NIFC Authority and have invested a minimum of Sh5 billion will benefit from the certainty that, the Capital Gains Tax applicable at the time they make their investments will remain unchanged during the lifetime of the investments.

Continue Reading


Hackers Make Tactical Change, Now Targeting Small Businesses




Traditionally, cybercriminals have been targeting big companies with aim of demanding ransoms running into millions. Nonetheless, the trend no longer holds, as new studies have shown the shift in hackers’ interest from big companies to small and medium ones.

Studies have shown that hackers are shifting their focus to small online businesses which they believe are more vulnerable.

Experts have warned that these SMEs and payment portals, especially those relying on mobile payment solutions, are now facing high risks of cyber attacks coordinated by these hackers.

Speaking during the inaugural Africa Cybersecurity Congress held in Nairobi, Hadi Maeleb, Agora Group co-founder and CEO said the threats to online businesses were growing at a high rate.

Further, he stated that more than 90% of business owners are unaware that their enterprises are at risk, despite the high growth rate of the attacks.

“Cybercriminals are now targeting small businesses more as they have realized that these enterprises do believe they would be exposed due to their comparatively low turnovers until they lose their data and payments are compromised,” said Mr Maeleb.

With the adoption of e-commerce platforms, State agencies, financial institutions, healthcare, energy and utilities have persistently faced cyber-attacks in the recent past.

According to CAK- Communications Authority of Kenya’s first-quarter data (between January to March 2022), a total of 79.2 million cyber-attacks were reported. This has prompted the government to issue 28,848 advisories in an attempt to fight the rising attacks.

Invest in Cybersecurity

Mr Maeleb noted that business owners should invest in cybersecurity tools as there is no magical solution to cybercrime.

“This ‘democratization’ of cyberattacks is expected to push losses due to business interruption, financial theft, personal data breaches and even ransom payments over the Sh4 trillion mark by end of 2022,” he said.

At the peak of the pandemic, several states adopted tough lockdown measures such as social distancing, working from home, and online learning.

Also read: Why Buyers Are Now Running Away From Popular Used Toyota Cars

Hackers shifting focus to small businesses.

This adoption of digital solutions such as e-commerce, remote working and banking went up as Kenyans turned to online platforms to curb the spread of the coronavirus.

“Unfortunately for them, the business of cybercrime has evolved to a point where attacks like ransomware are now sold as a service,” he added.

Even though these measures triggered the adoption of digital platforms, they also increased vulnerability such as ransom, data breaches, harassment, cyberbullying, and data breaches.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

To achieve Kenya’s Vision 2030 goal of a regional ICT hub, the tech sector was expected to contribute directly and indirectly to an additional 1.5% of Kenya’s GDP by 2017/2018.

Continue Reading


Why Buyers Are Now Running Away From Popular Used Toyota Cars




As it has been noted that Kenyans are now running away from the popular used Toyota car models, contrary to what has been a tradition in the country. The rise in their costs has seen even dealers cut down on imports of these vehicles due to decreased demand.

Traditionally, popular models such as Toyota Premio and RAV4 have been synonymous with middle-income earners over the years. However, this is no longer the trend.

Car dealers say more Kenyans are now going for vehicles such as Nissan Sylphy and Mazda, which cost less compared with popular Toyota models.

Toyota Vs Nisaan and Mazda models

According to Charles Munyori, the secretary-general of Kenya Auto Bazaar Association, Nissan Sylphy and Mazda’s CX5 and Axela, are quickly gaining popularity among Kenyans.

Mr Munyori said the price of a Toyota RAV4 has short up to Sh3 million currently from Sh2.8 million in February while a Premio is going for Sh2.2 million from Sh2 million four months ago.

On the contrary, Mazda Axela is now selling for Sh1.6 million with Nissan Sylphy (Blue Bird) going for at least Sh1.5 million.

Currently, consumers find these brands to be the best alternatives to their preferred models, as they are relatively cheaper and good.

Check out: Stabex, Uganda’s largest Oil Company That has Been Linked To DP Ruto

With the rising household costs, these car prices are making them affordable to most Kenyans as they struggle to balance the high cost of living.

“We are seeing a shift where Kenyans are now moving from the popular brands such as Toyota Premio and RAV4 to other models. This shift has been occasioned by the high cost that these cars are now fetching at the market,” said Mr Munyori.

“In fact, most of the car dealers are hardly bringing in Premio and RAV4 models because they are not moving and they will tie up money that they would need for importation of more vehicles,” he said.

Ex-Japanese vehicles

Ex-Japan vehicles dominate the Kenyan second-hand sector with a more than 80% market share.

Also read:

The buyers in the sector prefer these cars as their spare parts are easier to obtain locally compared to other brands. Additionally, buyers believe that the resale value of Toyota vehicles are higher than that of other brands like mazda or Nissan.

Reasons for risisng vehicle cost

The rising cost of vehicles in the country has been linked to the unavailability of dollars locally, a shortage of electronic chips in Japan, and a weakening shilling against the dollar.

The country is currently experiencing extreme dollar shortage, that one has to wait for at least three days to get $20,000 or $25,000 from the banks.

“We have to wait for like nine days in order to accumulate $80,000, and this has seen car dealers delay in making their orders. We are really feeling the impact of the dollar shortage in the market,” Mr Munyori said.

banks have imposed regulations on dollar purchase. This has forced traders to face difficulty in meeting their obligations.

Industrialists are forced to start seeking dollars in advance. The shortage puts a strain on supplier relations and the ability to negotiate favourable prices in gap markets.

On the other hand, Semiconductors are used in making electronic devices. Their shortage has forced the vehicle manufacturers to scale down the production. The quantity and quality cannot be maintained with decrease in one of the crucial raw material.

Finally, the shilling has persistently remained weak against the dollar. this has made it costly for importers shipping in goods.

The shilling has hit a record low trading at of Sh 117.06 against the dollar. This predicts a continued rise in imported goods, and signifies a further dollar shortage crisis.

The continuous depreciation in shilling stability is attributed to increased demand for dollars from importers. This highly arises on importaion of crude oil and merchandised goods.

It should be noted that most external debt is repaid in the dollar. Therefore, a weakened shilling increases prices of imported goods, and puts pressure on the country’s debt repayment.

Continue Reading