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Simpler cross-border payment 'will boost SADC'
![Simpler cross-border payment 'will boost SADC'](https://biz-file.com/c/1309/147141.jpg)
The first phase of a cross-border settlement project to create an integrated payment system between SADC countries began in July after it was commissioned by the SADC committee of central bank governors.
BankservAfrica, as the largest automated clearing house and payments system operator in Africa, will play a significant role in the Payments Integration Project.
The project initially involves Lesotho, Namibia, Swaziland and SA, who together make up the Common Monetary Area and share a common currency. Lesotho, Swaziland and Namibia have their own currencies, which are on par with the rand under the common monetary area arrangement.
Plans are in place to expand the system to allow SADC members to clear and settle transactions through a central settlement hub.
Border payments complicated
At the moment, cross-border payments are complicated by currency conversions, foreign exchange regulations and the intricacies of moving funds between countries and banks. "The project would see such transactions facilitated through a single currency and a central settlement hub,"Gillis said.
Speaking from Dubai, Gillis said the project could potentially benefit around 277m people in the SADC region. The gross domestic product (GDP) of the region is around US$780bn, of which SA accounts for almost half, at US$380bn.
"This is an opportunity to unlock about 50% of the SADC market," said Mr Gillis.
Cash makes up around half of the transactions taking place in the Southern African Development Community region. "That displacement of cash is critical to bolster a sound economy," Gillis said.
First phase successful
He said the first phase of the project, in place since July, had exceeded expectations, with cross-border settlements of about R10bn a week, made up of small transactions between Lesotho, Namibia, Swaziland and SA.
BankservAfrica will be involved in the second phase involving credit payments, which is scheduled to go live in July next year. In 2015, debit orders will be included. "So for example, an insurance company could sell into other markets and have debit orders signed by people living in other countries," said Gillis.
The new centralised system will simplify and standardise the way banks manage financial transactions across borders. This should lead to increased efficiencies and lower transaction costs.
"Currently, the only way to transact across borders is via a Swift money transfer. As this requires paperwork for every transaction, it is costly," said Mr Gillis.
The new system would have in place a regulatory framework within which the payments platform would operate and as such would not require burdensome administration, consequently lowering costs.
Source: Business Day via I-Net Bridge
Source: I-Net Bridge
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