South Africa’s G20 vision for African Trade Transformation

As the first African country to assume the G20 Presidency, South Africa has a unique opportunity to demonstrate leadership by prioritising African issues at the global stage.

A key focus should be securing greater financial and technological support for implementing the African Continental Free Trade Area (AfCFTA). Currently, intra-African trade is only 16%, highlighting the potential for growth through stronger trade integration. By 2035, boosting trade could increase Africa’s GDP by up to $500 billion, creating 30 million jobs and lifting millions out of poverty.

Additionally, enhanced trade would stimulate industrialisation, enabling African nations to transition from raw material exports to more diversified, higher-value manufacturing hubs. This shift would promote economic growth and strengthen Africa’s global competitiveness, reducing its reliance on external markets and improving its bargaining power in international negotiations.

Through effective leadership, South Africa can help shape a prosperous future for the continent.

However, a significant barrier to boosting intra-African trade is the absence of a robust, African-led payment system capable of efficiently handling cross-border transactions. Over 80% of intra-continental payments currently rely on the SWIFT system, which routes transactions through intermediary banks in Western countries.

This process causes significant delays and inflates transaction costs. African businesses lose an estimated $5 billion annually in transactions, according to Afreximbank. These high costs stem largely from currency conversion fees, ranging from 3% to 6% per transaction, and other service charges.

Some regional mechanisms, such as the SIRESS in Southern Africa and the CFA Franc Zone in West Africa, offer partial solutions. While they are more cost-effective and reduce delays, they have structural limitations. For example, SIRESS’s over-reliance on the South African Rand often marginalises smaller economies in the bloc, limiting equitable participation.

Meanwhile, around 20 African countries leverage mobile money platforms like M-Pesa and Orange Money for small-scale cross-border transactions. Others have pursued bilateral arrangements to avoid dollar dependency. For example, in 2018, Nigeria and China signed a $2.5 million currency swap deal, enabling businesses in both countries to settle trade transactions in either Naira or Yuan.

Likewise, in 2023, Tanzania and India inked the use of the Indian rupee for trade with Tanzania, facilitating direct trade in local currencies.

Additionally, Pan-African banks like United Bank of Africa and Ecobank have also attempted to create continent-wide payment solutions, leveraging their regional presence. However, these efforts face hurdles due to limited reach and interoperability challenges.

In more remote and underdeveloped regions, informal payment systems such as barter and cash still dominate, further fragmenting the continent’s trade ecosystem.

Without a unified, scalable, and accessible African payment infrastructure, the dream of seamless intra-African trade remains distant. Addressing these gaps is essential for lowering costs, enhancing trade efficiency, and achieving the full potential of the African Continental Free Trade Area (AfCFTA).

Towards an African Solution

In 2022, under the AfCFTA framework, the African Union and Afreximbank launched the Pan-African Payment and Settlement System (PAPSS), a financial infrastructure allowing intra-African transactions in local currencies. By removing the need for foreign currencies and offshore intermediaries, PAPSS aims to reduce transaction costs, cut delays, and boost trade efficiency.

However, significant challenges remain. Nearly 45% of African adults are unbanked, and 40% lack internet access, highlighting the need for stronger digital and financial infrastructure. Economic disparities across countries complicate benefit-sharing, while domestic issues like hyperinflation, currency controls, and political instability fuel reluctance to adopt the system.

Countries like Algeria and Sudan continue to rely on outdated mechanisms, and concerns over PAPSS’s transparency and trustworthiness have slowed broader adoption.

As G20 Chair, South Africa will champion deeper intra-African trade. Its success in implementing the Customs Modernisation Program and fostering trade within SACU and SADC positions it well.

By promoting best practices and encouraging the adoption of regional trade facilitation models seen in countries like Rwanda, Morocco, and Kenya, South Africa can lead efforts to unlock the full potential of PAPSS and advance African economic integration.

Way Forward

South Africa’s G20 leadership comes at a pivotal moment. With global tensions rising—conflicts in Eastern Europe and West Asia, and negative impacts of protectionism under the second Trump presidency, the international landscape is uncertain.

The threat of 100% tariffs on BRICS nations for de-dollarisation efforts adds to the pressure. As a member of both BRICS and the G20, South Africa must play a bridging role and try to tackle the socioeconomic challenges, encompassing the perspectives from Global North and South.

Under the G20 theme of “solidarity, equality, and sustainable development,” South Africa has outlined three core priorities: reducing poverty and the cost of living, building a capable and ethical developmental state, and driving inclusive growth and job creation.

Consequently, South Africa aims to leverage its G20 Presidency to advance the African Union’s 2063 agenda towards transforming Africa into a global powerhouse. With the ongoing structural changes in the global order, the agenda requires some revision.

A continental payment mechanism would definitely work as a key driver, contributing directly and indirectly to the implementation of Agenda 2063. As the G20 chair, South Africa must champion African priorities. Promoting intra-continental trade by supporting mechanisms like the Pan-African Payment and Settlement System (PAPSS) and digital public infrastructure (DPI), essential for a more integrated African trade system, would be at the top of its agenda.

* Ambassador Anil Sooklal is the High Commissioner of South Africa to India, Formerly BRICS and IBSA Sherpa, G20 Sherpa, IORA Focal Point, Adjunct Professor, Honorary Professor, Extraordinary Professor, North West University and Dr Samir Bhattacharya is Associate Fellow at Observer Research Foundation, where he works on geopolitics with particular reference to Africa in the changing global order.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.