Physical Address
60 Ekwema Cres, Layout 460281, Imo
COMESA’s New Payment System Aims to Cut Dollar Use in Kenya, Ethiopia, and Egypt
COMESA’s new payment system aims to cut dollar use in Kenya, Ethiopia, and Egypt by making trade easier and cheaper for businesses in these countries. The Common Market for Eastern and Southern Africa, or COMESA, is a group of 21 countries with more than 640 million people. They have started a new digital payment platform that lets businesses pay each other directly in their own local money instead of using the US dollar.
This payment system, called the Digital Retail Payments Platform, is designed to help traders avoid the extra cost and hassle of converting money into dollars and back. Right now, many businesses have to use the dollar for cross-border trade, which can be expensive because of high currency conversion fees. COMESA’s new payment system aims to cut these costs from about 8% down to less than 3% per transaction.
The platform is currently being tried out between Malawi and Zambia. If this test goes well, it will spread to all 21 COMESA countries, including big economies like Kenya, Ethiopia, and Egypt. These three countries together make up nearly half of COMESA’s combined economy, so cutting dollar use in Kenya, Ethiopia, and Egypt could make a big difference.
Kenya’s Trade Minister, Lee Kinyanjui, spoke about the new system during its launch in Nairobi. He said this is the first time cross-border trade inside COMESA can be paid directly using local currencies. He called it a “game-changer” because it allows businesses to avoid using the US dollar when trading, which saves money and time.
COMESA covers a large part of Africa, including countries like Burundi, Djibouti, Egypt, Eritrea, Libya, Madagascar, Mauritius, Rwanda, Sudan, Tunisia, Uganda, Zambia, and Zimbabwe. Altogether, these countries make up a market with a combined GDP of over $1 billion, making COMESA one of the largest trade groups on the continent.
Even though the member countries form a big group, trade between them is still small – less than 10% of their total trade. One main reason is the high cost of converting currencies and the strong reliance on the US dollar. This new payment system could open up billions of dollars’ worth of trade by making it much easier for small and medium businesses to trade across borders using their own currencies.
For Kenya, Ethiopia, and Egypt, cutting dollar use in Kenya, Ethiopia, and Egypt can also help protect their dollar reserves. These reserves are important for paying for goods and services outside the region. With less need to use the dollar for trade, their local currencies like the Kenyan shilling or Ethiopian birr may become more stable.
Kenya’s President William Ruto, who recently became COMESA chairman, said this new platform is an important step toward stronger economic ties in Africa. He also shared that Kenya has increased investments in regional trade banks like the Trade Development Bank and Afreximbank to support projects like this. He believes that building strong African financial institutions is a smart way to grow the continent’s economy.
Read Next: Uber’s Service Quality Declines in South Africa as Passenger Complaints Increases
COMESA’s new payment system aims to cut dollar use in Kenya, Ethiopia, and Egypt by allowing local money to play a bigger role in trade. This change could help reduce costs, increase trade, and bring African countries closer together.
By using local currencies for trade, the system helps businesses save money, cut the reliance on the US dollar, and grow stronger connections between COMESA countries. This new payment platform could be a big step forward in making trade faster, cheaper, and easier for millions of people in eastern and southern Africa.
Was this information useful? Drop a nice comment below. You can also check out other useful contents by following us on X/Twitter @siliconafritech, Instagram @Siliconafricatech, or Facebook @SiliconAfrica.
