Latest payments and data securities from SWIFT confirm sustained economic growth in Africa

Data from SWIFT shows that payments traffic between African countries recorded its highest ever growth rate this year underpinning the evolution of the intra-African transaction corridors.

In the year to date, African payment traffic volumes grew by 13.2% versus 8.8% growth for SWIFT worldwide, highlighting the sustainable growth in the region. Africa in fact was the fastest growing region for payments traffic, surpassing EMEA at 6.9%, the Americas at 12.1% and Apac at 12.6% growth. SWIFT data has been independently validated to serve as a measure of real economic activity. (See SWIFT Index, below).

Looking at SWIFT traffic at a country level, many African countries have experienced a staggering pace of growth. In Angola, for example, payments traffic grew by more than 78% in the year to date, versus the same period last year. In West Africa, Ghana payments traffic rose by almost 30%.

East Africa has also witnessed significant growth. In Kenya, payment message traffic rose by 23.1%, in Tanzania, payments rose by 32.9% and in Uganda, payments were up by 17.5%.

Crucially, SWIFT traffic reveals rising transaction volumes between African countries and therefore growing intra-Africa trade. For the full year 2014, SWIFT data shows that 52% of the traffic sent from Africa stayed within the African zone, up by 15.8% on the year before. This is the highest ever recorded growth rate for the intra-African traffic corridor.

The trend is particularly pronounced in two African regions. In East Africa, about 68% of the payment traffic sent from East Africa stays within the East African zone, highlighting payments and therefore trading activity within these trade corridors. In the Southern African Development Community (SADC), 55% of the traffic sent from SADC stays within the SADC area. Similarly, this region is recording record growth, with volumes up by 16.2% for the full year 2014, versus the previous year.

Estimates vary for the amount of infra-Africa trade, averaging 12-16% of total trade. SWIFT data suggests that 23% of total African trade is with other African countries. This compares to 70% of total trade in Europe being with other European countries.

“These figures show really positive growth, however there is still much that can be done. Increasing the level of intra-African trade is crucial to Africa’s development and will help to build sustainable growth. Creating efficient payment mechanisms such as SADC’s SIRESS will help to drive down the cost of cross-border payments in Africa and support this trend and help to encourage more investment,” says Hugo Smit, Head of Sub-Sahara Africa, SWIFT.

Critical regional harmonisation projects, such as the SADC Integrated Regional Electronic Settlement System (SIRESS), which is designed to allow transactions among banks in member countries to be settled in real time and without the need for the funds to flow through third-party clearing banks, is continuing to grow and receive support from its member banks. This will reduce barriers to trade and make cross border payments easier, cheaper and more efficient.

Speaking at the 22nd SWIFT African Regional Conference (ARC) held in Cape Town in May this year, South African Reserve Bank (SARB) governor Lesetja Kganyago said that SIRESS, launched in July 2013, was already having a significant impact on cross-border payments – 43% of intra-SADC payments were now taking place through SIRESS instead of via correspondent banking systems.

“By the last week of April this year, SIRESS had reached the R1 trillion settlement mark,” he said.

Securities, too, hold much potential for growth on the continent, already seeing an increase in activity, albeit from a lower base. According to SWIFT data for securities related traffic, excluding South Africa, volumes rose by 31% in each consecutive year between 2012 and 2014. Drilling down to a country level, some markets have seen incredible growth. For example, Kenya’s securities traffic was up by a staggering 122.3%, Tanzania by almost 80%, Ghana by 54.5%, Tanzania by 45% and in Uganda, 31.6%.

While these numbers show impressive growth for securities markets and signal real potential for African capital markets, much of this activity is by foreign investors investing in African markets, rather than local investors trading in African companies. Only in South Africa is the bulk of activity by domestic investors.

The harmonisation and standardisation of financial market infrastructure will play an important role in building liquidity and helping to increase intra-Africa investment on the continent.

“If Africa wants to continue growing its securities markets then continued investment is needed in its financial market infrastructure to help improve market access, increase efficiency, cut costs and deepen liquidity. The adoption of international standards and global best practice will support these efforts and also ensure that African securities markets are able to remain competitive for global investors,” says head of Business Development Ian Bessarabia.