Simplifying Payment Complexity in readiness for the African Continental Free Trade Agreement (AfCFTA).

“Medaase,” he said.

“Can you repeat that again?” I asked gently, with a smile.

“Medaase,” the cab driver responded.

I had asked him how to say thank you in Ghana’s native language. I had googled that as soon as I confirmed my flight ticket to Ghana. I wanted to hear a native say the word so I could pronounce it without a foreign accent.

“Medaase,” I said to him as he dropped me off at the hotel. He gushed sheepishly with the contentment of a tutor assessing his student.

“Medaase,” I said to the doorman who held the door for me as I highlighted from the cab and got into the hotel.

“Medaase,” I repeated to the staff at the front desk as she smiled her welcome and requested my ID for check-in.

Ghanaians are welcoming and helpful. In the few hours since I have been in Accra, I have needed help to negotiate the fare with a taxi (I lose internet service when I leave the hotel so my Uber app won’t work). My friend gave me 60GHS for petty cash the evening before he drove me to the airport the next morning. I planned to use the cash for my non-Uber trips. My Nigeria-issued Visa card worked on the Barclays Bank labeled POS terminal during my hotel check, and my colleagues’ Nigeria-issued MasterCard worked in the restaurant as we paid for lunch. I ate Ghana Jollof, and despite the entire fuss on whether it tastes better than the Nigerian Jollof, I totally loved it. Charley, I smiled at a stranger as I watched him pay for his lunch from his MTN mobile wallet before leaving the restaurant.

We had just joined a small crowd of tourists at the Kwame Nkrumah Mausoleum when I heard the tour guide say, “The white eagle you see above the door represents Kwame Nkrumah’s dream of a United Africa.”

Kwame believed strongly in the capacity of African States to be independent of their colonial masters and forge a united future.

“That’s a huge aspiration,” I said to myself. “Hold that thought,” I said as I pinched my wrist. “Ifunanya, be present.”

“On the extreme right is the queen,” continued the tour guide. “She is holding an egg on a pole. That gesture signifies the fragility of power. She understands that power shouldn’t be repressive, and that trust is essential in the leader-follower relationship. Once the trust is broken, it might be difficult to redeem. This is also similar to when power is lost as was the case in the coup that deposed Nkrumah in 1966. In spite of all his effort, he didn’t regain power from the National Liberation Council.”

“What a message!” I thought as we walked into the gallery that has all the books Kwame published in his lifetime, his piano, old furniture, some clothes and other remains recovered from the ruins of his official residence after he was overthrown. We had earlier seen his tomb and that of his wife. The tour guide mechanically recited all the Head of States and government officials Kwame met or danced within his lifetime. He described Kwame as a Ghanaian god and saviour.

I came to Kwame Nkrumah Mausoleum because my Google search presented it as the closest tourist attraction to my hotel. Leaving there, I had touched Kwame’s piano as a Prime Minister and President of Ghana and also learned that he was an influential advocate of Pan-Africanism and a founding member of the Organization of African Unity.

I had listened to a couple of speakers give their opening remark welcoming us to Ghana and thanking International Air Transport Association (IATA) for choosing Accra, Ghana, for the regional aviation forum when the Vice-President, Dr Mahamudu Bawumia, mounted the podium to declare open the event. Listening to Dr Mahamudu was akin to seeing Kwame in the first meeting of the Organization of African Unity (OAU) in Addis Ababa in 1963. While Kwame mounted the podium as a freedom fighter charging African leaders in OAU during his address to urgently rid itself of colonialism and forge a United Africa that would function under a union/continental government breaking down national boundaries, currency restrictions and trade barriers that resulted from the division of Colonialism at a time where Africa’s population was approaching 300 million, Dr Mahamudu advocated for Africa’s economic development through the African Continental Free Trade Agreement (AfCFTA).

After Dr Mahamudu thanked IATA, he called on the Heads of States to sign the AfCFTA agreement and follow-through. Referencing the role of the airlines in boosting the purpose of AfCFTA, he echoed that a good connection between cities would influence flows of investments. The Africa open skies agreement, if executed and implemented, would grow regional and international trade. This, he foretells, would lead to poverty reduction, innovation, and boost industrialization. “Protectionism is not an option”, he said. 100% of nothing is still zero!

Dr Mahamudu does have a point though. The main objective of the AfCFTA is removing tariff and non-tariff barriers on goods and services, so that member states can partake in intra-African trade and promote regional value chains that would lead to the integration of the African continent into the global economy. This would boost industrialization and competitiveness and ultimately contribute to Africa’s economic development and social progress #1. Yet, there are two issues that clog the wheels of this objective. First is the concern that the elimination of tariffs could threaten national productions. The second would be how to compensate countries that depend on customs duties to achieve their national budgets. These concerns are valid. Customs duties are a source of revenue to governments. The tariff imposed by a government on the products of another country is not just another source of revenue, but a deliberate attempt to boost national production. But would the ready internal market of Africa’s 1.2-billion population market compensate for the loss of the stated revenue streams?

Studies conducted by the United Nations Economic Commission for Africa says it should. It reported that implementing AfCFTA could increase intra-African trade by 52% in 2022, compared to the levels in 2010, thus reducing the gap with intra-regional trade quotas currently characterizing Asia (51%), North America (54%), and Europe (67%) #2. The report further found that the main beneficiaries of the AfCFTA would be small and medium-sized enterprises that account for 80% of the continent’s companies in the short term. The benefits will extend to all African citizens in the medium to long term, who will achieve a welfare gain estimated at 16.1 billion dollars, especially favouring women (who currently manage 70% of informal cross-border trade) and young people who could benefit from new job opportunities. “The intra-African economic and commercial growth would mainly affect the industrial and manufacturing sector demonstrating AfCFTA’s potential role in guiding the structural transformation of African countries. Such “internal” progress could, in turn, contribute to strengthening Africa’s position in global trade,” the report concluded.

So, here is the pie. Breaking national barriers opens up the borders to the flow of goods and services from manufacturers to their final consumers. There would be a push to better Africa’s distribution network, hence the development of ports, airports, railways, and highways to boost interconnectivity across the continent. This would strengthen Africa logistics networks that, today, deter great e-commerce businesses such as Alibaba and Amazon from scaling to Africa. Logistics companies such as Kobo360 could expand their operations to all African countries. Jumia’s e-commerce business can also scale to other African countries or it could centralize its e-commerce business to cater to the continent as against its respective countries of operation.

This sounds good! But until the achievement of a common African currency, how can we simplify our payments networks to cater to borderless Africa? How would a buyer in Ghana pay a seller in Niger seamlessly from the comfort of his house/office using his mobile phone? How would a manufacturer in South Africa pay suppliers in Kenya, Nigeria, and Egypt conveniently without dedicating a high proportion of his time to “bank work”? How can merchants take advantage of the market to scale their business in Africa without having to open bank accounts in all their countries of operation?

These questions require deep thought, an innovative solution and a need for a pan-African payment processor. This processor would aggregate all payment methods available in Africa, whether it is cards, bank accounts or mobile monies so that businesses can thrive. This processor would localize payment collection in all the African countries so that it can offer a cheaper and efficient alternative to the patchwork of several domestic acquirers. This processor would integrate the African continent into the global economy such that Americans, Asians, Europeans can order something from Africa from the comfort of their locations and still pay using their preferred card network or payment method - whether it is American Express, Union Pay, Diner’s Club, JCB, Alipay, Visa, MasterCard, Verve, RuPay, BC Card, etc. Luckily, the players are emerging. They are assembling the payment rails across Africa and developing a robust payment infrastructure.

Later in the day, as the cab driver drove my colleague, me and our new friend around Accra on our last evening, he pointed us to a field where a politician was buried. Out of curiosity, I asked him why a large expanse of land was used for a solo graveyard. He mentioned that a burial ceremony in Accra is a big deal. Even when the family of the bereaved does not have money to bury their dead, they go to a financier that bankrolls the burial for a stake in the money made from the ceremony. This is quite a contrast for Nigerians I said. In Nigeria, especially in the cities, it is also said that most brides and grooms or their families borrow to have flamboyant weddings with the hope of recouping the expenses from money sprayed and gifts received at the ceremony. This has led to event planning and management blossoming into a 100 billion Naira industry in Nigeria. As the desire for glamorous and colourful events increase, the event industry is a rough diamond in Africa. Likening the event financiers to development aid donors, AfCFTA would present Africa as a huge single bloc as opposed to fragmented markets, hence boosting its negotiating power.

Pause. You thought I would spend two days at an airline conference and not discuss airlines? No, the importance of the airlines is significant in all of this. Connectivity of people, be it business travellers or tourists, is vital to economic development. Democratizing payment collection for airlines by integrating a pan-African Gateway into the IATA Financial Gateway would simplify the complexities surrounding non-cash retail sales in Africa. This, and addressing other operational issues leading to revenue leakage or non-optimization of resources, would make African airlines more profitable.

According to Mr Ange, the President of the African Tourism Board, aviation and tourism work hand-in-hand. In fact, there is no tourism without aviation. Days are gone when tourists/explorers came by sea or even on roads. They fly. Travelling by road from Lagos to Accra, Ghana, would take roughly 10 hours. By sea, it would take about 20 hours to get to the Port of Accra from the Port of Lagos. If you choose to fly, it’s 45 minutes. Imagine the speed!

As Kwame said, we (Africa) cannot gait our needs, development, and security to the gait of camels and donkeys. What’s wrong with pacing those with the speed of an eagle? I asked on behalf of Kwame. We should break the boundaries through AfCFTA and fly!

Reference 1 & 2

https://www.researchgate.net/publication/329450723_African_Continental_Free_Trade_Area_Opportunities_and_Challenges