The Common Market for Eastern and Southern Africa (COMESA), a regional trade alliance comprising 21 nations and representing a population exceeding 640 million, has introduced an innovative digital payments platform aimed at simplifying and reducing the cost of cross-border trade by enabling transactions in local currencies rather than relying on the US dollar.
Called the Digital Retail Payments Platform, this system facilitates direct settlement of cross-border payments in the respective national currencies of traders. Currently undergoing pilot testing between Malawi and Zambia, the initiative is set to expand throughout all COMESA member countries, including key economies such as Kenya, Ethiopia, and Egypt.
COMESA anticipates that this platform will lower transaction fees to under 3% of the payment value, a significant reduction from the existing average cost of approximately 8%. The rollout is being carried out in collaboration with two digital financial service providers and a foreign exchange company, whose identities have not yet been disclosed.
Kenya’s Trade Minister, Lee Kinyanjui, highlighted the platform’s transformative potential during its unveiling in Nairobi, stating, “For the first time, cross-border trade within COMESA can be settled directly in local currencies. This development is revolutionary.”
A Regional Powerhouse with $1 Billion GDP
COMESA unites 21 countries spanning eastern, southern, and parts of northern Africa. Its membership includes Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Eswatini, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tunisia, Uganda, Zambia, and Zimbabwe.
Collectively, these nations form a market of over 640 million individuals and boast a combined GDP exceeding $1 billion, positioning COMESA as one of Africa’s most substantial regional economic blocs.
Despite this, trade within COMESA remains limited, constituting less than 10% of the bloc’s total commerce. This low intra-regional trade volume is largely attributed to high currency exchange costs, inadequate financial infrastructure, and the prevalent use of the US dollar for transaction settlements.
The introduction of the new digital payments platform has the potential to unlock significant economic value by easing cross-border trade for small and medium-sized enterprises. For dominant economies like Kenya, Egypt, and Ethiopia-which together represent nearly half of COMESA’s GDP-this shift could alleviate the strain on foreign currency reserves and contribute to more stable exchange rates.
Kenya’s President William Ruto, who recently assumed the chairmanship of COMESA, emphasized that the platform marks a crucial advancement toward deeper economic integration across Africa. He also noted Kenya’s increased financial commitments to regional trade institutions, including a $100 million investment in the Trade Development Bank (TDB) and $50 million in Afreximbank, to bolster these integration efforts.
“Strengthening our indigenous financial institutions is among the most promising strategies for Africa’s economic progress,” Ruto remarked.
By diminishing the dominance of the US dollar in regional trade, this payment platform could empower local currencies such as the Kenyan shilling and Ethiopian birr to play a more prominent role in facilitating commerce throughout eastern and southern Africa.
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