Cross-Border investment promotion E-payments landscape in EAC

The Project at A Glance

Africa has traditionally been an economically fragmented region and cross-border payments in Africa, including in the East African Community (EAC) region remain difficult and expensive. Cross-border payments in Africa are more costly than in any other region worldwide. As per the World Bank’s Remittance Price Worldwide 2020, the average cost of sending USD 200 globally is 6.5% while in Sub-Saharan Africa it amounts to approximately 8.19%.

In this context, International Economics Consulting Ltd. (IEC), with funding from the European Commission, provided technical assistance to support private sector engagement within the (EAC). Following discussions with the EAC Secretariat and the East African Business Council, three topics were selected for round table discussions namely trade finance and the challenges and opportunities for the private sector; the harmonization of payment systems in the EAC; and the facilitation of cross-border investments in the EAC.

What We Found

One of the fundamental objectives of the EAC is to attain a high level of regional integration. As per the Treaty for the Establishment of the East African Community, the regional economic community aims to establish a Customs Union, a Common Market, and a Monetary Union in order to finally establish a Political Federation. Currently, the EAC is working towards establishing its Monetary Union. As such, the three topics selected are of great importance to the region. The harmonisation of payment systems, for instance, will enable the region to secure the free movement of goods, labour, services and capital which are essential for regional integration in the EAC.

Our Strategy and Impact

In order to improve the cross-border landscape in the EAC region, a strong institutional framework must be established so as to ensure the effective governance of payment systems. A concentrated model, involving a joint regulator, a joint central bank and a centralised payment system, may have the most impact on regulatory, legal and technical harmonisation. Likewise, such a model will also have significant positive benefits on the safety, efficiency and integrity of the payment system. Following the implementation of the East African Monetary Union, the payment system in the EAC will shift toward the adoption of the concentrated model. Among other considerations, it was also highlighted that countries within the EAC region also need to establish an enabling policy environment for payment systems and digital payment solutions. Where regulatory gaps exist with regard to payment systems, countries need to ensure that the necessary regulations that adhere to international standards are adopted. These countries must ensure that their payment systems achieve safety, efficiency and integrity. Payment systems should also meet the minimum technical standards in areas of financial regulation, data governance, risk management and risk allocation, and reporting requirements, among others.

Our Core Solutions

At International Economics Consulting, our team helps clients in identifying the strengths of online trading platforms, gaps and strengths in the legal framework, payment systems, infrastructure, packaging and standards gaps, logistics and trade facilitation framework to take advantage of online tools for sales. We offer a full diagnostic of the e-commerce sector, mapping out the enterprises’ strengths and the institutional ecosystem enabling it. We work alongside different organisations and the private sector to empower them to leverage the opportunities presented by the digital revolution.