Direct settlement mechanism for intra-country payments is vital for trade, SA-Ghana delegates say

President Cyril Ramaphosa (left) and President Nana Akufo-Addo in a bilateral meeting ahead of their co-chairing of the Second Session of the South Africa-Ghana Bi-National Commission. Photo: GCIS

President Cyril Ramaphosa (left) and President Nana Akufo-Addo in a bilateral meeting ahead of their co-chairing of the Second Session of the South Africa-Ghana Bi-National Commission. Photo: GCIS

Published Mar 13, 2024


A direct settlement mechanism was vital to facilitate trade as intra-country payments were costly, delegates heard at the Second Session of the South Africa-Ghana Bi-National Commission (BNC) held yesterday.

President Cyril Ramaphosa welcomed President Nana Akufo-Addo and his delegation.

“We are pleased to host this business forum to explore business opportunities that enhance our bilateral economic relations,” he said.

South Africa was already the largest purchaser of Ghanaian exports in Africa, and the third-largest importer of Ghana’s products globally, he said.

On the investment front, South African companies have invested in 53 projects across Ghana with an estimated value of $1.4 billion (R26bn) in capital investment between January 2003 and January 2024.

Ramaphosa said: “South Africa and Ghana have untapped economic potential and much more needs to be done, both with regards to growth of total trade and the diversification of products to high-value manufactured exports.

“There is great potential to unlock economic opportunities through investment-led trade initiatives that are aimed at increasing trade of value-added products between our two countries,”.

Meanwhile, South African delegates representing more than 150 companies and their Ghanaian counterparts from 78 companies, in discussion groups, said there was an urgency in addressing the ability of African business people to trade directly and cost effectively through local currencies, which came up as a sore point for entrepreneurs of both countries.

The reality of the cost of converting one currency to a European or North American currency to make payment to another, which too would have to pay cost of converting the foreign currency to local one, was dissatisfying to delegates.

This came as trade opportunities ramped up under the African Continental Free Trade Area (AfCFTA).

Ronnie Ntuli, the chairperson of Thelo Group, an investment company with interests in the transportation and financial services sectors, noted an African Development Bank study as having said that savings could be made by both business and governments with the establishment of a direct settlement mechanism.

The AfDB, in its Africa Economic brief, identified its role to support for trade finance and cross-border payment systems to less-developed regions. It noted that given the low liquidity of the US dollar, which was prevalent in cross-border payments, the AfDB should encourage a less expensive option, which was the use of African regional currencies.

The call to steer away from the US dollar has been also called on by the rapidly expanding Brazil, India, China, Russia, South Africa (BRICS) bloc, which at its summit in August pondered on creating a common currency for trade and investment between each other, as a means of reducing their vulnerability to dollar exchange rate fluctuations.

Economists have pointed out the difficulties involved in such a project, given the economic, political and geographic disparities between the trading bloc.

Ntuli also drew attention to fiscal pressures which he said affected the ability of African governments to offer guarantees that would facilitate trade between countries as he cited opportunities opportunities including the $3.2bn (R60bn) for Ghana’s development of a 500km rail corridor, Aspen Ghana’s strong market base in that country from its South African origins, and a $230 million project to build an urban metropolis.

AfCFTA is currently negotiating a 40% local content on rules of origin for auto industry components with South Africans having the opportunity to invest and upgrade the Ghanaian auto industry.

Ntuli pointed out opportunities in Ghana's petroleum hub development through refineries that looked to build up storage capacity and port handling facilities.

“The logistics within the continent are a great hindrance. We are pleading that as Africans across the continent, we pay attention to addressing them to better align the trade between our countries,” Ntuli said.