Standard Bank leads the pack in seamless intra-African fleet payments

African trade is known for its complexity. Logistics hurdles, regulatory discrepancies and infrastructure limitations create friction that inhibits growth across the continent.

These challenges, together with the rise of intermediate and manufactured goods containing increasing technological content in global value chains, have led to a steady decline in African trade, resulting in the region contributing less than 3% of global trade today.

The world’s largest free trade zone

Enter the African Continental Free Trade Area (AfCFTA). This ambitious regional trade initiative aims to create one of the world’s largest free trade areas by unifying a market of 1.4-billion people for a combined GDP of about $3.4 trillion. 

AfCFTA aims to streamline intra-African trade by reducing tariffs on 90% of goods, simplifying customs procedures and addressing non-tariff barriers such as lengthy customs procedures, quotas on imports and restrictions on certain products.

Once fully enacted, AfCFTA could significantly transform Africa’s trade and economic landscape. The World Bank estimates that exports to the rest of the world could rise to 32% by 2035, and foreign direct investment could increase by over 150%.

To date, intraregional trade has remained low, at about 15% of total African trade. When you compare this figure to 60% in intraregional trade in Asia and 70% in Europe, one can hope that AfCFTA will have the same rallying effect as the free trade bloc agreement ASEAN in Southeast Asia and the European Union.

What does this mean for transporters?

According to the United Nations (UN) Economic Commission for Africa, demand will grow for all modes of transport under AfCFTA. However, inadequate transport infrastructure and services could hamper the realisation of the trade agreement. 

Standard Bank believes Africa is the growth story of this century. Today, the continent is valued for its natural resources, most notably its agriculture and mining. For Africa to benefit from increased trade, a conducive environment must be developed to empower its private sector to develop strong regional value chains with the manufacturing capabilities needed to produce high-quality finished goods.

Expanded intra-African trade may see road transport partially diverted to air, rail and waterways; however, the development of regional value chains will require robust road transportation networks, and therein lies an enormous opportunity for transporters. 

Reducing intra-African payment friction 

Cross-border payment constraints have long been a barrier to African trade — therefore solving the challenge of intra-African payments in local currencies is an essential precursor for swift and seamless regional trade. And that is what the Pan African Payment and Settlement System (PAPSS) is poised to achieve.

Launched in 2022, PAPSS is a project of the AfCFTA secretariat that aims to connect the African central and commercial banks and fintechs in all participating countries in a network that enables direct, fast and affordable transactions among any of the continent’s 42 currencies.

The impact of PAPSS will be significant. For the first time, transactions between different African countries can be settled directly and instantaneously. For instance, Ghanaian cedi can be traded for Gambian dalasi without the cost or delay of converting to US dollars as an intermediary currency of exchange.

Standard Bank commends PAPSS on this initiative to solve payment complexity in intra-African trade. Similarly, as Africa’s largest bank and the continent’s largest fleet manager, it’s also committed to driving innovation in the fleet payments space.

For instance, consider South African transporters delivering to Eswatini, Lesotho, Namibia or Botswana. The old traditional magnetic strip cards cannot be used to pay for fuel or anything else cross-border, so drivers are handed cash or credit cards to pay for fleet-related expenses in those countries. This creates risks along with complexities concerning currency conversions and reconciliations.

Digital fleet payments offer a unique opportunity to address these constraints. By enabling payment for a fleet of vehicles or equipment to be centrally managed and settled, the transaction costs and risks associated with cross-border payments can be significantly reduced.

This can be achieved through using digital payment solutions such as Standard Bank’s chip-and-PIN technology Visa Fleet Card, to provide transparency, security and speed — as one seamless payment mechanism.

Standard Bank’s Visa Fleet Cards offer more than a means of payment — they can fundamentally alter your ability to manage and optimise your fleet.

The cards are:

• Accepted cross-border and handle currency conversions, meaning drivers no longer need to carry cash or credit cards for fleet-related transactions inside or outside SA.
  
  
• Issued as vehicle-specific cards to each dedicated driver for easy reconciliation and accurate statistics on running costs for a holistic view of vehicle expenses.
  
  
• Enabled by robust chip encryption and PIN authorisation, protecting them from cloning, counterfeiting and skimming risks.
  
  
• Able to support odometer reading capture on POS devices, Mobile App and USSD.
  
  
• Used to pay for a variety of fleet-related expenses across numerous categories including fuel, maintenance, repairs, tyres, towing and tolls.
  
  
• Linked to Standard Bank’s market-first Fleet360 online platform for data analytics, exception reporting and real-time transaction tracking.
  
  
• Lighter on transaction and admin fees with reductions of up to 70%.

Visit Standard Bank’s website for more information on its fleet management solutions or email fleet.sales@standardbank.co.za

• About the author: Justin Thomas is head of Fleet Management at Standard Bank Business & Commercial Banking.

This article was sponsored by Standard Bank.