Absa Weighs Participation in Yuan Platform as China-Africa Trade Thrives -

Absa Group is contemplating the integration into a payment platform that facilitates direct transactions in Chinese currency, with the goal of leveraging the growing trade relationship with Africa’s largest trading partner.

The bank plans to connect to China’s Cross-Border Interbank Payment System, or CIPS, which acts as Beijing’s global payment system for yuan-based transactions, according to Abdi Mohamed, CEO of the South African bank’s Kenyan branch.

“We are a key player in the preliminary discussions regarding this system, assessing its implications for the continent and its potential as a viable platform,” he mentioned in an interview in Kigali, Rwanda, on Friday. “It represents a significant addition to our existing global payment systems.”

Standard Bank Group, the largest lender in Africa, became the first entity in the region to connect directly to CIPS in November, having processed R9.5 billion ($572 million) in transactions over the last six months. Furthermore, Ecobank Transnational CEO Jeremy Awori announced on Friday that the bank is moving forward with its application to join CIPS.

At present, African traders are converting their local currencies to dollars prior to exchanging them for yuan, a practice that raises costs, exposes them to dollar shortages, and increases susceptibility to fluctuations in foreign exchange.

Absa, South Africa’s third-largest lender with a footprint in 12 countries, is looking at “how to simplify that process for direct settlement,” remarked Mohamed.

Absa Kenya aims to double its pre-tax earnings in the next five years, sustaining the growth momentum it has developed over the past five years, according to Mohamed. A notable risk to this outlook is the impact of the Iran war on supply chains and inflation, which could adversely influence growth prospects.

While any secondary effects on credit quality, performance, and default rates have not yet been realized, Absa anticipates a swift increase in demand for loans and higher credit limits for imports due to elevated goods prices.

Absa is also investigating acquisition opportunities to bolster its market share in Kenya, Mohamed added.