From lithium to cashews, Africa is loaded with natural products that the rest of the world is willing to pay top dollar for.
Getting those products and raw materials out of Africa isn’t much trouble for the continent’s few trade partners, such as Vietnam, which regularly imports cashews and other agricultural products from the Ivory Coast. The challenge is paying for these items in a complex continent comprising 54 nations and 42 currencies.
Benjamin Fernandes, CEO of the cross-border payments and remittances fintech Nala, focuses on building Africa’s modern financial infrastructure, which he says is currently “1 percent built.” Fernandes joined us on Converge to discuss this unique situation in the world of cross-border payments.
“The most expensive continent in the world to trade with”
From a glance, one might think Africa is comparable to China due to its size and growth trajectory — 1.3 billion people today on pace to hit 2.5 billion by 2050 — but the economic facts are far different.
Where China has a single central bank and vast wealth distribution among its population, Africa essentially has 54 central banks. Each represents a sovereign nation, and in many parts of Africa, wealth inequality is among the highest in the world.
Fernandes says this creates a disjointed financial landscape for doing business, one filled with fees on top of fees just to move around money for simple transactions. He notes that 99 percent of transactions in Africa are made with “very expensive” cash due to the lack of organization and shortage of dollars continentwide.
“The African continent is the most expensive continent in the world to trade with,” Fernandes says. “The question it brings up to everybody is: Is this continent positioned to succeed?”
In Africa’s present form, Fernandes asserts the answer is “no.” While many global importers don’t yet see a viable trade partner, new opportunities are on the horizon.
Addressing the payments problem one rail at a time
In 2023, Emirates Airlines pulled out of its deal with Nigeria because it doesn’t have the ability to repatriate funds back to Dubai. To buy Africa’s lithium, Apple and Tesla import it from Europe because there aren’t financial systems in place to handle such transactions with U.S. companies. Cases such as these underscore the need for new solutions that provide stability for large-scale transactions and small businesses alike.
That’s why Nala and other initiatives are working to build payment rails to support a financial infrastructure that will connect African businesses to the world economy for the next 100 years.
“Finance service is a foundational element of global trade,” Fernandes says. “How do you enable these transactions to happen more directly?”
Without the digital infrastructure and automation technology for African businesses to accept payments and facilitate trade, international businesses simply will not find them to be a reliable partner.
With Nala, Fernandes has enabled local enterprises to achieve remittance on payments with better rates and next-day settlements. There is a long way to go in this quest, Fernandes notes, as Africa — despite its plethora of natural resources — continues to import far more than it exports. Still, progress in the last few years alone is reason enough for some to be optimistic about Africa’s long-term
“If we’re able to build payment rails … that would bring dollars into the market,” Fernandes says.
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*The information shared on this blog is for informational purposes only and should not be considered financial advice. Please note that the opinions expressed on Converge are solely the opinions of the host and the guests, not Convera’s.
