By Rachel Balsham, Deputy CEO at MFS Africa
Cross-border payments are about more than remittances. While remittances provide much-needed social support, particularly in difficult times, behind every cross-border payment is a unique socio-economic story. One such story is that of the broader positive impact of intra-African immigration.
According to the UN, of the almost 260 million international migrants, 38% are South to South migrants. Most migrants in Africa stay in the continent. Some publications have estimated that as many as 70% of African immigrants remain within the continent.
The UN Economic Development in Africa Report for 2018, offers a nuanced look at the experiences of migrants and the benefits of migration to origin and destination countries across Africa. According to the report, in addition to remittances, immigration has a positive impact on trade, investment, and reduced unemployment for the country of origin. In contrast, the destination country benefits through higher economic growth, more tax, higher productivity, entrepreneurship, and innovation. Despite the positive contributions of intra-African mobility, African immigrants face difficulties in the labour market primarily because of discrimination, nationalistic labour laws, and regulations even though they tend to have relatively higher levels of educational attainment. Consequently, immigrants are forced into necessity entrepreneurship that is highly dependent on a close social network.
Adoptive countries may not be supportive of immigrant entrepreneurs. Still, by deepening regional integration, policies such as the African Continental Free Trade Area Agreement (AfCFTA) open up opportunities for cross-border digital trade which can provide immigrant entrepreneurs access to an estimated 1.3 billion consumers on the continent. The UN estimates that the transition phase to the AfCFTA has the potential to generate benefits amounting to $16.1 billion and boost intra-Africa trade by as much as 33%, which could significantly improve the economic outcomes of SMEs across the continent.
However, for SMEs to fully realise the potential gains from the African Continental Free Trade Area, a broad range of public and private interventions are required to tackle issues that are creating barriers to meaningful participation for SMEs today. This is particularly the case for marginalised groups such as immigrants.
While immigrant entrepreneurs are embedded in close social enclaves to survive in their adopted countries, to grow a strong business, entrepreneurs require the ability to grow outside these protective enclaves. Their multi-country experiences make them ideal entrepreneurs with cross-border potential.
According to Mastercard, “more than half of all SMEs are missing out on global business opportunities due to a lack of access to infrastructure and regulatory expertise.” Cross-border payments in Africa present challenges due to the complex and fragmented financial services institutions and telecoms systems across the continent. Different regulatory regimes – with each system designed to meet the specific needs of individual markets – create a patchwork of different requirements that need to be fulfilled when making a cross-border payment. For SMEs looking to establish a pan-African presence, this presents a major obstacle to reaching new markets.
As MFS Africa, our focus has been on building a wide and deep digital payment network across Africa. By acquiring Beyonic, we are entering the underserved SME market, supporting African SMEs to make and receive digital payment seamlessly. Enabling businesses of all sizes to send and receive payments across borders easily lifts major financial barriers to economic growth – not only from a business perspective but also from a consumer one. This is about developing capability which will enable the growth of African cross-border businesses, which can expand beyond their domestic markets and drive innovation across the continent to the last-mile. But it’s also about providing African businesses and consumers with more options, enabling them to access services from beyond their base markets easily.