Ecobank is in talks with Bank of China to launch a direct local-currency-to-yuan settlement product for its customers by year’s end, its group CEO said, citing rising trade and commercial ties between Africa and China.
The talks come as some African markets explore alternatives to the dollar for cross-border payments, including the Chinese currency.
“We are looking at opportunities for us to settle with, instead of going through the dollar, we do it directly with the Chinese yuan,” Ecobank CEO Jeremy Awori told Reuters on Monday, citing many African small and medium businesses looking to China for growth.
“You need the right tools and payment mechanisms to be able to do that. We’re investing in those.” He said
Growing Yuan Transactions in Africa
South Africa’s Standard Bank said in November it had been authorised to offer transactions through China’s Cross-Border Interbank Payment System (CIPS), making the yuan the underpinning settlement currency for its clients.
Several other African countries have also explored alternatives to dollar-based payments, including a new home-grown payments system, Kenya’s conversion of some dollar-denominated Chinese railway loans into yuan and Zambia’s use of the Chinese currency for royalties at some mining firms.
The push comes amidst China’s plans to internationalise the yuan. China is also expanding zero trade tariffs this year for the 53 African nations it has diplomatic relations with.
“When you look at all the natural resources that exist on the continent, especially in energy, mining, oil and gas, China has also got a lot of interest and investments,” Awori said.
“African businesses have long complained that having to convert local currencies into dollars before paying suppliers in countries such as China adds costs and squeezes profit margins.
“Ecobank is expanding its China office to capitalise on those opportunities” The Ecobank CEO concluded.
