Absa Considers Joining Yuan Platform Amid Booming China-Africa Trade

Absa Group is considering joining a payment platform that enables direct transactions in Chinese currency, aiming to capitalize on the increasing trade with Africa’s largest trading partner.

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

“We are integral to the initial discussions about the system, exploring its implications for the continent and its potential as a platform,” he stated in an interview in Kigali, Rwanda, on Friday. “It’s a valuable addition to the global payment systems we currently utilize.”

Standard Bank Group, Africa’s largest lender, became the first institution in the region to connect directly to CIPS in November, having processed R9.5 billion ($572 million) in transactions over the past six months. Additionally, Ecobank Transnational CEO Jeremy Awori announced on Friday that the bank is applying to join CIPS.

Currently, African traders are converting their local currencies to dollars before exchanging them for yuan, a method that inflates costs, exposes them to dollar shortages, and increases vulnerability to foreign-exchange fluctuations.

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

Absa Kenya aims to double its pre-tax earnings over the next five years, maintaining the growth momentum it has built over the last five years, according to Mohamed. A significant risk to this outlook is the impact of the Iran war on supply chains and inflation, which could negatively affect growth prospects.

While secondary effects on credit quality, performance, and default rates have yet to be observed, Absa expects an immediate rise in demand for loans and higher credit limits for imports due to increased goods prices.

Absa is also exploring acquisitions to enhance its market share in Kenya, Mohamed added.

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