17
Nov
Africa banks offer Chinese renminbi payments
KAMPALA, Uganda: The business community in Uganda that trades with China can now carry out transact directly from the Ugandan shilling to the renminbi or yuan – marking a change from having to trade in US dollars.
This is attributed to the growing investments and trade volumes between Uganda and China. “As you know, China is probably our largest trading partner by some distance and the growth trajectory over the last few years suggests that it is probably going to cement its position as our number one trading partner,” said Julius Katera from Stanbic Bank Uganda.
Trade between the two countries has risen from US$99 million in 2005 to close to US$600 million in 2013.
Banks say the new direct payment system will massively reduce transaction costs normally incurred when exchanging currencies. “Historically if one went to do business in China, you would take currency exposure in three currencies – the shilling, the dollar, the renminbi – because you have to get out of the shilling go into the dollar, get out of the dollar and get into renminbi,” said Alpha Capital Partners managing director Stephen Kaboyo. “All that movement from one currency to another carries a currency risk”.
Banks say the system will also fast track doing business. China is becoming a very big economic giant its influence in the world, especially in developing countries like Uganda, is growing by leaps and bounds and industry experts believe it is perhaps the right time for the renminbi to hit the local retail market as an alternative International Reserve Currency.
The move will help local banks tap into the success of Asian giants doing business in African countries like Uganda. “We have got almost 40,000 jobs that have been created out of this investment between Uganda and China, so we looking forward to these numbers doubling in the years ahead and we are happy as Ecobank to be part of that plan,” said Ecobank Uganda managing director Michael Monari.
The direct payment system will enable those doing business between Uganda and China to get letters of credit and open bank accounts in Chinese yuan. African Banks have had to partner with major Chinese financial institutions in order to settle transactions in renminbi.
Source: http://www.channelnewsasia.com/news/business/international/africa-banks-offer/1476030.html