Triad of Cross-Border Business Payments, Remittances and SMEs: Africa's Economic Renaissance

Business in the African continent is witnessing a transformative shift, one that promises an economic renaissance unlike any before. This shift is predicated on three key pillars - cross-border payments, remittances, and rapid growth of the small and medium-sized enterprises (SME) sector. 

Each of these facets is dynamically interconnected, exerting a profound influence on the continent's socioeconomic landscape. As remittances surge into Africa from its diaspora, they not only provide financial stability to families but also act as seed capital for budding entrepreneurs, fuelling the growth of SMEs. Simultaneously, the Fintech revolution making cross-border payments easier is fostering new avenues for trade and global economic integration. 

This triad of cross-border payments, remittances, and SMEs is setting the stage for Africa's economic renaissance, heralding an era of unprecedented growth and prosperity. Remittances are no longer just a safety net for families. They are now driving substantial improvements in living conditions, education, healthcare, and entrepreneurial activity.

Another transformative impact of remittances is in the realm of entrepreneurship. For many, remittances serve as seed capital for starting or growing their own businesses. The resultant growth of the SME sector, employment and creation of a buzzing ecosystem helps drive Africa out of poverty. 

The participation of such SMEs in global trade drives outbound business payments from Africa. This, in turn, stimulates local economic growth, creates further employment opportunities, and sets the stage for sustainable development, contributing to a long-term development cycle. 

The number of entrepreneurs in Africa is expected to reach 200 million by 2025, which will continue to propel the growth of the SME sector well into the future. There are currently an estimated 44 million SMEs in Africa, accounting for 90% of businesses and 60% of employment in Africa, and are responsible for creating the majority of jobs in the continent. Nigeria leads, with 17 million SMEs, followed by Kenya at 10 million and South Africa with an estimated 8 million. 

According to the African Development Bank, the number of SMEs in Africa is expected to reach 120 million by 2025. The growth of the SME sector is having a positive impact on the African economy, with SMEs creating jobs, driving innovation, and contributing to economic growth.

  • In Kenya, the number of SMEs has grown by 50% in the last five years.
  • In Nigeria, the SME sector accounts for 60% of the country’s GDP.
  • In South Africa, the SME sector employs over 10 million people.
  • In South Africa, the SME sector exports over $10 billion worth of goods and services each year.

SMEs in Africa are showing immense potential and resilience in driving economic growth despite facing numerous challenges. Their ability to innovate and adapt to market dynamics makes them an essential sector in Africa's economic landscape.

Small and medium-sized enterprises (SMEs) in Africa make up a significant portion of cross-border business payments. In 2021, it was estimated that SMEs accounted for 30% of all cross-border business payments in Africa. This figure is expected to grow to 40% by 2025.

  • The value of cross-border payments by SMEs in Africa is estimated to be $100 billion per year.
  • The top 5 countries for cross-border payments by SMEs in Africa are Nigeria, Kenya, South Africa, Egypt, and Tanzania.
  • The most common types of cross-border payments by SMEs in Africa are imports and consequent payments to suppliers, followed by exports.

The future of cross-border payments by SMEs in Africa is bright. With the right support, SMEs can continue to grow their businesses and connect to new markets.

The Emergence of African Business Payments: Gateway to Global Markets

The landscape of business payments, outbound from Africa to the rest of the world has witnessed a transformative evolution in recent years. Traditional barriers to cross-border transactions are gradually dissipating, largely due to the rise of digital financial solutions. 

The global B2B cross-border payments market is estimated to be worth a staggering $150 trillion and is expected to reach $176 trillion by 2025. This is a huge market, and banks have a significant share of it. In contrast, the traditional Consumer-to-Consumer remittances are much smaller, at $800 billion.

A 2021 report by the African Development Bank (AfDB) estimates that the value of payments made by MSMRs in sub-Saharan Africa to their suppliers could reach $2 trillion by 2025. 

The growth of the SME sector in Africa is one of the main drivers of this increase. The SME sector is the backbone of the African economy, and it is responsible for creating the majority of jobs in the continent. As the SME sector grows, so too does the volume of payments made by SMEs to their suppliers. The SME sector holds a key promise in pushing Africa into the forefront of the global economy, boosting the growth of the country’s middle class and giving birth to hope in Africa.

When comparing payment figures with the world, Africa is still in its infancy, but with a huge potential and a great Future. Banks and nonbank players alike (such as RemittancesHub) are innovating to reduce friction in domestic and cross-border payments and delivering much-needed new solutions to consumers and businesses. Some of the key figures regarding overall Cross border Business payments from Africa paint a new picture: 

  • In 2021, the value of cross-border Business payments from Africa to the world was estimated to be $430 billion.
  • The average cost of cross-border payments from Africa to the world is 7.1%, which is significantly higher than the global average of 2.8%.
  • The average processing time for cross-border payments from Africa to the world is 3 days, which is also significantly higher than the global average of 1 day.
  • The use of mobile money for cross-border payments is growing rapidly. In 2021, the value of mobile money cross-border payments was estimated to be $10 billion.
  • The African Continental Free Trade Agreement (AfCFTA) is expected to boost cross-border trade in Africa, which could lead to an increase in the demand for cross-border payments.
  • Africa’s trade with the rest of the world is increasing by 11.3%. This growth is being driven by a number of factors such as growth in e-commerce, high penetration of mobiles, development of new payment technologies and of course, the growth of the SME sector
  • Increasing trade with China, Europe, India, the USA and Japan has had a significant impact on the growth of businesses in Africa. According to the World Bank, trade between Africa and these five countries increased by 70% between 2000 and 2019. In 2022, trade between Africa and these five countries was valued at $355 billion, which is a significant increase from the $255 billion recorded in 2021. 
  • A significant portion of these payments still involves traditional methods like bank transfers, which can be slow, expensive, and unpredictable due to reliance on the legacy SWIFT network

While Africa's cross-border business payment infrastructure continues to evolve, the recent developments are indeed promising. The rise in digital cross-border transactions is not just connecting Africa with the rest of the world; it's also playing a pivotal role in the continent's economic transformation. 

How RemittancesHub Can Help 

RemittancesHub is a digital solution that Banks, Remittance Operators and Fintechs can use to send outbound international business payments from Africa. RemittancesHub provides a single API integration, and single point settlement, to send payments globally, in near real-time, cost-effectively and with full transaction tracking. 

Amit Shrimali
Global Head – Sales & Business Development

Amit has gained experience in various industries for approximately 23-25 years - including Advertising, Dot Coms, Manufacturing Units, IT selling, and culminating Remittance.


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