International Payments, BRICS and Africa: Trends and Issues

The document examines the push by BRICS nations to reform the international monetary system and reduce reliance on the US dollar, particularly in the wake of financial sanctions against Russia and Iran. It analyzes the 'BRICS Pay' platform and China's specific local currency initiatives, such as the 'Hunan Model' of barter trade with Africa. The paper also evaluates the Pan-African Payment and Settlement System (PAPSS) as Africa's own mechanism for facilitating intra-continental trade in local currencies, noting that while it could save Africa $5 billion annually, it faces hurdles including informal cash trade and a lack of institutional trust. The author concludes that while these reforms offer a way to circumvent foreign exchange shortages, African policymakers must ensure that the US dollar is not simply replaced by other external currencies like the Chinese renminbi.

• The BRICS grouping is actively pursuing a monetary reform agenda to elevate the use of local currencies in international trade and financial transactions, driven partly by the use of the SWIFT system as a tool for political sanctions against members Russia and Iran.
• BRICS Pay is a blockchain-based payment system launched in 2018 to facilitate cross-border transactions between member countries and circumvent SWIFT, though it currently lacks a global network of financial institutions as comprehensive as SWIFT's.
• China is implementing a 'closed loop' or 'barter' trade model via the Hunan Pilot Free Trade Zone, where Chinese goods are exported to Africa and paid for in local currency, which is then used to buy African products for export back to China.
• The Pan-African Payment and Settlement System (PAPSS) aims to eliminate the need for extra-African financial intermediaries and third currencies in intra-African trade, with potential annual savings for Africa estimated at $5 billion.
• PAPSS faces significant implementation hurdles, including the prevalence of informal cash-based cross-border trade, the potential for stronger regional currencies to replace the dollar, and a lack of institutional trust among African financial institutions.
• Digital currency payments are emerging as a frontier for international settlements, evidenced by a January 2024 transaction where the UAE and China used digital yuan (e-CNY) to pay for oil, allowing for immediate contract settlement.
• Developing countries, particularly in Africa, face a 'foreign exchange gap' where insufficient import purchasing power inhibits growth, a problem exacerbated by the COVID-19 pandemic and rising US interest rates.

APA

JOHNSTON, L. (2024). International Payments, BRICS and Africa: Trends and Issues. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2024/10/SAIIA_OP-360_InternationalPaymentsBRICSAfrica.pdf

Chicago

JOHNSTON, LAUREN. International Payments, BRICS and Africa: Trends and Issues. South African Institute of International Affairs, 2024. https://saiia.org.za/wp-content/uploads/2024/10/SAIIA_OP-360_InternationalPaymentsBRICSAfrica.pdf.

Wikipedia

{{cite report |last1=JOHNSTON |first1=LAUREN |title=International Payments, BRICS and Africa: Trends and Issues |publisher=South African Institute of International Affairs |date=September 2024 |url=https://saiia.org.za/wp-content/uploads/2024/10/SAIIA_OP-360_InternationalPaymentsBRICSAfrica.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{johnston2024international, author = {JOHNSTON, LAUREN}, title = {{International Payments, BRICS and Africa: Trends and Issues}}, institution = {South African Institute of International Affairs}, year = {2024}, month = sep, url = {https://saiia.org.za/wp-content/uploads/2024/10/SAIIA_OP-360_InternationalPaymentsBRICSAfrica.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }