Making cross-border remittances between African countries cheaper and ensuring cross-border payments systems work to support trade across the continent will be priorities for the G20 Finance Track during South Africa’s presidency, Reserve Bank governor Lesetja Kganyago said on Thursday.
The issue of payments was particularly important for the African continent, which had one of the most expensive remittance corridors globally, between Harare and Johannesburg. But there were other similar corridors that were expensive.
He was speaking on the sidelines of the finance track meeting in Sandton, where he highlighted the importance of cross-border payments for financial inclusion and ultimately for sustainable economic development. Importantly, the African Continental Free Trade Area (AfCFTA) meant trade must be settled and that made interconnected payment systems important. Kganyago said fortunately the global Financial Stability Board had a cross-border payments committee that focused on access to payments systems and the costs, as well as on transparency, and these issues were at the heart of the G20’s finance agenda.
The World Bank, which monitors the cost of sending relatively small amounts of money from one country to another, found earlier this year that sending remittances globally cost an average of 6.65% of the amount sent, and cutting prices by at least five percentage points could save $16bn, most of it for developing countries.
Kganyago told the G20 central bank and finance ministry delegates on Thursday that South Africa believed the G20 agenda had become bloated over the years and it would use its presidency for focused discussions on a narrower agenda, rather than adding more items. It was time for the G20 Finance Track to take stock and focus on implementation and on how to accelerate the 2023 sustainable development goals, he said, though this would not be easy in an environment of geopolitical tension and global conflict.
Amid concern about a more isolationist US and the rise of protectionism in many countries, as well as about South Africa’s own foreign policy, Kganyago also emphasised that South Africa sought to reinvigorate the spirit of multilateralism within the G20 finance track. “This word ubuntu recognises our interconnectedness and is the essence of what the G20 is meant to be,” he said.
One of the G20’s most durable accomplishments was establishing the global Financial Stability Board during the 2008/09 global financial crisis, when the G20 developed into its present form led by the countries’ heads of government.
“Despite a series of shocks such as the Covid-19 pandemic, the March 23 market turmoil, banking crises and regional conflict, the global financial system has remained broadly resilient and macroeconomic shocks have been largely contained. This reflects genuine global co-operation to address risks and vulnerabilities and protect the public good,” Kganyago said. But the G20 could not be complacent and challenges with the implementation of FSB recommendations, and those of other global standard-setting bodies, must be addressed.
Another area of focus for the G20’s central banks and finance ministries is the rise of nonbank financial institutions and the risks these could pose for global financial stability. NBFIs had become very important in the global financial system, constituting as much as 40% of the financial system in some countries, Kganyago said. But they have tended to fall outside the regulatory framework, making it challenging to get details of their activities. The G20 has a Data Initiative, which is trying to gather those details and get to grips with their activities.
“We need data to arrive at more sensible policies,” Kganyago said.
This week’s finance track meetings brought together directors-general and deputy governors from the 19 G20 countries and the AU and EU, as well as international institutions such as the International Monetary Fund, whose first deputy MD, Gita Gopinath, attended the meeting in Sandton. Reserve Bank deputy governor Rashad Cassim and Treasury director-general Duncan Pieterse are the so-called “Sherpas’ for South Africa’s G20 finance track, which will hold its first high-level summit of finance ministers and central bank governors in Cape Town in February.
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