Renminbi usage for payments in South Africa has increased by 65% over the last 12 months and by 112% over the last 24 months, says global financial messaging services firm SWIFT.
According to the firm, renminbi payment messages, excluding domestic traffic, increased by 70% over the past 12 months. SWIFT data also shows that nearly 40% of renminbi payments by South African firms have been offshore payments, exchanged with countries other than China and Hong Kong, up from 16% in July 2015.
“The renminbi, in general, has had huge uptake over the last few years for two reasons. One is trade with China – they are a major player in the commodities market. The second is due to the Chinese desire to make the renminbi a world leading currency, in line with their own status as the second largest global economy. In broad terms you’d expect it to follow closely behind the dollar and euro just based on trading bloc size,” Harry Newman, head of banking at SWIFT told Moneyweb.
Newman added that South Africa’s strong trade links with China as well as the establishment of a domestic Renminbi clearing centre along with Singapore’s increased use of the renminbi for payments has stimulated usage of the currency.
“South Africa trades a lot with China, though sometimes this isn’t entirely evident. Just because trade doesn’t go directly to China doesn’t mean it isn’t trade with China. It might go through another location first, for example Singapore which is a shipping hub, but ultimately is trade with China,” he said.
Although Chinese demand for some South African commodities has fallen from historic highs, Newman said the currency in which invoices are billed could explain the increase in renminbi usage. If more invoices are paid in renminbi then the volume of renminbi payments will grow even if the trade remains the same, he said.
“There are also a few reports of some companies offering small discounts for payment in renminbi, which would of course encourage people to switch as well,” he added.
SWIFT expects the Memorandum of Understanding on the Promotion of China-Africa Cooperation, signed during the Forum on China-Africa Cooperation in Johannesburg in December 2015, to increase commercial exchanges between China and countries in Africa and have a positive impact on future renminbi volumes.
As at July 2016, the renminbi was the fifth most active currency for global payments, with a market share of 1.9%, SWIFT said.
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