In a groundbreaking move, the Africa Export-Import Bank has successfully integrated 11 African central banks into its cutting-edge Pan-African Payment and Settlement System (PAPSS), signaling a major stride toward efficient and cost-effective trade within the region. Developed in collaboration with the African Union, PAPSS eliminates the need for a third-party currency, like the U.S. dollar, allowing participants to conduct transactions in their own currencies.
This innovative payment system, designed to reduce expenses and streamline trade, has already garnered support from major players, including 81 commercial banks primarily from the West African monetary zone. Notably, Southern African giants like Standard Bank, the continent’s largest bank in terms of assets, are active participants in this transformative initiative.
John Bosco Sebabi, PAPSS deputy CEO, emphasized the significance of seamless payments for thriving trade, stating, ‘Trade goes well where payments can be made easily, and this is why we can only see trade pick up if we see improvement in efficient payments.’ Currently, over 80% of intra-African payments traverse European or U.S. channels, incurring hefty costs of up to $5 billion in fees and compliance expenses.
PAPSS operates with remarkable efficiency, allowing transactions to be completed within a mere 7 to 10 seconds, with a maximum processing time of 120 seconds. This swift and secure payment system is poised to revolutionize intra-African trade relationships, particularly within the framework of the African Continental Free Trade Area (AfCFTA). The AfCFTA, uniting 55 members of the African Union and eight Regional Economic Communities, aims to establish a single continental market with a combined GDP of approximately US$3.4 trillion and a population exceeding 1.3 billion.
Sebabi expressed optimism about PAPSS rapidly gaining momentum, addressing the current disparity in intra-regional trade volumes. While the region presently stands at a mere 18%, in stark contrast to Europe’s 70% and Asia’s 59%, PAPSS is expected to usher in a new era of economic collaboration and growth.
With anticipation building for more central banks to join PAPSS by the next year, the integration of this innovative payment system is set to transform the landscape of African trade, fostering stronger economic ties and bolstering the continent’s global standing.
“As more central banks express interest in joining the Pan-African Payment and Settlement System (PAPSS), the momentum behind this groundbreaking initiative continues to grow. The incorporation of additional central banks into PAPSS is poised to further strengthen Africa’s economic integration, enhance financial stability, and reduce reliance on foreign currencies, thereby promoting sustainable economic growth across the continent.
PAPSS not only simplifies transactions but also fosters financial inclusivity by engaging a wide array of participants. Central banks, acting as regulators and clearance agents, collaborate with commercial banks, fintech companies, payment service providers, and businesses operating throughout the region. This diverse collaboration ensures that PAPSS is inclusive and accessible, empowering various stakeholders to participate in the burgeoning intra-African trade.
One of the key strengths of PAPSS lies in its ability to operate across diverse African currencies, offering flexibility to participants. For instance, individuals and businesses in Zimbabwe or Rwanda can seamlessly transact in their local currencies, and PAPSS will facilitate the conversion through the respective central banks. This flexibility not only eliminates the need for a third-party currency but also simplifies cross-border transactions, making trade more efficient and cost-effective.
The swift transaction processing time of 7 to 10 seconds, with a maximum processing time of 120 seconds, is a testament to the advanced technology powering PAPSS. This rapid processing ensures that businesses can conduct transactions quickly, facilitating agile and responsive trade practices. Such efficiency is vital in the modern global economy, where speed and accuracy are paramount for businesses to stay competitive.
Additionally, PAPSS aligns seamlessly with the goals of the African Continental Free Trade Area (AfCFTA), which seeks to boost intra-African trade and create a unified market. By reducing trade barriers and promoting easier financial transactions, PAPSS contributes significantly to the realization of AfCFTA’s objectives. The initiative not only bolsters economic cooperation but also enhances the continent’s negotiating power on the global stage, fostering a stronger, united African economic front.
As the Pan-African Payment and Settlement System continues to expand its reach, it serves as a testament to Africa’s commitment to self-reliance, economic empowerment, and collaborative progress. With its innovative approach to payments and trade, PAPSS is shaping the future of African commerce, paving the way for increased prosperity, stability, and interconnectedness across the continent.”
