The Pan-African Payment and Settlement System (PAPSS) platform, established by multilateral finance institution the African Export-Import Bank (Afreximbank) and the African Continental Free Trade Area (AfCFTA) Secretariat, will save Africa more than $5-billion a year in payment transaction costs.
It will also play an increasingly important role in accelerating the transactions underpinning the operationalisation of the AfCFTA.
The PAPSS is expected to boost intra-African trade by transforming and facilitating payments, clearing and settlement for cross-border trade across Africa.
“We are eager to build upon the AfCFTA’s creation of a single market throughout Africa, and PAPSS provides the state-of-the-art financial market infrastructure connecting African markets to each other thereby enabling instant cross-border payments in respective local African currencies for cross-border trade,” said Afreximbank president and chairperson Professor Benedict Oramah.
“Afreximbank as the main settlement agent for PAPSS, provides settlement guarantees on the payment system and overdraft facilities to all settlement agents, in partnership with Africa’s participating central banks. PAPSS will effectively eliminate Africa’s financial borders, formalise and integrate Africa’s payment systems, and play a major role in facilitating and accelerating the huge AfCFTA-induced growth curve in intra-African trade,” he added.
The payment system is not designed to compete with or replace existing payment systems, but to facilitate the connectivity level that brings all payment systems together into one network that is interoperable, efficient and affordable, noted PAPSS CEO Mike Ogbalu.
“The PAPSS is designed to make our currencies regain value to domesticate intra-Africa payments in this journey towards African prosperity, while providing the superhighway which connects others to reach every part of this continent as we seek to create the Africa that we want.”
According to Afreximbank, the PAPSS provides the solution to the disconnected and fragmented nature of payment and settlement systems that have long impeded intra-African trade.
Prior to the PAPSS, more than 80% of African cross-border payment transactions originating from African banks had to be routed offshore for clearing and settlement using international banking relationships. That posed multiple challenges, ranging from payment delays to operational inefficiencies and compliance concerns for the disparate regional payment systems.
The PAPSS, which has been successfully piloted in the six countries of the West African Monetary Zone, delivers multiple advantages and efficiencies to intra-African trade payments, including reducing the cost, duration and time variability of cross-border payments across Africa, decreasing the liquidity requirements of commercial banks for cross-border payments and strengthening oversight of cross-border payment systems by central banks.
Further, the PAPSS is also set to deliver harmonisation across the continent through its comprehensive legal, regulatory and operational framework comprising standardised rules, formats and governance arrangements, harmonised know-your-customer and anti-money-laundering procedures, payment confirmation and settlement finality. A precondition for participation in the PAPSS is compliance with its set rules and standards, Afreximbank said.
The PAPSS platform was launched by Ghana VP Dr Mahamudu Bawumia, representing Ghana President Nana Akufo-Addo, on January 13, in Accra.
Akufo-Addo said the PAPSS was a major leap in releasing the continent from over-dependence on external players and factors to achieve a long-yearned-for acceleration in intra-continental trade and investment.
“This launch is a result of many months of hard work, resolve and commitment towards achieving set objectives for the growth of the continent in trade. All Central Banks in Africa must now join up and ensure seamless transfer of funds deploying this most practical and important African solution to an African problem,” he added.
Meanwhile, AfCFTA secretary-general Wamkele Mene said he appreciated the role and commitment of the continent’s heads of States and governments through the African Union, and said that their strong political will continues to be the bedrock of progress towards a full implementation of AfCFTA that has now been strongly boosted with the commercial launch of the PAPSS.