The African Export-Import Bank (Afreximbank) and the AfCFTA Secretariat have rolled out a financial market infrastructure to enable instant, cross-border payments in local currencies between African markets.
The platform, the Pan-African Payment and Settlement System (PAPSS), is set to boost intra-African trade significantly and underpin the implementation of the African Continental Free Trade Area (AfCFTA) as it simplifies cross-border transactions and reducing the dependency on hard currencies for these transactions.
PAPSS will serve as a continent-wide platform for the processing, clearing and settling of intra-African trade and commerce payments, leveraging a multilateral net settlement system.
Its full implementation is expected to save the continent more than US$5bn in payment transaction costs each year.
Afreximbank president Benedict Oramah said Africa can expect to begin to reap the fruits of the AfCFTA with the implementation of PAPSS.
“Afreximbank is proud to have contributed in the realisation of the multi-decade dream that seemed unachievable just a few years ago. PAPSS is not positioned to replace existing regional and national payment systems but to collaborate and work with them in better integrating African economies for the benefit of all,” Oramah said.
Wamkele Mene, AfCFTA secretary general said: “The introduction of PAPSS provides Africa with greater capacity to conduct cross-border transactions and expand the scale of both active and latent opportunities for enhanced intra-African trade.”
Mike Ogbalu III, CEO of PAPSS said the platform is designed to be a fundamental rail connecting African markets to each other and enabling individuals, businesses and governments on the continent to trade with each other seamlessly.
“PAPSS will provide fresh impetus for businesses to scale more easily across Africa, essentially eliminating the borders that have balkanised us and robbed us of our economic prosperity for so long,” he said.
The development of a pan-African payments infrastructure has been made possible by some of the continent’s leading institutions.
The platform has been developed by Afreximbank, who also acts as the main Settlement Agent in partnership with participating African Central banks.
The implementation of the infrastructure is taking place in collaboration with the African AfCFTA Secretariat with the endorsement of the African Union.
The commissioning of PAPSS follows a successful pilot phase in the countries of the West African Monetary Zone (WAMZ), with live transactions done in an instant.
The West Africa Monetary Institute collaborated with Afreximbank in launching the system in the WAMZ. PAPSS is now engaged in advanced discussions with other national and regional institutions to rapidly expand continent-wide connectivity.
Afreximbank provides settlement guarantees on the payment system and overdraft facilities to all settlement agents.
To accelerate expansion and ensure settlement finality, Afreximbank has approved US$500m to support the clearing and settlement in the WAMZ countries.
It is estimated that a further US$3bn will be made available to support the systems continent-wide implementation.