Afreximbank dangles US$3bn to support payment platform

BUSINESS REPORTER

The African Export-Import Bank (Afreximbank) says its support to the local currency payment and settlement system will jump to US$3bn once all African countries become members.

The Pan African Payment and Settlement System (PAPSS), which began operations last year, is billed to save African countries US$5bn annually in transaction costs.

Afreximbank president Benedict Oramah said PAPSS was making it possible to pay for intra-African trade, including contracts for building major infrastructure projects, in African currencies.

“Afreximbank currently supports the system with a US$500m facility to guarantee settlement finality, with the intention to increase this to US$3bn when membership expands from the current 9 countries to the entire continent,” Oramah said this week at the AfCFTA Business Forum in Cape Town.

“Finally, we can begin to save the US$5bn we pay out every year as charges and costs for intra-African payments.”

In his recent Monetary Policy Statement, central bank governor John Mangudya said Zimbabwe signed up to the PASS agreement in March 2022 to be part of a project, which is being developed in collaboration with Afreximbank.

“PAPSS is an interoperable cross-border financial market infrastructure enabling the integration of Africa’s financial markets to stimulate, hasten and sustain the pace of regional integration, economic growth and development and financial inclusiveness in the continent. As this is a payment system for cross-border transactions, banks will be advised of their role as they handle most of the payments,” Mangudya said.

There are 42 national currencies on the continent and access to hard currencies required to transact across borders is limited and intra-regional payments take 2 to 14 days to complete.

Under the PAPSS, payment will be completed within two minutes.

PAPSS is an enabler in driving intra-African trade under the African Continental Free Trade Area (AfCFTA), the largest trading bloc by member countries after the World Trade Organisation.

AfCFTA seeks to bring together all 55-member states of the African Union, covering a market of more than 1.2 billion and a combined GDP of over US$3 trillion.

Experts say the local currency payment and settlement system will be a game changer at a time when there are global calls to drop the dollar as the transaction currency.