BUSINESS REPORTER
Ghana’s President Nana Addo Dankwa Akufo-Addo will today officially open a platform which drives intra-African cross border payments in local currency as the continent seeks to save US$5bn annually in payment transaction costs.
A brainchild of the Cairo-headquartered Afreximbank, the Pan-African Payment and Settlement System (PAPSS) is set to unlock intra-African cross border transactions through the provision of a single payment infrastructure that cuts through the existing challenges of local currency exchange and ensures instant payment of funds.
Other speakers at the launch include Afreximbank president and chairman of its board Benedict Oramah, AfCFTA Secretariat secretary general Wamkele Mene, African Development Bank president Akinwumi Adesina, Africa’s richest man Aliko Dangote and central bank governors.
PAPSS eliminates intra-African financial borders, connecting African markets to each other, enabling local currencies to be used thereby reducing the need for offshore clearance and settlement of payments.
The platform was 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 PAPSS has been piloted successfully in the six countries that make up the West African Monetary Zone—Nigeria, The Gambia, Sierra Leone, Guinea, Liberia and Ghana. It will be used in other regions of the continent.
PAPSS will facilitate the payment, clearing and settlement system for intra-African trade; simplify intra-regional transactions; and reduce the cost, duration and time variability of cross-border payments.
PAPSS supports three core processes—instant payment, pre-funding and net settlement—in order to enable instant payments across African borders in local currency.
Under instant payment, participants no longer need to convert local currencies into hard currencies which then entailed the funds leaving Africa to be converted before being sent back again to the beneficiary bank – adding days to the transaction time. In addition, compliance, legal and sanctions checks are performed instantly within the system. Near-instant payments process within 120 seconds.
Due to the speed of the real-time payment process, PAPSS has to guarantee that funds are available to complete the originator’s transaction before effecting the movement of debits and credits between participants’ accounts. Participants have to agree to a pre-funding arrangement.
Net settlement across all participating central banks occurs at the same time each day.
Meanwhile, organisers of the Intra-African Trade Fair 2023 (IATF2023) will tomorrow announce opening of registration for next year’s fair to be held in Abidjan, Côte d’Ivoire.
IATF2021 held in Durban in November realised US$42.1bn in trade and investment deals.
