Dual currency ‘steals’ Zim’s PAPSS benefits

NDAMU SANDU

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has projected that the country’s trades will be lower under the Afreximbank-championed local currency payment and settlement system due to the use of a dual currency regime.

Zimbabwe uses the United States dollar and the Zimbabwe dollar as currencies and has registered for the Pan African Payment and Settlement System (PASPPS) which is billed to save Africa US$5bn per annum in transaction costs on cross border payments.

“Our trades are lower under SIRESS [SADC Integrated Regional Electronic Settlement System] because we are using a dual currency. The same will be happening under the PAPSS because we will be using the dual currency system. You measure the success of a payment and settlement system whether it is SIRESS or PAPSS when you are under a mono currency. That is when you can measure its usefulness and effectiveness,” Mangudya said.

Zimbabwe is using SIRESS, a regional platform for payments and settlements used by 16 countries.

PAPSS was commercially launched last year after being piloted in six West African countries—Nigeria, the Gambia, Sierra Leone, Liberia, Ghana and Guinea.

The local currency payment and settlement system was developed by Afreximbank, which acts as the main Settlement Agent in partnership with participating African Central banks.

The PAPSS is expected to integrate the disparate payment systems across the 55 countries on the continent, improve payment flows and reduce transaction costs would become central to the growth of intra-African trade.

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.