NDAMU SANDU
The pan African local currency payment and settlement system is in talks with the Reserve Bank of Zimbabwe and local commercial banks for them to join the platform billed to save Africa US$5bn annually in transaction costs on cross border payments.
The Pan African Payment and Settlement System (PAPSS) is in discussions with African central banks and commercial banks for them to use the platform in transactions.
“Engagements [with Reserve Bank of Zimbabwe and commercial banks] are still ongoing and we are hopeful that this can be confirmed soon,” CEO Mike Ogbalu told Business Times.
The commercial launch of PAPSS was done this year after it was successfully piloted in six countries that make up the West African Monetary Zone (WAMZ) — Nigeria, the Gambia, Sierra Leone, Liberia, Ghana and Guinea.
Ogbalu told Business Times that PAPSS now has members from the WAMZ region, East and Southern Africa.
“In total we have eight Central Banks, 7 switches and 45 commercial banks that are members of PAPSS which are at various stages of joining the network and implementation,” he said.
There have been calls for PAPSS to expand via regions especially after the pilot project in West Africa.
Observers felt it would have been more workable if PAPSS was first introduced in West Africa, East Africa, Central Africa, North Africa, and Southern Africa.
The success in those regions would have made it easier to then launch across Africa.
Ogbalu said PAPSS piloting/starting in WAMZ was a deliberate move as the region represents the “complexities of the whole of Africa”.
“It was the only region with multicurrency, multilingual and no cross-border payment system. For any system to work and have credibility, it depends on the success of a pilot. The successful pilot in the WAMZ countries has hence, given PAPSS the necessary credibility and experience to spread across Africa,” he said, adding that it has been “our plan to start earnest discussions with regions”.
“…we are in deep discussions with the EAC, COMESA, BEAC (Banque des Etats de l’Afrique Centrale) and BUNA, a system that connects the Arab world and mostly northern Africa,” Ogbalu said.
The platform 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.
