In a recent article in the U.N. magazine, called Africa Renewal, Mr. Kingsley Igbobor reported, and I quote: “when Fidelis Adele, the CEO of Freetown – based Solid Graphics, a printing and communications company, needed to order some printing equipment from Nigeria in September 2021, he paid an extra US$165 on top of a US$10,000 bank transfer to the seller. Yet, it took 3 days for the money to be credited to the beneficiary’s account in Nigeria.”
When Mr. Adele was informed of the Pan-African Payment and Settlement System (PAPSS) and how it would operate, he said and I quote: “If I can take the Leones to a bank here in Sierra Leone and pay for printing products in Nigeria, and the money is instantly deposited in the beneficiary’s account in Nigeria, that would be extraordinary!”
Your excellencies, distinguished Ladies and Gentlemen, today we begin the process of making the extraordinary conjecture of Mr. Adele an ordinary way of conducting Intra-African payments.
That vision, the distant possibility that Mr. Adele thought would be extraordinary is today a reality. Afreximbank is pleased to have worked with its partners in delivering a highly transformational integration instrument to our continent; We are proud to have once again lived up to our mantra, namely, ‘if it is possible, it will be done; If it is impossible, it CAN be done.”
We join earlier speakers in commending the Government of the Republic of Ghana, and the AfCFTA Secretariat for hosting this commercial launch.
We thank the Heads of State represented here, as well as the Honourable Ministers, Governors of Central Banks, Bankers, Business Leaders, Afreximbank and PAPSS Board Directors, Ambassadors and Heads of International organisations for sparing the time to join us today.
This strong show of support marks a solid beginning for the commercial opportunities of the PAPSS. Your Excellencies, globally a functioning payment infrastructure underpins international trade. An efficient payment systems unify fragmented markets and supports other trade services such as trade finance.
As trading under the African Continental Free Trade Agreement (AfCFTA) gains momentum, a functioning payment infrastructure that can 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.
This is particularly true because Africa presents a peculiar problem that lends itself to innovative solutions.
There are 42 national currencies on the continent, access to hard currencies required to transact across borders is very limited; current payment arrangements cost the continent about US$5bn annually; and intraregional payments take 2 to 14 days to complete.
With problems, it is no wonder that intra-Africa trade levels are so low! While Afreximbank and its partners are working hard, under the AfCFTA arrangement, to reduce the various impediments to intra-African trade, dealing with the problems of payment remains a key priority.
During my recent tour of a few Southern African countries after the recently concluded Intra-African Trade Fair (IATF) in Durban, a few entrepreneurs who participated in the Fair expressed absolute satisfaction in the entire event.
More importantly, in new deals signed and relationships forged. Aware of the hard currency challenges across Africa, the concern raised with me in country after country was how they would get paid when they ship their orders.
Your Excellencies, why should we require hard currencies for trade between Kenya and Uganda or between Senegal and Guinea?
Why should a trader in Malawi, worry about receiving payments for goods shipped to Kenya?
Why can’t we operate as if every African currency is convertible within Africa?
And why should intra-African payments be routed via third countries outside the continent?
Why should we pay US$5bn annually, more than the nominal GDP of more than 25 African countries, in clearing charges to non-African banks for Africa-to-Africa transactions.
With the Pan-African Payment and Settlement System (PAPSS) we will begin to address these absurdities.
That is why it is a revolutionary and pathbreaking system that will transform Africa’s financial landscape and promote continental trade and financial integration.
Today’s commercial launch of PAPSS is a watershed moment for the continent and represents another step towards restoring the dignity of Africans.
Beyond making payments more efficient, the Pan-African payment and Settlement System will begin to strengthen African currencies and enhance their regional convertibility.
PAPSS will also serve as an added tool for monetary policy management for most African countries. This is why, at the outset, Afreximbank plans to back the System with a US$3bn overdraft facility to African central banks and other direct participants.
This facility will avail resources to the central banks for settlements and clearing while bringing stability and predictability to external payment flows and current account management.
Among commercial banks, the Bank, through its Afreximbank Trade Facilitation Programme (AFTRAF), is forging relationships with at least 500 African banks providing them with LC confirmation lines we intend to grow to US$8bn from over US$2bn today.
This will represent the largest banking relationship ever forged by any financial institution on the continent.
Presently the Bank has onboarded over 480 banks. Your Excellencies, distinguished Ladies and Gentlemen, I invite you to pause for a moment and think of the possibilities we are opening today. Permit me to highlight a few.
- We are making it possible for a South African chocolate manufacturer to buy Ghanaian cocoa butter by simply using Rands to buy Cedis;
- We have created a platform for a Zambian farmer in a rural village to download his or her favourite Nollywood movie by simply paying in Zambian Kwacha while the movie-maker in Nigeria receives the Naira;
- We have opened the opportunity for a Senegalese to buy critical pharmaceuticals from Egypt by simply using the CFA Franc to buy Egyptian Pound;
- It would now be possible for an African EPC contractor to price infrastructure projects in the currency of the project owners, making them more competitive;
- With the PAPSS, a Gambian can pay for holidays in the Seychelles using Gambian Dalasi; and African Airlines will have the opportunity to convert their monies stuck in various African countries into their national currencies:
- PAPSS will make it possible for a Tunisian to buy shares in the Mauritius Stock Exchange using the Tunisian Dinar. Your excellencies, distinguished Ladies and Gentlemen, in one move,
- We will contribute to strengthening Africa currencies and restore pride in them;
- We will confer advantage to African contractors in participating in infrastructure projects in Africa and reduce the foreign currency burden of the projects in the process;
- We can lend African currencies to other African Countries and book Intra-Regional trade
- We will make intra-African trade most attractive, creating employment;
- We will improve liquidity in our stock exchanges; and
- We will make Africa airlines stronger by improving their liquidity.
In rolling out this System, we recognised that central banks were at different stages of development of their payment infrastructure.
We are therefore helping many central banks to upgrade and improve their systems. We are most pleased to have assisted six central banks in West Africa and initiated the necessary processes of extending this support to other sub-regions.
As we expand to the rest of the continent, the Bank will be working with the African Development Bank and others to enable all necessary upgrades.
Your Excellencies, I would like to put on record the important role played by Central Banks, particularly those in West Africa Monetary Zone in making PAPSS a reality.
As co-creatives, their guidance and expert advice helped in finetuning the System to optimally serve the intended purpose.
We thank the Governors, the members of the PAPSS Governing Council for their tremendous support. Policy support from institutions such as the Association of African Central Banks (AACB) and Technical support from system designers and developers are most appreciated.
The members of the Board of Directors of Afreximbank, members of PAPSS Management Board, and Members of PAPSS Membership Mobilisation Working Group deserve our full appreciation.
And so does the former and current Director General of the West African Monetary Institute. e would also like to put on record the leadership roles played by H.E. President Fattah El-Sisi, the President of the Arab Republic of Egypt, under whose Chairmanship of the AU the PAPSS was launched as an AU project, and to His Excellency, Nana Addo Dan Kwa Akufo Addo, the AU champion of financial institutions for his unflinching support that accelerated the PAPSS development work.
His Excellency, Mohamed Issoufou, former President of Niger played a pivotal role in pushing forward the AfCFTA and PAPSS, we are very grateful.
The support of His Excellency Moussa Faki Mahamat, Chair of the AU Commission, His Excellency, Ambassador Muchanga, AU Commissioner for Economic Development, Trade, Industry and Mining; and His Excellency, Mr. Wamkele Mene, Secretary-General of the AfCFTA Secretariat, were critical in leveraging continental policy support for the PAPSS.
The able team at the AfCFTA Secretariat worked and continues to work tirelessly with Afreximbank, PAPSS and West African Monetary Institute teams on this project.
Today, we are witnessing the fruit of that effort. The Management of PAPSS led by Messrs Mike Ogbalu and John Bosco Sebabi deserve special mention for their accomplishments within a short time.
While I congratulate all of us on this historic achievement, we are not unmindful that this just the beginning.
We are fully aware of the hard road we still have to travel to achieve continental coverage. We will be counting on your continued support while remain resolute and focused, convinced that this is a battle we must win for our people, no matter the obstacles we must overcome Thank you for your kind attention.
Prof Benedict Oramah is Afreximbank’s president and chairman of the Board of Directors. He made the presentation during the commercial launch of PAPSS last week.