Afreximbank, AfCFTA secretariat host commercial launch of pan-African payment system

PAPSS

PAPSS

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The African Export-Import Bank (Afreximbank) and the Africa Continental Free Trade Area (AfCFTA) secretariat, Thursday in Accra, Ghana, hosted a commercial launch of the Pan-African Payment and Settlement System (PAPSS), a cross-border financial market infrastructure enabling payment transactions across African markets.

By Stephen Enoch

PAPSS seeks to streamline the complexities and expenditures of cross-border payments in Africa thus payments under the platform are initiated and settled in local currencies of initiators and beneficiaries, effectively eliminating the need for third party currencies so as to boost intra-African trade under the African Continental Free Trade Area (AfCFTA). It was developed through a collaborative effort of Afreximbank, the AfCFTA secretariat and central banks of countries of the West African Monetary Zone (WAMZ).

Prof Benedict Oramah, president of Afreximbank, described PAPSS as a ‘highly transformational integration instrument’, noting that asides improving payment flow and reducing transactional cost, the payment platform was an innovative solution to the high demand for hard currencies for cross-border trade between African markets; which currently costs the continent about $5bn annually.

“Beyond making payments more efficient, PAPSS will begin to strengthen African currencies and enhance their regional convertibility and will also serve as a tool for monetary policy management for most African countries which is why Afreximbank plans to back up the system with a $3bn overdraft facility to African central banks and other direct participants,” said the Afreximbank president.

Wamkele Mene, secretary general of the AFCFTA, described the commercial launch of PAPSS as a crucial milestone in Africa’s integration drive, one that would reduce the continent’s reliance on third currencies and significantly boost intra-African trade. He added that the payment platform would help in actualizing the vision of the AfCFTA and accordingly, pledged the AfCFTA secretariat’s commitment to ensure payment systems enabling intra-African trade such as PAPSS were legally embedded within the architecture of the African Union.

“The strong support of our Heads of States cannot be overemphasized and in the process of implementing PAPSS, we expect that our heads of states will provide strong leadership and political impetus to ensure that PAPSS is implemented to its full extent. The Covid-19 pandemic resulted in border closures and restrictions which amounted to logistical difficulties and disruptions in supply chains. In the midst of this, our heads of state took the bold decision that Africa must commence trading under the AfCFTA,” Mene recalled.

Mike Ogbalu III, CEO of PAPSS said although varied payment systems had overtime existed in Africa at national and sub-regional levels, they lacked interoperability and accordingly, the potential to stimulate intra-African trade, which necessitated the creation of PAPSS as an Africa-wide payment infrastructure to hasten the pace of the continent’s economic growth.

“The system has been tested and proven to work, using local African currencies. It started in 2016 with various engagements to understand the existing regional payment systems, their pros and cons and how best to approach the establishment of an Africa-wide payment infrastructure. Engagement took place with Regional Economic Communities (RECs) such as COMESA, EAC and SADC as well as major payment system operators in Africa.

“The PAPSS pilot in the West African Monetary Zone (WAMZ) central banks has been completed and all 6 central banks have tested and gone through the trial of operations and in August 2021, all the central banks became live on the system and have since then continued sending live transactions across the WAMZ region and subsequently, we have signed up 12 commercial banks and four switches,” Mr Ogbalu said.

The PAPSS CEO maintained that engagement with other African central banks had commenced in earnest. “Every bank joining the PAPSS gains access to trade returns of thousands of end users already connected and through our growing community of financial institutions, and every central bank joining the system extends our collective reach to millions more, with the resultant positive impact on intra-African trade,” Mr Ogbalu assured.

Aliko Dangote, the president of Dangote Group cum Africa’s richest man, who spoke at the PAPSS commercial launch through the group managing director of Dangote Industries, Olakunle Alake, extoled Afreximbank’s efforts of easing operations of multinationals and conglomerates such as the Dangote Group through the PAPPS, which he described as “simple, low-cost and risk controlled payment clearing and settlement system.”

“This important benefit would not have come at a better time than now when global trade has been characterized with logistic challenges amid the Coronavirus pandemic. Given the overarching benefits derivable from PAPSS and its importance in fostering intra-African trade, I urge regulators and other stakeholders to look out for any surge in operational challenges and ensure a successful implementation of PAPSS,” Mr Alake called.

Thursday’s commercial launch of PAPSS which was attended by high-profile African leaders, governors of central banks and CEOs of commercial banks, was aimed at making the payment platform available for use by the African public. It followed a successful pilot phase in the six countries of the WAMZ region, namely Nigeria, Ghana, Liberia, Sierra Leone, The Gambia and Guinea. Afreximbank and AfCFTA Secretariat assured PAPSS would soon be rolled out across other AU member states as a means of processing, clearing and settling of intra-African trade and commerce payments.