It has been forecasted that Africa could save over USD5 billion annually in payment transaction costs through the Pan-African Payment and Settlement System (PAPSS). PAPSS was launched in Ghana on Thursday and is expected to play an increasingly significant role in accelerating the continent’s transactions underpinning the operationalisation of the AfCFTA.
Speakind through his Vice President, Ghana President Nana Akufo-Addo complimented Afreximbank and AfCFTA Secretariat for the establishment of the payment system citing PAPSS as a major leap in releasing the continent from overdependence on external players and factors in achieving a long yearned-for acceleration in intra-continental trade and investment.
“All Central Banks in Africa must now join up and ensure seamless transfer of funds deploying this most practical and important African solution to an African problem,” said President Nana Akufo-Addo.
He commented on the pan African significance of Ghana hosting the event as a harbinger of the hard-won struggle for economic self-determination following the political decolonisation of the continent over 60 years ago.
PAPSS, developed by African Export-Import Bank (Afreximbank), is expected to boost intra-African trade by transforming and facilitating payment, clearing and settlement for cross-border trade across Africa.
“We are eager to build upon the African Continental Free Trade Area’s creation of a single market throughout Africa, and PAPSS provides the state-of-the-art financial market infrastructure connecting African markets to each other thereby enabling instant cross-border payments in respective local African currencies for cross-border trade. Afreximbank as the main Settlement Agent for PAPSS, provides settlement guarantees on the payment system and overdraft facilities to all settlement agents, in partnership with Africa’s participating Central Banks. PAPSS will effectively eliminate Africa’s financial borders, formalise and integrate Africa’s payment systems, and play a major role in facilitating and accelerating the huge AfCFTA-induced growth curve in intra-African trade,” said Prof Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank.
PAPSS CEO Mr Mike Ogbalu emphasized that the payment system is not designed to compete with or replace existing payment systems, but to facilitate the connectivity level that brings all payments systems together into one network that is interoperable, efficient and affordable.
“PAPSS is designed to make our currencies regain value to domesticate intra-Africa payments in this journey towards African prosperity, while providing the superhighway which connects others to reach every part of this continent as we seek to create the Africa that We Want,” said Ogbalu.
According to Afreximbank, PAPSS provides the solution to the disconnected and fragmented nature of payment and settlement systems that have long impeded intra-African trade. Prior to PAPSS, over 80 per cent of African cross-border payment transactions originating from African banks had to be routed offshore for clearing and settlement using international banking relationships. That posed multiple challenges, ranging from payment delays to operational inefficiencies and compliance concerns for the disparate regional payment systems.
PAPSS has been successfully piloted in the six countries of the West African Monetary Zone.
The system is expected to reduce the cost, duration and time variability of cross-border payments across Africa, decrease the liquidity requirements of commercial banks for cross-border payments; and trengthen oversight of cross-border payment systems by central banks.
PAPSS is also set to deliver harmonisation across the continent through its comprehensive legal, regulatory and operational framework comprising standardised rules, formats and governance arrangements, harmonised Know-Your-Customer and Anti-Money Laundering procedures, payment confirmation and settlement finality. A precondition for participation in PAPSS is compliance with its set rules and standards.
The PAPSS launch event was graced by the presence of Olusegun Obasanjo, former President of the Federal Republic of Nigeria and Chairman of the IAFTA Advisory Council, and Mahamadou Issoufou – former President of Republic of Niger who is acknowledged as a champion in driving the establishment of the AfCTA Initiative.
Issoufou lauded the far-reaching vision and determination of African leaders in establishing the world’s largest free trade area. Featuring presentations by Wamkele Mene, Secretary General AfCFTA Secretariat; Godwin Emefiele, Governor, Central Bank of Nigeria and Chairman PAPSS Governing Council, the launch was witnessed by representatives of the Presidents of Egypt and Uganda (and DRC representing Chair of AUC) who proferred their respective congratulations and support for the launch of PAPSS, a potential game-changer in Africa’s economic destiny.
On his part, the AfCFTA Secretary General Wamkele Mene appreciated the role and commitment of the Continent’s Heads of States and Governments through the African Union, saying that their strong political will, continues to be the bedrock of progress towards a full implementation of AfCFTA that has now been strongly boosted with the commercial launch of the PAPSS.