Yesterday January 13, 2022, a historic event happened in the capital of Ghana, Accra. The Pan-African Payment and Settlement System (PAPSS), a platform expected to save Africa more than $5 billion annually in payment transaction costs, while it plays an increasingly significant role in accelerating the continent’s transactions underpinning the operationalisation of the AfCFTA was launched.
PAPSS, developed by the African Export-Import Bank (Afreximbank), and established in partnership with the Africa Continental Free Trade Area (AfCFTA) Secretariat is expected to boost intra-African trade by transforming and facilitating payment, clearing and settlement for cross-border trade across Africa.
Commending the partners at the launch, the Vice President of Ghana, Dr Mahamudu Bawumia, speaking on behalf of the President, Nana Akufo-Addo said PAPSS is 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.
“This launch is a result of many months of hard work, resolve and commitment towards achieving set objectives for the growth of the continent in trade. 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,” he said.
He also indicated 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.
In his remarks, Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, said: “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 respect of 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.”
The AfCFTA Secretary-General, Wamkele Mene appreciated the role and commitment of African leaders through the African Union, and noted 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.
The CEO of PAPSS, Mike Ogbalu, in his remarks, 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 payment 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,” he said.
What PAPSS would achieve
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, which has been successfully piloted in the six countries of the West African Monetary Zone, delivers multiple advantages and efficiencies to intra-African trade payments, including:
- Reducing the cost, duration and time variability of cross-border payments across Africa;
- Decreasing the liquidity requirements of commercial banks for cross-border payments; and
- Strengthening 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.