The African Union, African Export-Import Bank (Afreximbank) and AfCFTA have inaugurated the Pan-African Payment and Settlement System (PAPSS), thereby making it available for use by the public.
The News Agency of Nigeria (NAN), reports that PAPSS is a cross-border, financial market infrastructure enabling payment transactions across Africa.
The commercial launch of PAPSS, which took place in Accra, Ghana, virtually and physically, would ensure instant or near-instant transfers of funds between originators in one African country and beneficiaries in another.
Speaking at the event, Mr Mike Ogbalu, CEO of PAPSS, said that the feat was a step forward in the continent’s collective journey towards self-reliance.
“A journey that is leading us to the prosperous Africa of our dreams as espoused in the African Union’s Agenda 2063: the Africa We Want.
“Our progress on this journey has as its guiding lights a clear shared vision and unity of purpose. But this, like every journey also requires critical infrastructure to accelerate the fundamental elements that will underpin a prosperous continent.
“A prosperous continent is a trading continent; a continent that builds and retains wealth from its goods and services.
“Governments, businesses, and individuals consume goods and services which they obtain in exchange for value. The fundamental means by which value is exchanged or traded is through payments.
“The more efficient payment systems are, the higher the velocity of value exchange and consequently, the higher the volume and value of trade and our subsequent prosperity.
According to him, at a continental level, establishing an efficient payment infrastructure will go a long way to eliminate the artificial borders that have divided the continent and robbed us of our shared prosperity.
On some of the benefits of a Pan-Africa payment and settlement system, he said that it would be the enabling infrastructure to spur the growth of intra-African trade and commerce.
“This is with the active participation of central banks, financial institutions, regional economic communities, private sectors, and other stakeholders.
“Payment infrastructure has existed at both national and sub-regional levels for a while.
“These systems, however, lack interoperability, fragmented national and regional payment systems cannot stimulate pan-African economic development and intra-African trade at the pace required to significantly increase the percentage of trade amongst African countries.
“These national and regional payment systems have made a good start, bringing about significant modernisation within their jurisdictions.
“It is paramount that we now integrate all of Africa financially to hasten the pace of economic growth in the continent,’’ Ogbalu said.
Also, Mr Wamkele Mene, Secretary General, AfCFTA Secretariat, affirmed that the pioneering effort at achieving a pan African payments and settlements system would enable Africa to reduce reliance on third currencies.
According to him, it also has the potential to significantly boost intra-Africa trade.
NAN also reports that the PAPSS project 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 payments infrastructure.
Engagements took place with Regional Economic Communities including COMESA, East African Community, and SADC, as well as with all major payment systems operators in Africa.
Furthermore, discussions with the West African Monetary Zone (WAMZ) commenced in 2017 and following successful interactions with them, the Central Bank Governors of the Zone agreed to implement a pilot scheme of the system as a proof of concept.
Systems development commenced as well as development of the regulatory framework including the PAPSS Bye Law, Scheme Rules and Membership Agreements and other establishment structures required for instituting the System.
In 2019, at its 12th Extra Ordinary Summit held in Niamey, Niger on July 7, 2019, the Assembly of the African Union (AU) launched PAPSS and adopted it as a key instrument for the implementation of the African Continental Free Trade Agreement (AfCFTA).
This was a great milestone as PAPSS was endorsed as the required payment system in Africa.
Following this mandate by the African Union, the partners embarked on further system development, and instituted a strong governance structure.
The PAPSS pilot in WAMZ central banks has been completed and all six Central Banks have tested and gone through the trial operations.
In the last week of August 2021, all the Central Banks became live on the system and have since been sending through live transactions across the WAMZ region.
Engagements with other Central Banks in Africa have commenced in earnest and there is focus on regional payment systems to ensure bulk/group connection.
With every bank on boarded to PAPSS, thousands of their clients would be enabled to trade within Africa.
It will enhance transactions in Africa — Ghanaian President Akufo-Addo
Ghana’s President, Nana Akufo-Addo, says the inauguration of the Pan-African Payment and Settlement System (PAPSS) will accelerate transactions in Africa.
Akufo-Addo, was represented by the Vice President Dr Mahamudu Bawumia, at the inauguration of PAPSS in Accra, Ghana.
According to him, the ground-breaking platform will save Africa more than five billion dollars annually in payment transaction costs, while underpinning the operationalisation of the African Continental Free Trade Area (AfCFTA).
He also commended the African Export-Import Bank (Afreximbank) and AfCFTA Secretariat for the establishment of the payment system,
The Ghanaian president also commended the bank for 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.
“This inauguration is a result of many months of hard work, resolve and commitment toward 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 complimented the pan African significance of Ghana hosting the event as an indication of the hard-won struggle for economic self-determination following the political decolonisation of the continent over 60 years ago.
Pan-African payment system to save Africa $5bn annually — AfCFTA
The African Continental Free Trade Area (AfCFTA) Secretariat on its part says the commercial roll-out of the Pan-African Payment & Settlement System (PAPSS) will save Africa up to US$5 billion dollars annually.
Mene said, “The great liberation struggle heroes of our continent over 60 years ago had a vision of an integrated market in Africa are rejoicing today because the dream of an integrated Africa is becoming a reality in our lifetime.
“How fitting it is, therefore, that the commercial launch of the PAPSS is taking place here in Ghana, a country that has always been at the intellectual and philosophical vanguard of Pan-Africanism.
“This project is a pioneering effort at achieving a pan-African payments and settlements system which will enable Africa to reduce reliance on third currencies, and more importantly, it has the potential to significantly boost intra-Africa trade.
“The commercial roll-out of the PAPSS is timely and set to boost intra-Africa trade significantly by making cross-border payments less reliant on third currencies.
“It is set to save the continent up to US$5 billion dollars annually, which is the amount currency convertibility costs Africa.”
Mene explained that the African continent had, in the last two years, borne the effects of the challenges of the COVID-19 pandemic, which led to border closures, restrictions and logistical difficulties that had disrupted trade and economies.
“In the midst of this, our Heads of States took the bold decision to commence trading under the very difficult conditions that were caused by the COVID-19.
“Since the commencement of trading under the AfCFTA on Jan 1, 2021, significant improvements were recorded in other key aspects of the implementation of the agreement,” he said.
Mene added: “They include an increase in the number of AfCFTA State parties from 35 (64 per cent) in December 2020 to 39 (73 per cent) at the end of 2021.
“Improvement in the agreement on the AfCFTA rules of origin from 81.8 per cent to 88.6 per cent.
“Activation and operationalisation of the Dispute Settlement Body (DSB), a key pillar in the successful implementation of the agreement, in April.”
According to the AfCTA Secretary General, the Appellate body was also being constituted.
He also cited the successful hosting of the second edition of the IATF in Durban, South Africa, in November 2021, where a record US$ 42.1 billion trade and trade-related deals were concluded.
“Continuation of preliminary work on the phase II negotiations covering protocols on Intellectual Property, Investment, Competition Policy, Digital Trade (e-commerce), and Women and Youth in Trade.
“All these are a testament to the fact that momentum to implement the AfCFTA Agreement, one of the flagship projects of Agenda 2063, to achieve an integrated, prosperous and peaceful Africa, is on course.
“With the launch of the PAPPS, a critical tool of boosting intra-Africa trade, the implementation of the AfCFTA is well positioned to benefit SMEs, young entrepreneurs and those trading across borders in Africa.
“This is by significantly reducing the cost of trading across borders in Africa,” he said.