Various African banknotes.

New Payment System Could Boost Intra-African Trade by Billions of Dollars

The new pan-African payment settlement system can reduce transaction times to seconds and lower costs by billions of dollars, removing a key barrier to intra-African trade.

February 14, 2022

A new instant payment initiative, the pan-African payment settlement system (PAPSS), is set to facilitate cross-border trade in a fragmented continent with high transaction costs that have hampered African growth.

PAPSS, developed by the African Continental Free Trade Area (AfCFTA) Secretariat, the African Export-Import Bank, and the African Union, launched for commercial use on January 13 following a pilot project in the West African Monetary Zone. The financial platform supports three core functions: instant payments, pre-funding, and net settlement. PAPSS also helps harmonize the legal and regulatory environment across the continent and supports AfCFTA’s goal of promoting intra-African trade, which is low compared to other regions of the world.

Historically, settlements across Africa have required a third currency such as dollars, euros, or pounds—some 48% of all bank payments involved foreign lenders. Using third-party currencies not only delays transactions, but is expensive. Currency convertibility costs Africa as much as USD 5 billion annually, according to AfCFTA Secretary-General Wamkele Mene.

PAPSS Chief Executive Mike Ogbalu III was cited by as saying: “The commercial launch marks a significant milestone in connecting African markets seamlessly. It will provide a fresh impetus for businesses to scale more easily across Africa and is likely to save the continent more than USD 5 billion in transactions costs every year.”

Fewer Risks, Greater Integration

PAPSS enables the efficient flow of money securely across African borders, minimizing risk and contributing to financial integration across regions. Participants no longer need to convert local currencies into exchanged currencies, and overnight settlements allow central banks to reduce their foreign currency holdings. The technology checks for compliance, legality, and punishments in real time. The system can reduce transaction times to seconds, removing a key barrier to intra-African e-commerce, services, and goods trade growth.

The system will revamp the payments infrastructure by creating a cross-border network that facilitates direct transactions among the more than 40 currencies used across the continent. Consumers will be able to make payments in one local currency while sellers are paid in their own currency. This means a buyer in Ghana can pay in cedis while a seller in South Africa receives the payment in rand.

“For a trader across the border, it means the [individual] will be able to get goods very quickly, as well as trade them and recover funds very quickly, which will increase the velocity of money and ensures that businesses move quickly,” PAPSS Deputy CEO John Bosco Sebabi told

Key Role for Central Banks

While the platform can support both low- and high-value transactions, individual central banks have the discretion to set transaction limits. This has raised some concerns about the lack of a standardized framework across countries, without which critics say the initiative will not be effective.

Sebabi told that PAPSS would not interfere in national jurisdictional rules set by central banks, though he agreed that standards are important, and a minimum is required to ensure the payments system can run smoothly. PAPSS, the Association of African Central Banks, and the AfCFTA Secretariat will work together to harmonize some standards and rules to facilitate the continent-wide implementation of the project. Central bank participation is key to the success of PAPSS. The goal is to have at least two central banks in each African region joining the platform, Sebabi said.

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