A new continent-wide payment system that seeks to strengthen African fiat currencies, as well as to boost intra-Africa trade, recently went live. Discussions about onboarding more African countries are still ongoing.
SMEs the Main Beneficiaries of the Payment System
A new African payment system, the Pan-African Payment and Settlement System (PAPSS), recently went live in Ghana, setting the stage for its rollout across the continent. The payment system seeks to strengthen African fiat currencies as well as to boost intra-Africa trade.
The payment system — the brainchild of the African Union, Afreximbank and AfCFTA — is an attempt to reduce African countries’ dependence on the U.S. dollar. However, as a Techcabal report notes, only seven countries — all members of the West African Monetary Zone (WAMZ) — were part of the pilot phase.
Meanwhile, the same report suggests that the continent’s small-to-medium enterprises (SMEs) could be the main beneficiaries of the PAPSS system. It adds that as more start to use the PAPSS system, an estimated $5 billion in savings on clearance and transactional costs will be realized annually.
These savings, in turn, will enable the SMEs to scale as Mike Ogbalu, the CEO of PAPSS, explains.
“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 $5 billion in transactions costs every year,” noted Ogbalu.
Enhanced Cross-Border Commerce
Just like Ogbalu, who insists that the new payment system could help the continent to save billions of dollars, Pamela Coke-Hamilton, an executive director at the International Trade Centre, claims the new payment system will help the African continent reduce barriers to trade that are faced by SMEs. The executive director explained:
ITC is preparing enterprises to benefit from PAPSS, creating new opportunities for growth in cross-border e-commerce and sustainable trade.
The Techcabal report suggests that discussions about onboarding other African central banks are still ongoing. The report also states that through the new payment system, Africa has moved closer to having a single currency for the entire continent.
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