The recently launched new Pan-African Payments and Settlement System aims to reduce cross-border payment fees and transaction delays across the continent, and eventually help businesses grow.
WHETHER IT’S A WORKING MIGRANT TRANSFERRING MONEY TO FAMILY OR A MERCHANT MAKING A CROSS-BORDER PAYMENT, SENDING MONEY TO AFRICA HAS BEEN ESSENTIALLY COSTLY AND SLOW. But a new pan-African enterprise could change at once to better reduce reliance on foreign currency.
“It is expected to save the continent up to $5 billion a year, the amount that currency convertibility is costing Africa,” Benedict Oramah, Chairman of Afreximbank, said of the initiative. January in Accra, Ghana.
The Pan African Payments and Settlement System (PAPSS), a centralized payment and settlement infrastructure for intra-African trade and commercial payments developed with Afreximbank and the African Continental Free Trade Area (AfCFTA) Secretariat, is designed to enable rapid cross-border transfer. payments, reducing the dependence on the US dollar, the pound sterling and the delays incurred by these currencies. This follows a successful trial in the West African monetary zone (Nigeria, Ghana, Liberia, Sierra Leone, Gambia and Guinea).
Currently, of the 42 currencies on the continent, few have value outside their country. The AfCFTA is trying to bring together the 54 African countries to trade in a single market with liberalized tariffs and the
removal of non-tariff barriers to cross-border trade.
Thirty-nine countries are on board so far, said AfCFTA General Secretary Wamkele Mene.
“The PAPSS is designed to be a fundamental rail linking African markets together and allowing individuals, businesses and governments on the continent to trade with each other seamlessly.
PAPSS will give new impetus to businesses to move more easily across Africa, essentially breaking down the borders that have balkanized us and robbed us of our economic prosperity for so long,” said Mike Ogablu III, CEO of PAPSS, during the operational deployment of PAPSS on September 28th.
The PAPSS claims that it aims to ease the transactional burden on consumers. Previously, local currencies had to be converted into hard currency, with transfers taking days. PAPSS attests that compliance, legal and sanction checks are performed instantly and near-instant payments are processed in 120 seconds.
Dominating the news for the past two years, cryptocurrency is the new lexicon of money. How would the crypto world view this? Speaking to FORBES AFRICA, Blockonomics, a decentralized Bitcoin payment solution, explains how crypto and initiatives like PAPSS can work for greater financial freedom for Africa.
Blockonomics tries to solve the problem of long waits and fees in a different direction.
Its VP of Growth, Frederick Coleman, says the decentralized nature of the crypto exchange is just another avenue for Africans to use, as Bitcoin transcends borders.
“In conjunction, cryptocurrency and centralized initiatives like PAPSS can work, expanding people’s rights and horizons. Initiatives like the PAPSS are necessary; it doesn’t matter where it comes from, as long as people benefit from it,” Coleman says.
Forbes reports that mobile money transactions in Africa amounted to nearly $500 billion during the pandemic.
Mobile remittances in Africa are likely to be most positively impacted by PAPSS. In the past, Africans had to find alternatives to traditional banks to make cross-border payments to friends and family.
Cash is still king on the continent. Oliver O’Brien, executive director of strategy and business development at Mukuru, a money transfer provider in Africa, said PAPSS will enable access to online networks for cash-dependent customers. O’Brien says it can help people move from the informal economy to the formal digital economy.
“Mukuru is very excited about the launch of PAPSS. Systems like these that offer fast and affordable bank-to-bank (digital) cross-border transactions are disrupting slow and expensive international payment networks that typically only process high-value bank transfers,” says O’Brien.
US mobile payments company Boku, which has a strong presence in Africa, agrees.
“The creation of PAPSS is undoubtedly a good thing for everyone involved in the African economy, including payment providers. Boku is in favor of anything that allows funds to flow more smoothly, especially across borders,” says Josh Gosliner, Marketing and Communications Manager at Boku.
Prospects for a more unified African economy could begin with PAPSS, and time will tell if that means greater financial inclusion for traders, migrants and the majority of informal entrepreneurs thriving in the bowels of Africa.
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