The Pan-African Payment and Settlement System of the Africa Export-Import Bank now includes 11 African central banks, with the rest expected to join by next year.
According to CNBC Africa, the deputy CEO of PAPSS, John Bosco Sebabi, disclosed the details.
Afreximbank estimated that over 80% of payments made inside Africa are presently made through Europe or the US.
Up to $5 billion in fees and compliance costs are predicted for this approach. It should be highlighted that PAPSS, an initiative in partnership with the African Union, will provide a new choice where users can interact in their own currencies, doing away with the need for a third-party currency like the US dollar.
The primary players in the system include commercial banks, Fintechs, payment service providers, central banks acting as clearinghouses and regulators, and their business clients across the area.
“Trade is facilitated by easy payment processing, so trade growth is contingent upon improvements in payment efficiency.
“The ability to ease this is the problem, not the removal of the US dollar. PAPSS, for instance, will debit accounts in Zimbabwean dollars, credit accounts in Rwandan francs, and the central banks will settle the difference in any currency that is most convenient for the respective users.”
“This is going to happen very, very soon. 81 commercial banks are participating, the majority of them are from the West African Monetary Zone.”
The Africa Continental Free Trade Agreement was launched by the African Union in January 2021, and it was widely embraced right away.
With this action, the largest and most recent trading bloc in history was formed, creating a single market for the 1.3 billion people living on the continent, with a combined GDP of $3.4 trillion.
At roughly 18%, Africa currently has the lowest rates of intraregional commerce globally, much lower than those of Europe at 70% and Asia at 59%.
In the course of the conversation, Sebabi mentioned that transactions can be finished in as little as 7 to 10 seconds, and a maximum of 120 seconds, which is encouraging for the growth of trade across African nations.