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The Africa Export-Import Bank has incorporated 11 African central banks into its leading Pan-African Payment and Settlement System (PAPSS)

11 African central banks join Afreximbank's continental payment system, PAPSS | Pulselive Kenya

Adekunle Agbetiloye

The Africa Export-Import Bank has incorporated 11 African central banks into its leading Pan-African Payment and Settlement System (PAPSS) and anticipates that the remaining central banks will join by next year, marking a significant milestone in their efforts to reduce expenses and streamline trade within the region.

PAPSS, a collaboration with the African Union, offers an alternative in which participants can conduct transactions in their currencies, eliminating the necessity for a third-party currency such as the U.S. dollar.

“Trade goes well where payments can be made easily, and this is why we can only see trade pick up if we see improvement in efficient payments,” John Bosco Sebabi, PAPSS deputy CEO stated in an interview with CNBC.

Afreximbank estimates that more than 80 per cent of intra-African payments currently pass through either European or U.S. channels, incurring costs of up to $5 billion in fees and compliance expenses.

The primary participants in the PAPSS' system are central banks, which will serve as regulators and clearance agents, commercial banks, fintech companies, payment service providers, and their customers, including businesses operating throughout the region.

“The issue here is not the exclusion of the U.S dollar but to be able to ease this. For those in Zimbabwe or Rwanda, for example, PAPSS will debit their accounts in Zim dollars, credit their accounts in Rwanda francs and then the central banks work it out in any currency convenient to them,” Sebabi said.

The AfCFTA, which unites the 55 members of the African Union (AU) and eight Regional Economic Communities (RECs), is&nbsp;<a href="https://africa.businessinsider.com/local/lifestyle/5-important-things-to-know-about-the-african-continental-free-trade-area-agreement/ped1sqv">the largest free trade area in the world</a>. It has an overarching goal of establishing a single continental market with a combined GDP of around US$3.4 trillion and a population of over 1.3 billion.

However, the region currently experiences the world's lowest intra-regional trade volumes, standing at 18 per cent, in stark contrast to Europe's 70 per cent and Asia's 59 per cent. Sebabi expects that PAPSS will rapidly gain momentum to address this disparity.

“This will rollout very, very quickly. We have got 81 commercial banks on board, mostly from the West African monetary zone,” he said.

Southern African participants in the system include Standard Bank, the largest bank on the continent in terms of assets.&nbsp;

According to Sebabi, transactions can be completed within a remarkably short time frame, ranging from as little as 7 to 10 seconds, with a maximum processing time of 120 seconds. This payment system has the potential to significantly enhance intra-African trade relationships.

11 African central banks join Afreximbank's continental payment system, PAPSS

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