The introduction of the Pan-African Payment and Settlement System (PAPSS) which is a platform that will domesticate intra-regional payments within Africa will save the continent more than $5 billion in payment transaction costs per annum.
This will also formalise a significant proportion of the estimated $50 billion of informal intra-African trade, and above all, contribute in boosting intra-African trade, the President and Chairman of Afreximbank, Professor Benedict Oramah has indicated.
The Pan African Payment and Settlement System will enable intra-African trade to be paid for in African currencies. With that system, intra-African trade will be localized in terms of currency, reduce transaction costs in intra-regional payments and hopefully formalise a significant proportion of the 40-50 billion U.S. dollars in informal intra-African trade. It is also believed that the system will in 3 – 4 years add more than 40 billion U.S. dollars to annual intra-African trade flows.
By making it possible for Africans to pay for intra-regional trade in their local currencies, “the digital platform will deal with a fatal blow to the underdevelopment of Africa caused by defragmentation of its economies with the primary objective to reduce significantly the foreign currency content of intra-African trade payments.
According to Prof Oramah, no people have achieved meaningful development when their economic progress depends on others. “Making cross-border payments easier, cheaper and safer is an obvious critical step in creating an Africa we want,” he stressed.
He has therefore argued that, in the renewed focus on industrial and value-chain development across the continent in trying to boost trade and investment, it is imperative that African countries address the economic costs of effecting so many payments in scarce foreign exchange.
The Afreximbank through its various technology-driven initiatives is keen to work to reduce key constraints to intra-African trade and investments.
The Bank is emphasizing lack of regional payment infrastructure that raises transactions costs in Intra-African trade, improving access to trade information, creating the infrastructure that will enable seamless conduct of customer due diligence on African counterparties as well as improving the efficiency of transporting goods across Africa’s numerous land borders.
“We now expect that an Ivorian can pay for his holidays in Seychelles in CFA Franc; that EgyptAir can sell its tickets to a Ghanaian in Ghanaian Cedi in confidence that it will receive Egyptian pounds. We expect this platform to be transformative of the way Africa trades with itself”, Professor Oramah stresses.
The same way Professor Oramah is hopeful that a small trader in Uganda can buy South African wine, paid for in Ugandan Shilling, while sitting in his small shop in Kampala while the South African exporter receives payment in Rand in the comfort of his or her shop in Cape Town.
Afreximbank has also completed the development of an Africa Customer Due Diligence Repository Platform (MANSA) which will make it possible for KYC (Know your customer) and AML (Anti Money Laundry) checks to be quickly done on counterparties thereby reducing risk perceptions that hinder trade and financial flows into Africa.
The population of the platform is underway and with the help of Central Bank of Egypt, extensive training of African Central Banks and commercial banks is ongoing. It is expected that by the end of 2020, the platform will hold over 500,000 data sets making it the largest repository of Customer Due Diligence Information on African entities globally.
Afreximbank has therefore set itself the goal of granting trade finance and trade services lines amounting to 8 billion U.S. dollars to 500 African banks spread across the continent, by the end of 2021. About 320 banks have so far been on-boarded into the Programme and work is continuing.