AfCFTA Rails: Digital Payments Infrastructure

Secretary General of the African Continental Free Trade Agreement (AfCFTA), Wamkele Mene

Two months after the AfCFTA start of trading ceremony, the potential and possibilities of the largest trade agreement since creation of the World Trade Organisation (WTO) in 1994 continue to inspire equal parts of cautious optimism and boundless hope.

The promise of AfCFTA is great. A continental trade bloc of 1.3 billion people; a combined GDP of US$3.4trillion; and the potential to lift 30 million people out of extreme poverty are highly desirable and needed goals, especially in light of the reversal of progress in poverty reduction and economic turmoil COVID-19 has brought, is bringing, and will bring.

While Africa may have been spared an anticipated devastation by the pandemic thus far, it has not evaded the economic brunt – and will perhaps have the hardest time recovering economically as the usual development partners and aid sources which would come to its aid grapple with economic stabilisation and recovery in their own countries.  Africa will have to pull itself up – and AfCFTA provides a viable way to do so.

To give AfCFTA the best chance of achieving this potential, however, there are critical trade rails that have to be put in place to facilitate intra-African trade. And this article discusses one of these critical rails – the payment rails.

So, how do we ensure seamless payments across Africa in support of trade? In terms of technology and collective business capacity, Payments across the continent could probably be made seamless today. The technology and market are there. What is required now is governments (individually and collectively) building a collective payments ecosystem that facilitates seamless payments, prioritising the following considerations:

Regulatory Landscape

We need to put as much effort as we are putting into getting the operational blocks of the agreement and secretariat going into getting the African payments regulatory landscape similarly integrated. The current African Payments landscape has significant disparities and fragmentations which are untenable.

To effectively facilitate seamless payments, the regulatory landscape for cross-border payments must be clear, enabling and robust. We must avoid the creation of regulatory ambiguity, implicitly lax regimes/havens, and other undesirable consequences.

For instance, currently, not every country has a licencing regime in place for payment service providers (PSP) or FinTechs. Current cross-border Payment needs to reflect the digital transformation we have seen in national payment systems. In order to continue providing the same efficiency and convenience benefits Fintech innovation has produced in individual countries, we need to move quickly and converge as a continent on this. Countries such as Ghana, Nigeria, Zambia, and Kenya can provide some leadership with their experience as the discussions and negotiations are finalised in this regard.

Regional Payment Settlement System

While the Pan-African Payment Settlement System (PAPSS) has seen significant strides being made toward its operationalisation, its vitality makes it impossible to leave out of this discussion. Implementing PAPSS will free African countries from the current reliance on hard currencies (such as the US dollar, euro, British pound sterling) for effecting intra-Africa trade payments.

This involvement of hard currencies, in addition to increasing time taken to complete transactions, accounts for more than US$5bn in cross-border payment transaction costs annually. With PAPSS, African countries will settle each other in respective local currencies, with only the outstanding trade deficit to be settled in hard currency – leading to significant transaction cost and time savings.

The path to fully operationalising PAPSS is bound to be a challenging one. Fortunately, we have existing sub-regional payment settlements such as the Regional Payment and settlement System (REPSS) of the Common Market for Eastern and Southern Africa between the central banks of Egypt, Congo, Zambia, Rwanda, Mauritius, Kenya, Malawi, Swaziland, and Uganda; and can leverage experiences and best practices gleaned from these systems. Speedy action must be taken to bring countries which are not party to sub-regional systems (and whose domestic systems and capacities will need to be buoyed-up to be able to plug in to the PAPSS) in line as soon as possible.

Passporting Capability

This follows from the integration of payment systems, licencing regimes and regulatory requirements. With passporting, a Payment service provider that is duly licenced in one jurisdiction within the AfCFTA may be permitted to carry on certain agreed permitted activities in another AfCFTA jurisdiction by setting up a branch and/or agents in the second jurisdiction.

To ensure this permission does not create undesired regulatory gaps and uncertainties, the scope of this permission is well-defined and agreed by party-countries and their respective central banks. Further, it does not preclude additional local regulatory requirements, and certain services may be strictly reserved for the local regulator to oversee. Countries may also, if need be, establish operational thresholds (e.g. transaction value) for more stringent local regulation under agreed passporting permissions.

While paying attention to competition, individual country realities and local content laws, we need to have this in place to support the building and enjoyment of economies of scale in Payment service provision; which will allow for greater value-addition in payment services, all other things being equal, at a reduced cost to the general AfCFTA public.

Digitisation of Government Services and Payments

As we operationalise AfCFTA, we have the opportunity to create a trade value chain that is digital from inception and incorporates digital capabilities and considerations into every facet of the value chain right from set-up. One extremely ripe area for digitisation along this value chain is government services and payments. Various government trade formalities and statutory fees and payments remain largely analogue, despite serious inefficiencies. We cannot maintain these systems if we truly want to scale the movement of people, goods, and money across Africa.

We already have some good examples like the GHANA.GOV project – a digital service and revenue collection platform created to provide a single point of access to government of Ghana services for the public sector; and CEPICI in Cote d’Ivoire, which takes care of everything to do with company set-up formalities and investment.

For specific trade applications, we have the example of Tanzania Customs Integrated System (TANCIS), a paperless system for managing the payment of Customs duties and mitigating fraud. TANCIS employs an escrow system to moderate the exploitation of transit provisions to evade port duties.

Under TANCIS, all goods arriving at Tanzanian ports are registered on the system and the applicable duty paid into an escrow account. If registered goods do not cross a border within 30 days, the reserved duty is paid to the Tanzanian authorities. When registered goods cross a border as indicated, a simple swipe of the barcode on registered goods as they pass from Tanzania into the importing country reverts duties from the escrow account to the rightful importing country. This occurs automatically without further exchange of documents.

TANCIS has not only significantly reduced the opportunities for fraud at Tanzanian ports and borders, but has also created an incentive for Tanzania’s neighbours to better-monitor goods entering their countries so that they can rightfully claim duties due them.


The promise of AfCFTA remains very viable. However, we need to make sure that we put systems in place which will enable the continent to reap the fruit of this momentous integration. Where payments are concerned, taking care of the considerations raised regarding regulatory landscape, domestication of regional settlements, institution of passporting capability and increased digitisation of government services and payments will set us on the best possible path for success.

By Dr. Augustina Odame, Chamber of Technology

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