The implementation of a centralised payment and settlement infrastructure is expected to contribute in addressing the low intra-African trade, particularly with the integration of banks and fintechs, Country Manager of AZA Finance, Nana Yaw Owusu-Banahene, has said.
Intra‐African trade stands at around 10 percent compared to 60 percent, 40 percent, 30 percent intra‐regional trade that has been achieved by Europe, North America and ASEAN respectively, according to the AU’s ‘Action plan for boosting intra‐African trade’.
Speaking during the 1st plenary session of the ‘Money Summit’ organised by the Business and Financial Times, Mr. Owusu-Banahene recognised that a major factor in the low level of intra‐African trade has been the cost of doing business across the continent.
“The cost of forex alone increases the prices of goods and services that we purchase in Africa. So, matching cedis to naira – through The Pan-African Payments and Settlement System (PAPSS) – is going to be a real game-changer,” he stated.
It is because of this that he observed the integration of central banks – and also the incorporation of all existing fintechs on the continent – by PAPSS will spur the effort to address intra-Africa trade development.
PAPSS, developed in collaboration with the African Export-Import Bank (Afreximbank), is envisaged to facilitate payments as well as formalise some of the unrecorded trade due to the prevalence of informal cross-border trade in Africa.
It is expected to be the most important component of the African Continental Free Trade Area (AfCFTA) since it promises to save businesses across the continent some US$5billion annually in transaction costs, as trade among African countries is projected to hit 22 percent by 2040 – raking in US$70billion of additional value.
It will also provide an alternative to current high-cost and lengthy correspondent banking relationships to facilitate trade and other economic activities among African countries through a simple, low-cost and risk-controlled payment clearing and settlement system.
The benefits of PAPPSS for cross-border payments include cost reduction; reduction in duration and time variability; decreasing liquidity requirements of commercial banks; decreasing liquidity requirements of central banks for settlement as well as its payments; and strengthening central banks’ oversight of cross-border payment systems.
It is against this background that the Country Manager of AZA Finance is confident – with PAPSS leading these major changes – intra-African trade issues will speedily be resolved.
Head of Product and Business Development, Monica Oraro – also speaking about PAPSS’ autonomy from external influence during the 1st plenary of the Money Summit, indicated that the structure of PAPSS guarantees its independence to operate.
On her part, the Managing Partner at Koranteng & Koranteng Legal Advisors, Afua Adubea Koranteng, said the shareholding structure of Afreximbank – referencing the non-African entities with about 20 percent stake – could perhaps have some potential influence on the work of PAPSS.
The 1st plenary session focused on Africa’s Payment and Settlement System; Opportunities, Challenges and the Way Forward.
The Money Summit was held in partnership with the Bank of Ghana with support from Hubtel, Letshego, AZA Finance, FBN Bank, Fidelity Bank, Ghana Stock Exchange (GSE) and the Securities and Exchange Commission (SEC).
It was under the theme Africa’s Economic Growth – Facilitating Investment, Payments and Settlement Systems.
The conference sought to build on the maiden edition’s resounding success by once again bringing together the best financial minds to deliberate on issues relevant to trade facilitation on the continent and the development of its financial systems, particularly given the recently launched Pan-African Payment and Settlement System (PAPSS).