Effective implementation of the Pan African Payments and Settlement System (PAPSS) could move the continent closer to realising a common currency.
This, according to Atta Yeboah-Gyan – an executive at Fidelity Bank, is because PAPSS will eliminate many of the challenges with payments within the continent; the demand for foreign currencies, speed of transaction processing and the cost of currency conversion.
“The coming into effect of the PAPSS platform is going to make a compelling case for countries in Africa to begin fast-tracking the aspiration toward having a single currency,” he said.
When this happens, he said, all transactions will be settled in that currency, and “we are going to have the value of our currencies evident, because it will reflect the value of goods we produce and not because there is excessive demand for any hard currency. So, the value of a common currency would be the reflection of value for the goods we produce rather than an interplay of demand and supply”.
Mr. Yeboah-Gyan spoke at the second edition of The Money Summit (TMS) in Accra, organised by the Business and Financial Times (B&FT) in partnership with Bank of Ghana (BoG) and with support from Hubtel, Letshego, AZA Finance, FBNBank, Ghana Stock Exchange (GSE) and Securities and Exchange Commission (SEC). It was themed Africa’s Economic Growth- facilitating Investment, payments and Settlement Systems.
The continent currently spends over US$5billion as payment transaction cost yearly, due to the lack of common payment platform and currency. However, he said the PAPSS platform will permit settlement on net basis – which means demand for hard currencies, like the dollar, will reduce. This will impact the stabilisation of currencies on the continent. A stable currency will then help most economies within the continent to meet certain criteria for a common currency.
Meanwhile, he said, strong political will and sound monetary framework from member-states are of more importance to achieving the single currency aspiration that has eluded the continent for many decades. “It behoves African governments and monetary policy regulatory authorities to begin managing our economies well, stabilise the political environment and get the convergence criteria in place, so we can issue common currencies that we can trade in,” he added.
PAPSS, launched earlier this year, will serve as a continent-wide platform for processing, clearing and settling intra-African transactions and payments; and is seen as a major step toward boosting cross-border trade under the African Continental Free Trade Area.