Has the AfCFTA surmounted its biggest hurdle by implementing PAPSS?


“Let’s make the African market the market of Africans. Produce in Africa, transform in Africa and consume in Africa. Let’s produce what we need and let’s consume what we produce instead of importing” – Thomas Sankara, former president of Burkina Faso.

In 2020 the World Bank stated that implementing the African Continental Free Trade Area (AfCFTA) had the potential of growing African exports by US$560billion while increasing Africa’s income by US$450billion by 2035. The AfCFTA is a treaty that is going to connect approximately 1.3 billion people across 55 African countries with a combined GDP of US$3.4trillion.

The possibilities that abound with implementation of this treaty are not without their own attendant challenges. Chief among these challenges is creating a common system of payments, given the numerous currencies and payment systems used in the continent’s various economic sectors. To address this challenge, the Pan-African Payment and Settlement System (PAPSS) was created.

Implementation of the Pan-African Payment and Settlement System (PAPSS) by central banks is a significant step toward a successful enactment of the African Continental Free Trade Area (AfCFTA). The Pan-African Payment and Settlement System (PAPSS) is an African Union infrastructure developed in collaboration with the African Export-Import Bank (Afreximbank) to support trading under the AfCFTA.

The Pan-African Payment and Settlement System works in partnership with central banks on the African continent to offer a payment and settlement service to which commercial banks, payment service providers and fintech organisations across the continent can connect as participants. As at March 2023, the Pan-African Payment and Settlement System network consisted of nine central banks, sixty commercial banks and four switches. It will expand further into the five (5) regions of Africa before the end of 2023. All central banks in Africa under the AfCFTA are to sign up by the end of 2024, and all commercial banks by the end of 2025.

However, there are other important challenges which must be tackled for a successful implementation of Pan-African Payment and Settlement System under the AfCFTA. These feature fragmented financial infrastructure, including differences in payment systems, regulatory frameworks and technological capabilities; limited digital penetration and financial inclusion; complex currency conversion and exchange rate risks; regulatory and compliance hurdles; cybersecurity concerns; and integration with existing payment systems. Additionally, there are concerns about some African economies’ lack of competitiveness, which could limit their ability to benefit from increased trade opportunities under AfCFTA.

What is the Pan-African Payment and Settlement System (PAPSS)?
The Pan African Payment and Settlement System (PAPSS) is a payment and settlement platform designed to facilitate intra-African trade and payments by enabling African countries to settle transactions in their local currencies, rather than in foreign currencies like the US dollar (USD), the British pound sterling (GBP) or euro. This is anticipated to lessen the transaction costs and currency risks related with cross-border trade, and promote the use of African currencies in trade settlements. The platform minimises risk and contributes to financial integration across the regions.

Benefits of the Pan-African Payment and Settlement System (PAPSS)

  • Reduction in demand for foreign currency and its attendant benefits

Conceivably, the biggest benefit of AfCFTA on the African banking sector is the Pan-African Payment and Settlement System (PAPSS). The Pan-African Payment and Settlement System can streamline and facilitate trade transactions within the free trade area by providing a secure and efficient payment and settlement system. It enables businesses across Africa to transact seamlessly, reducing barriers and delays associated with cross-border payments.

As a continent-wide platform for processing, clearing and settling intra-African payments, the system is designed to enable individuals, businesses and governments to make instant cross-border payments in the more than 40 different African currencies; thus reducing the need for US dollars (USD), and other hard currencies. This in the long-term will simplify cross-border trade in Africa. Acquiring hard currency is a particular challenge for small and medium-sized enterprises (SMEs).

There are fewer than 55 African currencies because of the two CFA franc zones in Central and Western Africa, which themselves demonstrate that while common currencies are useful, barriers to trade also need to be reduced if trade volumes are to grow. The hunger for non-African hard currency was destroying African currencies, causing depreciation and inflation within the African continent. The implementation of this system will help reduce the rate of currency depreciation and inflation in African countries.

        (ii) Provides greater transparency and control

All payment channels, whether banks or fintech operators, will be able to utilise the Pan-African Payment and Settlement System on behalf of their customers. Instant transactions should increase trust and confidence between trade partners, reducing liquidity requirements for settlements and freeing-up more money for other uses. The creation of a single window for all cross-border transactions made across the continent will provide central banks with greater transparency and control. With implementation of the Pan-African Payment and Settlement System, Africa can expect to begin to reap the fruits of the African Continental Free Trade Agreement. PAPSS is not positioned to replace existing regional and national payment systems, but to collaborate and work with them in better integrating African economies for the benefit of all.

    (iii) Ease of payments across the continent

The Pan-African Payment and Settlement System establishes a standardised payment infrastructure across African countries participating in AfCFTA. This harmonisation of payment systems promotes interoperability, making it easier for businesses to conduct transactions regardless of the country or currency involved.

        (iv) Lower transaction costs

The Pan-African Payment and Settlement System can contribute to cost reduction in trade activities by offering a single platform for payment and settlement, and businesses can avoid multiple currency conversions and associated fees. This can result in lower transaction costs, making trade more affordable and attractive for businesses within the AfCFTA.

          (v) Increased efficiency

With the Pan-African Payment and Settlement System, trade processes become more efficient. The system enables real-time or near-real-time payment settlements, eliminating the need for lengthy delays and paperwork. This improved efficiency contributes to smoother trade operations and enhances business productivity within the AfCFTA.

(vi) Enhanced financial inclusion

The Pan-African Payment and Settlement System has the potential to enhance financial inclusion within the AfCFTA region. By providing a digital platform it can reach remote and underserved areas, enabling individuals and businesses to participate more actively in regional trade. This inclusion fosters economic growth and opportunities for a broader segment of the population.

The Pan-African Payment and Settlement System will play a vital role in strengthening economic integration among African countries. By promoting seamless cross-border transactions, it encourages trade and investment within the AfCFTA region. The improved economic integration can lead to increased intra-African trade, job creation and overall economic development.

     (viii) Risk mitigation

The Pan-African Payment and Settlement System can help mitigate risks associated with cross-border trade. The platform provides a secure channel for payment and settlement, reducing the risk of fraud and transactional disputes. This enhanced security and transparency can build trust among businesses, boosting trade activities within the AfCFTA.

(ix) Data insights

The Pan-African Payment and Settlement System generates valuable transactional data that can be leveraged for data insights and analysis. The data can provide useful information on trade patterns, market trends and consumer behavior within the AfCFTA. Such insights can assist policymakers and businesses in making informed decisions, promoting trade growth and economic development.

Potential hurdles challenging the smooth implementation of PAPSS

  • Implementation challenges

The Pan-African Payment and Settlement System’s implementation across multiple African countries can be complex and challenging. It requires coordination, cooperation and investment from participating nations. The Pan-African Payment and Settlement System must navigate through various regulatory frameworks and compliance requirements across African countries. Each country may have its own financial regulations, data privacy laws and security standards. Ensuring compliance with these diverse regulations can be complex, requiring ongoing coordination and cooperation among participating countries.

Varying levels of technological infrastructure, regulatory frameworks and financial systems in different countries can pose obstacles to seamless integration and adoption of the Pan-African Payment and Settlement System.

  • Limited access and adoption

The Pan-African Payment and Settlement System may face issues related to limited access and adoption, particularly in regions with low digital penetration and inadequate financial infrastructure. In areas where Internet connectivity and technological literacy are low, businesses and individuals may struggle to utilise the system effectively. This could create a digital divide and hinder the full potential of PAPSS within AfCFTA.

  • Currency conversion challenges

While the Pan-African Payment and Settlement System aims to streamline cross-border transactions, it may still face challenges related to currency conversions. African countries use different currencies, and fluctuations in exchange rates can impact the cost and efficiency of transactions. PAPSS needs to address these challenges to ensure smooth and cost-effective currency conversions.

  • Operational and technical risks

The Pan-African Payment and Settlement System, like any other digital payment system, is susceptible to operational and technical risks. System outages, cybersecurity threats and technical glitches can disrupt payment and settlement processes – leading to delays and potential financial losses. Robust risk management and mitigation measures need to be in place to address these risks effectively.

  • Dependency on a single system

As the Pan-African Payment and Settlement System becomes a central payment and settlement system within the AfCFTA, there is a risk of over-reliance on a single system. Any disruptions or failures in the PAPSS infrastructure could have a significant impact on cross-border trade and financial activities. Diversification and contingency plans should be considered to mitigate such risks.

  • Limited integration with existing systems

PAPSS may face challenges in integrating with existing payment systems and financial institutions within African countries. Legacy systems, different technical protocols and varying levels of readiness for integration can impede the seamless adoption of PAPSS. Collaborative efforts and investment may be needed to bridge the gaps and ensure effective integration.


Overall, PAPSS contributes to goals of the AfCFTA by facilitating trade, reducing costs, promoting financial inclusion and fostering economic integration among African countries. It is important to note that while potential hurdles exist, they are not insurmountable. With proper planning, investment and collaboration, these challenges can be addressed to maximise benefits of the Pan-African Payment and Settlement System within the AfCFTA.

To overcome implementation challenges, there should be a focus on capacity building and infrastructure development. Initiatives should be undertaken to promote financial inclusion for quick adoption. For smooth implementation, there is a need to create transparent and competitive exchange rates – and offer currency-hedging solutions than can facilitate smooth cross-border transactions. Regular monitoring, maintenance and upgrading of the PAPSS infrastructure are necessary to minimise disruptions. Collaboration with cybersecurity experts and adherence to international best practices can enhance the system’s security.

By adopting these solutions, the drawbacks associated with PAPSS implementation within the AfCFTA can be effectively addressed, ensuring a smoother and more efficient cross-border payment and settlement system.

Therefore, while implementation of the Pan-African Payment and Settlement System is an important step toward success for the AfCFTA, there is still a long way to go in overcoming the significant challenges which exist. It will require sustained efforts by governments, businesses and other stakeholders to address these challenges and fully realise the AfCFTA’s potential.

The writer is a banker at Ecobank Ghana PLC, with a focus on but not limited to working with SMEs and Corporates in Ghana on their payment service needs.

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