To sustain interest in and guarantee success for the Pan-African Payment and Settlement System (PAPSS), controlling bodies – the African Continental Free Trade Area (AfCFTA) and Afreximbank – must dedicate a portion of transactional revenues to the central banks of state parties.
This forms one of the key recommendations from the Ghana International Trade and Finance Conference (GITFiC) contained in the August edition of its monthly research reports. Focusing on the impact of digital payment systems in facilitating cross-border trade, the Conference proposed that a minimum of 1% of all transaction revenues are remitted to individual apex banks.
PAPSS is a centralised payment and settlement infrastructure for intra-African trade and commerce payments developed by the African Export-Import Bank (Afreximbank) to facilitate payments and formalise some of the unrecorded trade due to the prevalence of informal cross-border trade in Africa.
According to Afreximbank, the project is being piloted across the West African Monetary Zone (WAMZ) and “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”.
Offering a rationale behind the research subject area, Chief Executive Officer at GITFiC, Selassie Kofi Ackom, stated that the rapid adoption of digital payment systems globally represents the biggest advancement toward financial inclusion in modern history, and one which Africa and AfCFTA must take full advantage of.
“Digital payment systems can make a great mark in the formal and informal trading sector if the requisite structures of regulation, trust and policy are put in place,” he said.
Other recommendations proposed by GIFTiC include the formulation of policies to regulate digital currencies by state parties; the need for governments to invest adequately in financial technology, and the rolling out of programmes to build institutional capacities for the continent’s largely informal trade sector.
On his part, Principal Economist and Project Manager with the West African Monetary Institute (WAMI) Tajudeen Nasiru, stated that there is much cause for optimism regarding trade on the continent – saying that increased intra-African trade, particularly through a platform such as PAPSS, will give a better indication of the value of currencies of state parties; arguing that they are stronger than they appear.
Basing his position on purchasing power in real terms, he argued that the average currency on the continent can be used to purchase items that their counterparts in more developed nations cannot, despite being largely import-dependent.
“The strength of a currency is its value, and that is determined by what it can be exchanged for. Even though the dollar is hovering around the six-cedi mark, the cedi is oftentimes able to purchase items which the equivalent dollar would fail to do,” he said.