Africa is set to adopt the Pan African Payment and Settlement System (PAPSS) by February 2024, according to Kenyan President, William Ruto.
The system offers an alternative in which participants can conduct transactions in their currencies eliminating the necessity for a third-party currency such as the U.S dollar.
According to Ruto, Kenya will host the system.
“Kenya is a champion [of Africa’s integration] and we have been asked to host the headquarters of the pan-African payment system in Kenya,” Ruto told participants at the launch of AfCFTA’s Trade and Development Centre at the Strathmore University in Nairobi, Kenya.
“Because we are leaders in the technology space and promoters of AfCFTA and any institution that supports the integration of our continent, we have gladly accepted to host the headquarters of the Pan-African Payment System [PAPSS] in Kenya.”
The platform, developed by the African Export-Import Bank (Afreximbank) with the backing of the African Union (AU), allows a trader in a participating country to direct their local bank to make a payment to a supplier in a different country using the local currency.
Subsequently, her bank sends instructions to PAPSS to execute the payment through the local bank of the supplier settling the transaction in the currency of the supplier’s jurisdiction in real-time. PAPSS is responsible for conducting validation checks before transmitting the instructions to the recipient bank.
Key participants in the PAPSS system are central banks, which will act as regulators and clearance agents, commercial banks, fintech companies, payment service providers to their customers, including businesses across the region.
In June 2023, five of Africa’s top Commercial Banks committed to facilitating cross-border trade using the Pan-African Payment and Settlement System (PAPSS).
The banks included:
- Ecobank (Togo)
- Access Bank (Nigeria)
- UBA Group (Nigeria)
- Kenya Commercial Bank (Kenya)
- Standard Bank (South Africa)
Africa’s continental market has a combined GDP of around $3.4 trillion and a population of over 1.3 billion. However, the region has the world’s lowest intra-regional trade volumes, standing at 18%, in stark contrast to Europe’s 70% and Asia’s 59%.
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