Recently, a new payment system for Africa was launched. It aims to increase intra-African trade and strengthen African fiat currencies. There are ongoing discussions about the possibility of adding more African countries to this system.
The Payment System’s Main Beneficiaries are the SMEs
The Pan-African Payment and Settlement System, a new payment system for Africa, was recently launched in Ghana. This set the scene for the expansion of the Pan-African Payment and Settlement System across the continent. This payment system aims to increase intra-African trade and strengthen African fiat currencies.
The payment system — the brainchild of the African Union, Afreximbank and AfCFTA — is an attempt to reduce African countries’ dependence on the U.S. dollar. However, as a Techcabal report notes, only seven countries — all members of the West African Monetary Zone (WAMZ) — were part of the pilot phase.
Meanwhile, the same report suggests that the continent’s small-to-medium enterprises (SMEs) could be the main beneficiaries of the PAPSS system. According to the report, $5 billion worth of savings in clearing and transaction costs can be achieved annually if more companies use PAPSS.
This will in turn allow the SMEs scale, as Mike Ogbalu – CEO of PAPSS – explains.
“The commercial launch marks a significant milestone in connecting African markets seamlessly. It will provide a fresh impetus for businesses to scale more easily across Africa and is likely to save the continent more than $5 billion in transactions costs every year,” noted Ogbalu.
Cross-Border Commerce Enhancement
Pamela Coke Hamilton is an executive director at International Trade Centre and claims that new payment systems will allow Africa to reduce the barriers that SMEs face when it comes to trade. According to the executive director:
ITC prepares enterprises for PAPSS. This creates new opportunities to grow cross-border commerce and sustainably trade.
According to Techcabal, discussions are ongoing about the possibility of other African central banks being added. It is also stated that Africa’s new payment system has made it easier to have a single currency across the continent.
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