The president of the African Export-Import Bank (Afreximbank) announced this Thursday the provision of $3 billion to ensure the operation of the Pan African Payment and Settlement System (PAPSS), allowing intra-African trade in the same currency.
“We have negotiated with 500 African banks, giving them services and commercial support to ensure the launch of credit lines of up to $8 billion, which today stands at $2 billion, and we have made $3 billion available in a financial instrument for African central banks, which will thus have resources to ensure stability and predictability in financial flows,” Benedict Oramah said.
Speaking at the commercial launch of the PAPSS, a financial mechanism that allows trade between African countries in the same currency, Oramah stressed that “today the extraordinary has become possible”.
With this system, trade between African companies will dispense with the exchange of currencies so that the producer receives in his currency, while the consumer also pays in his currency, through a financial infrastructure that allows automatic payments using two different currencies in two countries.
“Africa has a peculiar problem, which is that it has 42 national currencies, and access to hard currency [such as the dollar or euro] is very limited, which makes trade have transaction costs of $5 billion a year,” Oramah explained, adding, “No wonder intra-African trade levels are so low.”
For the president of Afreximbank, which launched the initiative together with the African Union, the PAPSS “can transform the African financial landscape, because it is a milestone and represents another step towards restoring the dignity of Africans by making payments more efficient and strengthening African currencies.”
With this system, the banker said, “a Senegalese family can book a holiday in the Seychelles and pay in their currency, and a chocolate company in South Africa can order cocoa from Guinea Conakry and pay in their currency,” eliminating the cost of foreign exchange and ensuring that payment is made immediately, when today it can take up to 14 days.
Another advantage of this system that is already operational as of Thursday is that large African contractors will be able to price their projects in the currency of the country where the work will be carried out, which avoids fluctuations due to the exchange rate with the dollar and thus, “the price of large projects will tend to be lower,” Oramah concluded at the commercial launch of the PAPSS, which was held this Thursday from Ghana in a face-to-face and virtual format.
