Kenya has become the tenth country to join the Pan African Payments and Settlement System (PAPSS), a new way to make instant cross-border payments in local currencies across the continent.
“This means that Kenyan companies can trade with their peers from other African member states using our local currencies, a major boost for the African Continental Free Trade Area (AfCFTA),” Trade Secretary Moses Kuria said on October 6, noting that the Central Bank of Kenya (CBK) had signed the agreement and completed all necessary formalities.
The vast majority of Africa’s intra-regional trade is currently done through conversions to the US dollar. Initiatives like PAPSS and the AfCFTA, which would create the world’s largest free trade zone by area, seek to boost internal trade by reducing barriers, including the need for intermediaries such as the greenback.
PAPSS was launched in January 2022, and is currently used by commercial banks and payment service providers in nine African countries: Nigeria, Ghana, Liberia, Guinea, Sierra Leone, The Gambia, Djibouti, Zimbabwe, and Zambia.
Since its launch, PAPSS has reportedly saved African companies over $5bn in transaction charges they would have incurred using alternative payment methods. With its growing success, PAPSS is expected to be rolled out to all 54 African countries in the near future.
The African Export-Import Bank (Afreximbank) expects 15 to 20 countries will have joined the system by the end of 2023, its president, Benedict Oramah, told Bloomberg in June.
PAPSS is using dollar exchange rates for now, said Oramah, whose bank funds the system, but is working with central banks to develop an exchange-rate mechanism that would allow Africa’s 42 currencies to be convertible among themselves. “What we are doing is to domesticate intra-African payments,” he said.
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