Why PAPSS Is A Game-Changer
For African Business


Catherine Muya

Head of Product:
Digital Payments Solutions


The African Continental Free Trade Area recently introduced the Pan-African Payments and Settlement Systems (PAPSS), which facilitates instant cross-border payments in local currencies between countries. It’s a significant dealmaker for intra-African trade.

One of the major early wins of the African Continental Free Trade Area (AfCFTA) is the Pan-African Payment and Settlement System, or PAPPS, which facilitates instant cross-border payments in local currencies between African countries. In the absence of a single currency for the continent, PAPPS offers the next-best thing: a multi-currency clearing platform that all but eliminates the need to source hard currencies to support transactions between two African markets.

PAPSS was launched by the African Export-Import Bank (Afreximbank) and the AfCFTA Secretariat in January 2022, one year after trade officially commenced within AfCFTA. This came after a successful pilot project in the six West African Monetary Zone countries: Ghana, Nigeria, Gambia, Guinea, Libera and Sierra Leone. The WAMZ region, with its multi-lingual, multi-regulator, multi-currency diversity, was the ideal testing ground for the complexities anticipated in the broader African context.

“PAPPS elevates the role of African currencies, because for the longest time there has been a heavy dependency on the foreign currency, which has been to the detriment of those African currencies, suppressing trade and economic development,” says Catherine Muya, Head of Product: Digital Payments Solutions at Absa.

A solution for liquidity issues

Pre- PAPSS, a business in one African country would have had to buy US dollars to make a trade with a business in another African country. Typically, the hard currency would have left the African continent to be processed by an offshore correspondent bank. PAPPS removes that (often slow and expensive) middle step, supporting three core processes: instant payment, pre-funding and net settlement.

The system works in collaboration with Africa’s central banks to provide a payment and settlement service to which the continent’s commercial banks, payment service providers and fintechs can connect. PAPSS is not intended to replace existing payment systems, but rather to work with them in better integrating African economies for the benefit of all.

“Let’s take a very practical example of an SME in Botswana who wants to sell a product or service to a business in Ghana,” says Muya. “The seller in Botswana would quote in pula, and the buyer in Ghana would settle in cedi. That the experience for the traders.”

Behind the scenes, however, those pula were leaving Africa, being converted to euros or US dollars, and then coming back into Africa as cedi. That circuitous journey would take time and would drain hard currency liquidity in the market, as the bank in Ghana would try to source hard currency to facilitate the transaction. Now, under PAPSS, the same transaction would be a straight conversion from pula to cedi. It immediately reduces the hard currency liquidity issues that affected so many sub-Saharan African markets through 2020 and 2021.

“You now have two parties participating in a transaction, as opposed to correspondent institutions that are also participating in the journey,” says Muya. “Now it’s just the sending institution and the receiving institution, with the pre-funding done in local currency.”

It’s a quicker and significantly cheaper process, using (at massive scale) a real-time settlement system. The AfCFTA estimates that PAPPs will save Africa more than USD5-billion a year in payment transaction costs alone.

Simpler, easier cross-border trade

“PAPSS simplifies the cross-border trading experience,” says Muya. “Foreign exchange (forex, or FX) has long been a space where trade was left to the experts. Now, with financial institutions like Absa participating in the simplification of the process, businesses can focus on the agendas of the day without needing to worry about the other details – like how they want to trade going forward – which just add to the cost of transacting.”

In business, time is also money – so instant payments have enormous value. “Traders will no longer have to wait days for their payments to clear,” says Muya. “In the pilot exercises we saw turnaround times of a matter of seconds. And in addition to the speed, there’s also the potential of 24/7 availability of the settlement system. One must appreciate that trade doesn’t only take place during business hours, and it often happens between different time zones. PAPSS’s availability alone is a dealmaker, which will open many trade corridors within Africa.”

As PAPSS rolls out across Africa, Absa is already involved as a participating commercial bank and is seeing the benefits PAPPS presents to its client. “Those opportunities will become the levers that open us up to even greater value addition from a financial institution perspective,” says Muya. “It’s a very exciting time for us as a Pan-African bank, and for our clients who do cross-border trades within the continent.”

To access pan-African foreign exchange expertise for your business, corporate and institutional needs.


Catherine Muya

Head of Product: Digital Payments Solutions

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