‘Pan-African Settlement System to Slash Transaction Costs by $5bn Annually’
James Emejo in Abuja
The Secretary-General of the African Continental Free Trade Area Agreement (AfCFTA) Secretariat, Mr. Wamkele Mene, has said that the full implementation of Pan-African Payment and Settlement System (PAPSS) will cut annual cost of transactions by $5 billion.
The amount he said represented the aggregate amount spent on currency convertibility.
While pointing out that the pilot implementation of the platform had already started in six countries in West Africa, which have switched on unto the system, Mene added that the system is currently running smoothly.
The AfCFTA boss, while on a visit to the country, told THISDAY that it will be difficult to boost intra-African trade with 42 currencies of various countries, thus, the need for currency convertibility.
He expressed confidence that full implementation of the pan-African payment platform would begin by December.
He said: “We have started a piloting phase of the Pan-African Payment and Settlement System (PAPSS); six countries in West Africa which have switched on unto the platform.
“Transactions are already happening within these six countries that are at the advanced stage of pilot project.
“Africa has 42 currencies and the cost of the currency convertibility actually is a constraint to intra-African trade.”
He said: “It makes us inefficient and makes our trade unnecessarily expensive and adds to the cost of doing business for the SMEs.
“So the payment settlement platform will really make a significant contribution and our estimates that it would reduce the cost of transactions by $5 billion annually and that is the aggregate amount that is the aggregate amount that is spent on currency convertibility.”
He explained that when the system is fully up and running, countries will be able to, “transact with somebody in Kenya, you will transact in naira and they will receive Kenya shillings.”
He said Afreximbank will be the correspondent facility, adding that they have, “invested their own funds and we are working with them as the secretariat but they have been very strong in investing in African solutions.”
He said: “And this Pan-African payment system certainly in the last 60 years is probably one of the most significant achievements.”
Mele said though the continent may not be able to have a common currency over night as it would still grapple with issue of different currencies, the payment and settlement system, remained the first major step in addressing some of the challenges that are related to the cost of currency.
While further assuring on the December implementation timeline for the payment system, he said, “What we have to do is to continue discussing with central banks around the continent which we have been doing so that the central banks can set up the systems in their own jurisdictions.
“But I am encouraged by what I have seen and heard that countries do understand the importance of the payment platform for Africa’s economy.
“If we want to boost intra African trade, we are not going to be able to boost that with 42 currencies. So all of us must move as quickly as possible and I think the end of the year is within reach, maybe not for all countries but I think we can have a large number of countries. ”
According to him: “If we want to boost intra African trade, we are not going to be able to boost that with 42 currencies.
“So all of us must move as quickly as possible and I think the end of the year is within reach, maybe not for all countries but I think we can have a large number of countries.”
Providing further update on AfCFTA implementation, he said 38 countries had now ratified their agreement to establish the trade deal.
He called for patience among Africans who are eager to see the trading begin in earnest.
“They should be patient and understand that we are in the initial stages of significant endeavour to bring together what is now 38 countries to trade together under a set of rules and it’s not an easy thing to do.
“We will know from the experience of European Union (EU) that it has taken the EU 72 years to get to this point of market interventions that the EU enjoys today.
“So, it is not easy what we are doing, it’s a difficult task, it’s time consuming, and it requires that we be patient and that we shall see the results in year’s to come,” he said.