Kenya has accepted to host the headquarters of the Pan-African Payment and Settlement System (PAPSS), which is expected to enable traders on the continent to settle deals in their respective national currencies.
According to President William Ruto, during the African Continental Free Trade Area Conference at Strathmore University on November 7th 2023, Kenya as a leader in the technology space in Africa was asked to host the headquarters of PAPSS, which he gladly accepted.
“We have been asked to host the headquarters of the Pan-African Payment and Settlement System in Kenya. Because we are leaders in the technology space and because we are also promoters of the ACFTA and any institution that supports the integration of our continent, we have gladly accepted to host the headquarters of PAPSS,” he said.
PAPSS, which is a brainchild of African Export-Import Bank (Afreximbank), is a centralized financial market infrastructure that allows a trader in one country to instruct his or her financial institution to pay another trader in a different country using their local currency. The platform is projected to save the continent billions that are incurred when traders have to convert and trade in dollars.
With 11 African central banks having already been incorporated into PAPSS so far, and many more expected to join up, the system will be effective in the continent by when the platform will be adopted by African Union’s Assembly of Heads of State and Government, come 2024.
The dollar, the global reserve currency, still dominates global trade. Traders in Africa have faced a difficult situation since last year, being hit by a shortage of the US currency amid a flight to safe havens by investors in the face of elevated global inflation and interest rates. This resulted in delays in settling deals with suppliers abroad and the depreciation of most currencies in Africa.
With most African currencies depreciating against the dollar, and most payments done in dollars, traders have been negatively affected, having to part with an increasing amount, or reducing the products they purchase.
The payment system, which was officially launched in Accra, Ghana, on January 13, 2022, is expected to save the continent more than Sh757.5 billion ($5 billion) in payment transaction costs each year according to the African Continental Free Trade Area (AfCFTA) secretariat.