PAPSS functions as a financial framework that enables cross-border payments in African currencies, eliminating the necessity for intra-Africa trade to be contingent on US dollar foreign reserves.
Presently, nine central banks have officially embraced PAPSS, with over 70 banks across Africa, including Botswana, having endorsed its adoption. During a recently concluded roadshow for the Intra-African Trade Fair in Gaborone, Gainmore Zanawe, a senior manager at Afreximbank, emphasised that as the Africa Continental Free Trade Area (AfCFTA) agreement disrupts established global trade patterns, it is imperative to establish robust financial systems that facilitate seamless payment for goods and services throughout the continent.
"As we begin to trade more amongst each other as Africans it is important that we are in charge of this trade fully," he articulated. "Why should trade that strictly happens between African countries involve the US dollar?" Zanawe questioned. He revealed ongoing discussions with the Botswana government to integrate the Bank of Botswana into the PAPSS framework.
"We want to end the use of the US dollar in Africa trade," he emphasised. Advocates of PAPSS believe that when the system is fully integrated across the continent, African nations will no longer need to convert their local currencies into hard currencies like the dollar. This will eliminate the cumbersome process where funds leave Africa for conversion before returning to the recipient bank. Zanawe noted that the time is ripe for Africa to unshackle its economic systems from Western influence.
He characterised the new payment and settlement system as "a stride toward liberation," asserting that it would save money for Africa and enhance interconnectivity across the continent.
According to Zanawe, this payment system will annually save Africa up to $5 billion which is traditionally lost in transactional costs tied to international payments between nations. Conventionally, the international trade process has involved settling trade payments for goods and services between countries in US dollars, following the 1944 'Bretton Woods Agreement'.
This agreement pegged the exchange rate for all foreign currencies to the dollar, with the US redeeming the dollar for its value in gold. Zanawe contended that PAPSS would stimulate greater trade among African nations. "Africa conducts 80% more trade with the rest of the world than within itself," he observed. “It is even shocking to know that South Africa buys leather for its textile industries from India and Europe while Zambia sells leather in international markets.”
