Window of opportunity to improve small business trade competitiveness across Africa

Micro, small and medium-sized enterprises (MSMEs) in low- and middle-income countries suffer from high import and export costs, and uncertain transaction delays caused by limited correspondent bank relations, foreign currency availability and cross-border transaction rail capacity.

Until now, payments and documentation need to go from a buyer’s bank through at least two “traded currency” intermediary “correspondent banks” to reach another supplier’s bank. Checks on transactions that take minutes or hours between strong, fully automated economies can take many days and cost a business in a low or middle-income country more than 10% of a transaction’s value. Central banks in these countries tie up millions in precious international currency reserves to settle large and small trade transactions.

With the launch of the Pan-African Payment and Settlement System (PAPSS) on 13 January, Africa shows the developing world and emerging economies how these international transaction challenges can be addressed with a commercially viable modern solution.

The International Trade Centre is proud to support the commercial launch of PAPSS, which will play an important role in accelerating inter-African trade, improving the competitiveness of small businesses and in realizing the objectives of the African Continental Free Trade Area (AfCFTA).

With instant payments through the PAPSS platform, participants no longer need to convert local currencies into traded currencies. Central Banks can engage in overnight settlements reducing international currency holdings.  Compliance, legal and sanctions checks are performed instantly by the system. PAPSS has the potential to cut transaction times to seconds, removing a huge barrier to the growth of intra-African e-commerce, services and products trade.

Mike Ogbalu III, Chief Executive Officer of PAPSS says: “The commercial launch marks a significant milestone in connecting African markets seamlessly. It will provide a fresh impetus for businesses to scale more easily across Africa and is likely to save the continent more than $5 billion in transactions costs every year.”

Pamela Coke-Hamilton, Executive Director of the International Trade Centre, added: “In these uncertain times, African countries now have a commercially viable tool that can address a critical barrier for MSMEs to trade competitively. ITC is preparing enterprises to benefit from PAPSS, creating new opportunities for growth in cross-border e-commerce and sustainable trade.”

Further information on PAPSS can be found through: https://papss.com.

Source: The International Trade Centre (Published on January 13, 2022)

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