By Sani Abdul-Rahman
Africa’s new cross-border payment system will not impact intra-regional trade unless countries invest to expand production and value addition, a panel of Financial Experts have warned.
The Pan-African Payment and Settlement System (PAPPS) was rolled out to support the implementation of the African Continental Free Trade Area (AfCFTA).
PAPPS will facilitate cross-border payments in real-time and in local currencies thus reducing offshore and transaction costs significantly.
“The system will only address cross-border payment bottlenecks,” Chief Financial Officer at Fidelity Bank, Attah Yeboah Gyan said at 2022 Money Summit in Accra. He added, “that PAPPS alone will not deliver the AfCFTA, countries would have to diversify their economies for PAPPS to be meaningful.”
Cross-border Traders in Africa settle payments via Europe and the United States banks, and the cumbersome process discourages intra-regional trade, according to the African Export-Import Bank.
The payment system coupled with export diversification will enable African countries to realize the full benefits of the AfCFTA.
The 54-nation trade zone will become the world’s biggest free trade area, with a market population of 1.3 billion and a combined Gross Domestic Product of $3.4 trillion by 2040.
Diversifying export to drive AfCFTA
To help increase intra-African trade, the AfCFTA countries would have to accelerate export diversification and make trade more inclusive, according to some trade experts.
“In the case of commodity-exporting countries, trade diversification of export supports a shift from an over-dependence on commodities to higher-value-added products and services,” the United Nations Economic Commission for Africa (ECA) said in a report on regional trade.
The ECA added that “economic diversification allows for more inclusion of small and medium-sized enterprises and helps encourage innovation as more markets open.”
