The African Export-Import Bank (Afreximbank) will launch its new Pan-African Payment and Settlement (PAPS) platform at the African Union (AU) Extraordinary Summit on July 7, 2019 in Niamey, Niger Republic.
The summit will be dedicated to the launch of the operational phase of the AfCFTA as well as its operational instruments. The AU Summit’s delegations to be hosted in the newly built Radisson Blu Hotel of Niamey are expected to launch the following operational instruments of the treaty: Rules of Origin Portal; Tariff Concession Portals; Portal on Monitoring and Elimination of Non-Tariff Barriers; Digital Payments and Clearing System and African Trade Observatory Dashboard.
Afreximbank’s president, Benedict Oramah, explained that PAPS, which will be available on mobile devices, would facilitate the clearing and settlement of intra-African trade transactions in African currencies and significantly reduce the dependence on US dollars and other hard currencies in the settlement of regional trade.
According to Oramah, the bank has partnered the West African Monetary Institute (Wami) to launch a pilot in six West African countries by the end of the year. The West African Monetary Zone is the continent’s only economic community that does not already have a settlement platform – hence Afreximbank’s decision to pilot the new solution in the region.
Previously referred to as the Intra-Africa Trade Platform, it is one of a number of new initiatives that the bank is currently implementing as part of its strategy to facilitate greater volumes of intra-African trade as well as formalise the continent’s informal trade, which is estimated by the bank to be close to $40 billion.
“Africa’s challenge when it comes to payments and settlements,” Oramah explained, “comes down to the fact that it has multiple local currencies, meaning that cross-border payments typically involve a third currency, such as the US dollar or Euro. This leads to a high cost of intra-African payments, which can take weeks to process.
“Governments want to build their reserves so they tend to prefer exports to markets that issue hard currency. For this reason, a significant amount of cross-border trade occurs informally. The issue is compounded by the fact that most traders currently do not have a system that enables them to settle in a secure way,” Oramah said.
He explained that with the new platform “a buyer in country A buying from a seller in country B can pay in his or her own currency for the goods, while the seller will receive his or her own currency. At the end of the day, the only countries that will have to pay dollars will be those in deficit”.Although the president conceded that it might not be possible to completely eliminate hard currencies in trade settlements, he believed that through the platform it will be significantly reduced.
The Niamey Summit will surely be one of the most attended AU Summits by Heads of State and other personalities in recent time. Special guests will likely include the Secretary-General of the United Nations António Guterres, the director-general of the World Trade Organization, Roberto Azevêdo, the Secretary-General of the United Nations Conference on Trade and Development, Mukhisa Kituyi, the President and Chairman of the Board of Directors of the African Export–Import Bank (Afreximbank) Benedict Oramah, the executive director of International Trade Centre, Arancha Gonzalez, the European Commissioner for International Cooperation and Development Neven Mimica, among others.
The summit will also consider and approve a set of other decisions coming from the Executive Council as part of the reform of the African Union.