This posting in Bloomberg announces a new cross-border payments system, this one launched and based in Accra, the capital of Ghana. The system was developed by Afreximbank based in Cairo. According to the release, the Pan-African Payments and Settlement System is a real-time system. It is one of the building blocks towards the full realization of the African Continental Free Trade Area, which was set up and agreed upon in 2018 among African Union nations, and will eventually represent the largest free trade zone in the world.
‘The so-called Pan-African Payment and Settlement System will facilitate intra-regional trade and payments by enabling the real-time transfer of funds from one African country to another, he said. Traders have, until now, had to settle payments via U.S. and European banks and the new system is expected to save the continent about $5 billion in offshore clearance and transaction costs, according to its developer, the African Export-Import Bank.’
Since there are no details about operational scale, it seems that initial transactions will involve Ghana and Nigeria, and then we assume gradually expand infrastructure during the coming decade to include 54 sovereign nations in the scheme. We recently released member research on the growth of immediate payment systems across the globe. One of the key trends we identified was the expectation for the realization of real-time payments across borders, so this is another example of that direction.
‘“This is an African solution to an African problem and it’s the most practical and most important achievement in payment-system integration on the African continent since independence from colonial rule,” Bawumia said. It’s the closest the continent has come to the benefits of a common currency, he said… It’s also one of the key building blocks for the African Continental Free Trade Area, he said. The continent-wide trade zone that’s set to be fully operational in 2030 could be the world’s biggest free trade zone by area, with a potential market of 1.2 billion people and a combined gross domestic product of $2.5 trillion.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group