Nana Dwemoh Benneh, CEO of Universal Merchant Bank (UMB), expressed his optimism that the Pan African Payments and Settlement System (PAPSS) will boost trade on the African continent.
Indeed, the PAPSS, a centralized payment and settlement system that allowed commercial transactions in local currencies, would make transactions between companies instantaneous and direct, and eliminate intermediaries who contribute to financial losses.
Participating African central banks would act as clearing agents, while Afreximbank would be the principal clearing agent and provider of settlement guarantees and overdraft facilities.
This will remove the need to convert currencies through intermediaries.
Nana Benneh said the move will boost business activities on the continent through the implementation of the African Continental Free Trade Area (AfCFTA).
The AfCFTA is a strategic trade pact created between African Union (AU) countries to provide a single continental market for goods and services with free movement of business people and investment.
Nana Benneh expressed her optimism that PAPPS will boost intra-African trade during a panel discussion at a recent public forum hosted in 2022 by the Ghana Academy of Arts and Sciences (GAAS) on the theme: “African Continental Free Trade Area: Challenges and Prospects”.
He said, “It is common knowledge that Africa has some of the highest remittance and settlement fees. It is estimated that we lose at least $5 billion a year in transfer fees alone. What PAPSS offers is the ability to bypass these fees, cut out middlemen, and peer-to-peer trading.
“So customers can go to a Ghanaian bank to trade with their peers in Kenya, and that transfer from a Ghanaian bank to a Kenyan bank will be done directly in Cedi in shilling,” added Nana Benneh.
The UMB CEO said the Bank recognizes this payment and settlement platform as “the next growth variable in African banking,” adding that the Bank is working on innovations in this regard.
Dr. Ernest Addison, Governor of the Bank of Ghana (BoG), pointed out that the passage of the Payment Systems and Services Act 2019 (Act 987) and other interventions paved the way for the non-banking sector , including fintech companies, to work in the payment ecosystem.
This led to phenomenal growth in the payment system in Ghana and demanded that this growth be extended to all African countries to facilitate intra-continental trade.
He noted that: “A strong and well-regulated African financial infrastructure could deepen the benefits of intra-regional trade, eliminate the use of a third currency for settlement, improve business liquidity management and reduce transaction costs. “.
Beyond improving the speed and reducing the cost of transactions, integrated African payment and settlement systems would support the AfCFTA by mitigating the risks associated with intra-African commercial payments and facilitating the efficient operation of African financial markets,” he added.
The Governor noted that the PAPSS would be that strategic infrastructure to ensure transparent transactions, as it would also facilitate remittances, offer securities settlement, and provide opportunities for point-of-sale and ATM transactions.