EFA Co-hosts a Session on African Cross-Border Payments at the UNCTAD Ecommerce Week

EFA co-hosted with the German Government and Smart Africa a Session on Cross-border Payment Solutions for Africa, moderated by the EFSA Chair, Karen Nadasen of PayU, on 26 April. The Session discussed existing and planned regional solutions, such as the solution by COMESA. There is also a SADC cross-border system (TCIB) being worked on by BankServ Africa. The Session then discussed the new (launched in January) Pan-African Payments and Settlement System (PAPSS) and how that will work to ease the problems that traders in Africa experience when selling across African borders. The system will enable the continent to retain the $5bn paid in annual fees to foreign banks in clearing charges for third-party currencies used to settle trade transactions (such as the US$, the British pound, and the Euro). PAPSS mentioned that they are entering an agreement with the South African fintech, MFSAfrica. PAPSS has also signed strategic relationships with other key institutions (see below).

The Session also discussed the possibility of an African “Stablecoin” solution. This Newsletter carried an item on Stablecoins last month – these are blockchain-based cryptocurrencies but based on an established value (e.g. the US$ or Euro). The Session suggested a stablecoin for Africa should be based on either a basket of the most stable national currencies from African countries or on a commodity such as gold. The Twitter coverage for this session is  https://twitter.com/unctadinafrica/status/1519680073632481282?s=24&t=WZjqY1L74i8A6mo26be2cg

Meanwhile, PAPSS has reached an agreement with BUNA, the cross-border and multi-currency payment system owned by the Arab Monetary Fund (AMF). This forms the foundation for the interoperability between PAPSS and BUNA payment systems, their participants will be able to make fast, secure, and affordable transactions in their local currencies between the African continent and the Arab region. PAPSS is expanding its footprints across Africa with 8 central banks, 6 switches, and about 25 of the largest commercial banks on the continent.

It is also worth remembering that there have been a number of attempts to create a regional single currency. The francophone CFA franc used by 8 West African states still reigns strong, despite an attempt to replace it with a West African currency, which failed to get traction when Nigeria refused to accept a common currency based on the Euro. Last month East African central banks discussed the proposed implementation of a single currency regime by the year 2024, and put a hold on the idea, citing delays by member countries in realising targets set out in the Monetary Union roadmap. The banking regulators, through the East African Community Monetary Affairs Committee (MAC), noted that while considerable progress had been made towards the realisation of a monetary union there are several challenges which impede its implementation. President Cyril Ramaphosa’s proposal, while he was chairing the AU for an African single currency based on the Rand, did not fly either.