Editor's Desk
"Trade without tears or dollars ?"
This week entrepreneurs across Africa can look forward a new era of trading across the continent that could increase their wealth .
That is the bold statement from the people behind the continent’s fledgling trading bloc the African Continental Free Trade Area. There was a huge gathering at a launch in Accra, the capital of Ghana, last week – the city is the home to the secretariat of the AfCFTA.
It was all about a five-letter acronym PAPPS – that is, a Pan-African Payment and Settlement System that promises to make it easier for Africans to do business with other countries. Analysts at the launch said it had the power to drive trade and confidence in the continent.
It is all part of a bigger dream by the AfCFTA for a thriving prosperous trading bloc of more than a billion people.
What it promises is a payment system that will ensure companies will get their money for their goods, solving the problem has been one of the major hurdles of the AfCFTA.Afreximbank, in collaboration with the West African Monetary Zone launched the pilot phase of the payment and settlement infrastructure in West African countries. Here payment and settlement were conducted with the organisers claiming considerable success.
The big point about PAPPS is that it takes foreign currency out of transactions in the free trade zone – a move likely to be very popular with entrepreneurs who lose millions every year through the cost of converting their currency into US dollars and then back into the currency of the country they are doing business with. This costs importers and exporters in Africa an estimated $5 billion in revenue, according to the AfCFTA. In effect, the PAPSS platform will side-step the use of foreign currency by serving as the clearing, processing, and settlement agent in the transaction.
Afreximbank has injected $500 million into infrastructure to help accelerate the new settlement system.
It is all another step forward. Yet on the ground, countries like Nigeria – the largest economy in Africa – lags with paperwork to make the free trade area operational.
This year the AfCFTA needs another acronym aside from PAPPS: MA – more action.
