(ABUJA) – A new African payment system aimed at removing the US dollar as a middle currency in trade is showing promising results, with financial experts hailing it as a major breakthrough for cross border transactions across the continent, including for countries like South Sudan which have long struggled with currency incompatibilities and high transaction costs.
The Pan African Payments and Settlement System (Papss), which was launched in 2019 by Afreximbank in partnership with the African Union, has started to ease the burden of slow and expensive international payments.
The system enables real time payments in local currencies between African countries, using blockchain technology to bypass traditional reliance on third party currencies like the US dollar and the euro.
So far, 16 African countries have signed up to the system, with users reporting that what used to take several days for payments to go through now only takes a few minutes. This direct exchange of local currencies is helping to reduce the cost and delays that come with converting to global reserve currencies — a process that often hampers trade, especially in countries with weak currencies or dollar shortages such as South Sudan.
Papss CEO Mike Ogbalu said the idea emerged from the frustrations experienced by African companies that operate in multiple countries. “We were challenged to build a system to handle Africa’s currency incompatibility, and that’s what we’ve achieved through Papss,” he said during the Afreximbank annual meetings held in Abuja, Nigeria last week.
The system was developed in collaboration with Interstellar, a blockchain technology firm. It connects 16 central banks, 150 commercial banks and 14 transaction switches across the continent, enabling real time money transfers between users.
“This is not just a technical innovation. It’s a fundamental shift,” Ogbalu said, referring to the long standing dependence on foreign currencies that often delay or block trade.
Dr Yemi Kale, Afreximbank’s chief economist, noted that although the transition away from dollar based transactions is gradual, the system is already showing market use and gaining acceptance.
“You don’t change a decades old system overnight. Countries need to change their laws, their trade partners, and the way they do business,” she said.
With 85 percent of intra African trade still being done with the same few partners and in foreign currencies, Papss provides a new opportunity for nations like South Sudan to better integrate into African trade frameworks without the usual roadblocks caused by hard currency limitations.
Kale added that even major economies like China are looking for ways to move away from the dollar.
“So this shift in Africa is happening at the right time,” she said. When asked about possible US backlash, Kale said it was unlikely.
“The US sees Africa as inconsequential in trade terms. Only 2–3 percent of US trade is with Africa, so they are not really paying attention to what we are doing,” she said.
Among early adopters of the system are airlines, which have often struggled to repatriate revenue due to dollar shortages in African countries. According to Afreximbank, over $2 billion (approx. 9.2 trillion South Sudanese Pounds) belonging to airline companies is currently stuck in various African economies, including those with limited access to hard currency.
Insurance companies, telecom operators and other multinationals have expressed similar interest in the Papss system as they also face difficulties in transferring earnings out of African countries.
Major banks from across the continent have already signed up, including Nigeria’s Zenith Bank, United Bank for Africa, First Bank, and Access Bank; Kenya’s KCB; and Rwanda’s Bank of Kigali. Pan African banking group Ecobank has also joined.
Countries currently integrated into the system include Nigeria, Ghana, Liberia, The Gambia, Guinea, Sierra Leone, Kenya, Zimbabwe, Zambia and Djibouti.
While South Sudan is not yet a participant, experts believe joining the platform could greatly help its trade and financial sector, which has suffered from weak currency reserves, limited access to dollars and delayed international transactions.
Papss is expected to play a vital role in strengthening regional trade under the African Continental Free Trade Area (AfCFTA) and offer countries like South Sudan a realistic alternative to the dollar dominated financial world as well as helping small businesses overcome currency exchange hurdles that have long held them back as African economies continue to build local trading systems.
