The Africa Export-Import Bank has successfully incorporated 11 African central banks into its flagship Pan-African Payment and Settlement System (PAPSS) and foresees the remaining central banks joining by the next year. This is a crucial advancement in its mission to reduce costs and streamline trading across the region’s 55 territories.

“Trade thrives where payments are efficient, and that’s why we can anticipate trade to flourish with improvements in payment efficiency,” explained John Bosco Sebabi, Deputy CEO of PAPSS, in an interview with CNBC Africa’s Godfrey Mutizwa.

Currently, over 80% of intra-African payments are routed through either Europe or the United States, incurring an estimated cost of up to $5 billion in fees and compliance costs. PAPSS, a collaborative initiative with the African Union, offers an alternative solution where participants can conduct transactions in their respective currencies without the need for a third-party currency, such as the U.S. dollar.

Key participants in this system include central banks, which will serve as regulators and clearinghouses, commercial banks, fintech companies, payment service providers, and businesses operating throughout the region.

Sebabi clarified that the intention is not to exclude the U.S. dollar but to facilitate trade. For instance, individuals in Zimbabwe or Rwanda will have their accounts debited in Zim dollars, credited in Rwanda francs, and central banks will reconcile the transactions in a mutually convenient currency.

The African Union initiated the Africa Continental Free Trade Agreement in January 2021, establishing the world’s youngest and largest trading bloc. With rapid ratification, this agreement created a common market with a combined gross domestic product of $3.4 trillion for the continent’s 1.3 billion inhabitants.

Despite its potential, the African region currently has one of the lowest levels of intra-regional trade, standing at around 18%, compared to Europe’s 70% and Asia’s 59%. Sebabi is optimistic that PAPSS will gain swift traction, saying, “This will roll out very, very quickly. We have 81 commercial banks on board, mainly from the West African monetary zone.”

Prominent Southern African participants include Standard Bank, the largest bank on the continent based on assets. Sebabi further emphasized that “payments will be made within as little as 7-10 seconds, with a maximum of 120 seconds. This payment system has the potential to significantly boost intra-African trade relations.”