When Fidelis Adele, the CEO of Freetown-based Solid Graphics, a printing and communications company, needed to order some printing equipment from Nigeria in September, he paid an extra $165 on top of a $10,000 bank transfer to the seller.?Yet it took three days for the money transferred in Sierra Leone to be credited to the beneficiary＊s account in Nigeria.?
※I paid $30 as transfer fee, $35 as SWIFT charges and another $100 bank charges,§ Mr. Adele told?Africa Renewal. SWIFT stands for Society for Worldwide Interbank Financial Telecommunication, a global network that processes international payments.
Mr. Adele did not attempt to use financial services companies such as Western Union or MoneyGram because the ※exchange rate for those companies is just bad.§?
The other option would have been to fly to Lagos, a three-hour journey, carrying the physical cash along. ※I have done that a few times,§ he said, ※but it is not cost-effective unless it＊s a huge amount, and it is risky.§
Traders across Africa experience similar ordeal paying for goods or services across borders. In the process they lose valuable time and money.?
This cumbersome and time-consuming process ※costs us [Africans] about $5 billion in [money transfer] charges each year,§?according to Benedict Oramah, President of the??(Afreximbank), in an interview with?Africa Renewal. ※We are a poor continent. We shouldn't waste money like that.§
Payment system launched
To address the situation, Afreximbank has partnered with the African Continental Free Trade Area (AfCFTA) Secretariat to launch the??(PAPSS), a platform that facilitates instant cross-border payments in local currencies between countries.
The PAPSS has been piloted successfully in the six countries that make up the West African Monetary Zone (WAMZ)〞Nigeria, the Gambia, Sierra Leone, Liberia, Ghana and Guinea. Because of its multi-currency and bi-lingual makeup, WAMZ is considered a microcosm of the continent.
On using WAMZ for the pilot, Prof. Oramah says: ※The six WAMZ countries have different currencies. One of the countries is Francophone and the others are Anglophone. You have a big economy like Nigeria and then you have smaller economies. So anything that can go wrong in other parts of Africa would have gone wrong in the WAMZ, and we will have been able to address it during the piloting phase.§
The operational rollout of PAPSS was announced at the end of September, meaning that countries＊ central banks, which will be the clearing agents, can now coordinate with Afreximbank, which is the main clearing agent and provider of settlement guarantees and overdraft facilities.?
Afreximbank doled out $500 million to service West Africa and intends to provide a further $3 billion for an Africa-wide PAPSS operation.
Analysts expect African traders, especially those in West Africa, to begin to take advantage of the platform by the end of 2021.
Mr. Oramah, who is based in Cairo, Egypt, explains the hurdles faced by African traders in personal terms: ※I want to transfer money to Nigeria from Egypt. It goes through a corresponding bank in a country outside of Africa before it arrives in Nigeria. I pay charges before the person in Nigeria gets it.
※And it takes time. Sometimes it takes weeks. So, we [Afreximbank] calculated how much that costs the continent〞forget about the time〞it costs Africans $5 billion yearly.?
※Also, if I am in Egypt, and I want to watch my favourite Nollywood movies, I probably have to remit in US dollars. But the PAPSS changes that for you. All you need do is pay the Nigerian producer in Nigerian Naira.§
The CEO of PAPSS Mike Ogbalu says that during the piloting phase in West Africa, bank accounts in different countries were debited and credited within 10 seconds.??He has assured of a robust technology that can handle large transactions.
How PAPSS works
Sending money using the PAPSS is a five-step process:
- ?The first step is when an individual issues a payment instruction to their local bank or payment service provider.
- Second, the bank or the payment service provider??sends the instructions to PAPSS.
- Third, PAPSS validates the payment instruction.?
- Fourth, upon successful validation, PAPSS will forward the instruction to the beneficiary＊s bank or payment service provider.
- Lastly, the bank or payment service provide pays the transferred funds, in local currency, to the beneficiary.
In announcing the rollout of PAPSS, Afreximbank says that by ※simplifying cross-border transactions and reducing the dependency on hard currencies for these transactions, PAPSS is set to boost intra-African trade significantly.§ Intra-African trade is currently at a meagerly 17 per cent.
The PAPSS is also expected to lead to increases in value addition to products, jobs creation and more earnings for traders.
Wamkele Mene, the Secretary-General of AfCFTA Secretariat, said PAPSS will lead to efficient cross-border trade transactions and put Africa on a new economic trajectory.
"There are 42 currencies in Africa. We want to make sure that a trader in Ghana can transfer Ghanaian cedi to a counterpart in Kenya who will receive Kenyan shillings," Mr. Mene told?Africa Renewal?in an earlier?.
Mr. Adele agrees that PAPSS will help his business. ※If I can take the Leones to a bank here [in Sierra Leone] and pay for printing products in Nigeria, and the money is instantly deposited in the beneficiary＊s account in Nigeria, that would be extraordinary,§?he says.
Until briefed by?Africa Renewal, Mr. Adele was not aware of the PAPSS, underscoring the communication challenge of raising intra-African traders＊ awareness about the platform.
Mr. Oramah notes, however, that a campaign is underway to market and promote the PAPSS, hoping that by the end of the year African traders will be informed enough to use the system.
