Kenya has made a significant move by securing the hosting rights for Papss, a pan-African payment and settlement system. This positions Kenya at the forefront of Africa’s efforts to reduce reliance on the US dollar.
President William Ruto announced this development, highlighting that the platform is expected to save the continent approximately $5 billion. It will enable traders to settle deals using their respective national currencies.
History of PAPSS
The Pan-African Payment and Settlement System (PAPSS) is a centralized system designed to facilitate trade within Africa for goods and services.
Launched in January 2022 by the African Union (AU) and the African Export-Import Bank (Afreximbank), it supports trading activities under the African Continental Free Trade Area (AfCFTA).
PAPSS enables companies in Africa to conduct intra-African trade transactions using their local currency, resulting in reduced costs and faster settlement and payment processes.
In February 2024, the AU’s Assembly of Heads of State and Government will officially adopt PAPSS, marking a significant milestone in fostering financial independence and integration across the continent.
Operational mode
According to the report, the PAPSS platform aims to enable smooth cross-border transactions. This means that a trader in one participating country can instruct their local bank to make a payment to a supplier in another country using their own local currency.
The trader’s bank will then send instructions to PAPSS, which conducts validation checks before settling the payment through the supplier’s local bank in their respective currency, all in real-time.
This process ensures secure and validated transactions within the framework of the pan-African payment and settlement system.
Kenya and financial innovation
Kenya has emerged as a leader in financial innovation on the African continent. Not only has it attracted a significant portion of venture capital funds in Africa, but it also hosted the Inaugural Africa Digital Finance Summit in 2021 and again in 2022, showcasing its dedication to transforming the financial landscape.
Furthermore, Kenya has taken proactive measures to regulate the use of cryptocurrency within the country. It has also become a hub for successful blockchain projects across the continent, including Kontani Pay, COIN AFX, EasyFlip, TRADDIFY, and many more.
AfCFTA for the advancement of Africa
The President of Kenya praised the country’s position as a technology leader and its support for the African Continental Free Trade Area (AfCFTA).
He expressed pride in backing institutions that promote continental integration and gladly accepted the responsibility of hosting the headquarters for the pan-African payment system in Kenya.
Wamkele Mene, the Secretary-General of AfCFTA, emphasized the historical importance of establishing a unified payment system and integrated market, which aligns with the founding principles of the Organization of African Unity in May 1963.
Highlighting the development as a pivotal stride in digital innovation for inclusive trade, Wamkele emphasized its significance in achieving the founding goals of African unity.
He expressed remorse for the extended timeline and disclosed that the primary beneficiaries of the African payment and settlement system are small and medium enterprises, along with young entrepreneurs who struggle with currency conversion costs.
