The Pan African Payment Settlement System is reshaping trade financing in Africa by enabling local currency transactions across 22 countries.
Image: AI Ron
It is a sad fact of African trade that a typical finance transaction between two businesses in different countries on the continent first travels for vetting to New York or Europe before finding its way back to Africa, all the while gathering additional fees and costs.
Sometimes, clients wait days for approvals, putting African trade within the control of institutions outside the continent.
This is one of the stark facts that emerged at the Africa Trade Conference 2026, hosted by Access Bank on Wednesday in Cape Town, where delegates raised the significant cost of trade finance as a major factor that inhibits intra-continental trade.
At the conference, Dr Kennedy Mbekeani, Director General of the African Development Bank's Southern Africa region, said Africa's markets are fragmented, small, and underdeveloped. This fragmentation is why the war in Ukraine has resulted in a food crisis in some African countries and why the Middle East crisis has caused food and fuel uncertainty on the continent.
He said this market fragmentation is a choice by African governments, and opening their borders to trade will result in much bigger trade and economic benefits for them.
Mike Ogbalu, CEO of the Pan African Payment Settlement System (PAPSS), stated that their payment system aims to bring control of African trade financing back to the continent. Introduced in 2022, it is now active in 22 African countries and across 170 banks on the continent.
Originally launched by the African Union and the African Export-Import Bank to facilitate cross-border payments in local African currencies, without having to convert to a hard currency, Ogbalu noted that they initially targeted a 120-second timeframe for a typical transaction to be concluded.
In fact, this is now turning out to be about 12 seconds, compared to transactions that previously often took days to conclude.
He said that the technology for this platform was developed on the continent and represents a novel way to address, for instance, the vulnerability of traders to foreign currency movements during inter-continental trade.
It also provides a solution for traders who invest in African countries but later find that their capital cannot be externalised.
Additionally, it offers a good way to make payments to various places in Africa in local currency. "PAPSS is world-class financial infrastructure built to world standards," he said.
Ogbalu explained that PAPSS is governed through four layers, with the top layer comprising a board of African central bank governors.
Mbekeani saidthat the African Continental Free Trade Area is a significant development towards intra-regional trade on the continent, but its benefits would be felt unevenly.
The free trade area would fail if it did not also produce infrastructure benefits for low-income countries. Part of overcoming this challenge is convincing governments that they need to work in partnership with the private sector and other stakeholders in the development and operation of infrastructure.
"We have regulations to boost economic growth within countries, we have regulations to boost stability and peace, but we require better regional integration to bring stability on the continent. However, even if you achieve regulatory harmony, you still need the infrastructure," he said.
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