As we all witness the new economic crises in the world and wars between Russia and Ukraine that had an impact of world economy. Africa is trying to use their local currency to trade between countries. There has been a big conversion in trade because African countries have use US dollar to trade.
Wamkele Mene, secretary general of the AfCFTA Secretariat say that we wane expand the trades to other countries and help local economies in African continent.
The currency conversion in US dollars was more than 4.5 billion annually.
Moving away from the US dollar is a big step in making local economies stronger and more efficient in trade.
William Ruto the president of Kenya announces the „pan African payment settlement system PAPSS “. The PAPSS payment method across African borders in local currency supports three core processes:
• Instant payment,
• Pre-funding and,
• Net settlement.
„How instant payments work
With Instant payment, participants no longer need to convert local currencies into hard currencies which then entailed the funds leaving Africa to be converted before being sent back again to the beneficiary bank – adding days to the transaction time. In addition, compliance, legal and sanctions checks are performed instantly within the system. Near-instant payments process within 120 seconds. “
„How pre-funding works
Due to the speed of the real-time payment process, PAPSS needs to guarantee that funds are available to complete the originator’s transaction before effecting the movement of debits and credits between participants’ accounts. Participants must, therefore, agree to a pre-funding arrangement. Direct Participants integrate directly with PAPSS and the real-time gross settlement (RTGS) systems of central banks in the pre-funding process. Participants without an RTGS account – Indirect Participants – are able to fund or defund their clearing accounts on PAPSS with the aid of a Direct Participant providing the required liquidity.“
Notifications are carried via the ISO 20022 messaging standard, notifying PAPSS, the Participants and RTGS of the status of every stage of the transaction.
„How settlement works
PAPSS needs to ensure prompt settlement within 24 hours. Net settlement across all participating central banks occurs at the same time – 11.00 UTC – each day. As with the pre-funding process, notifications are carried via an ISO 20022 messaging system, notifying PAPSS, the Participants and RTGS of the status of every stage of the transaction. „