Understanding PAPSS - A Take on Africa's New Payment System and it's Impact on Zambia.

Ever thought about how money moves between African countries, or how this affects trade? Africa’s new Pan-African Payment and Settlement System (PAPSS) aims to simplifying cross-border transactions and empowering local economies. PAPSS represents a real shift for African trade, and here’s why it matters for Zambia and Africa’s economic landscape.

The Problem Before PAPSS

Historically, African cross-border transactions were often routed through foreign intermediaries, adding costs and delays. For example, if a Zambian business wanted to pay a Kenyan supplier, funds would often go through banks outside Africa, such as in Europe or America, adding layers of complexity, higher transaction fees, and extended processing times. This inefficiency has been a barrier to inter-African trade and integration, impeding growth.

What is PAPSS?

PAPSS is a revolutionary financial infrastructure designed to streamline and localize payments across African nations. Launched by the African Union and the African Export-Import Bank (Afreximbank), PAPSS offers a new framework that allows instant payments in local African currencies for cross-border trade. Think of PAPSS as a digital bridge for payments across the continent. With PAPSS, businesses and consumers in Zambia and elsewhere can make and receive payments across African borders in real time, without needing to convert funds into a foreign currency. This is expected to have a profound impact on trade volume and economic integration.

Why Zambia’s Involvement Matters

In December 2022, Zambia joined PAPSS, positioning itself to reap the benefits of a connected African financial ecosystem. This participation holds several key advantages for Zambian businesses and the national economy:

1. Reduced Costs: By eliminating the need for foreign intermediaries, PAPSS significantly reduces the cost of transactions. Zambian companies will save on foreign exchange and bank fees, making African trade more financially viable.
2. Speed and Efficiency: Cross-border payments that used to take several days can now be completed in seconds. This efficiency can improve cash flow, enabling Zambian businesses to operate more flexibly and efficiently within African markets.
3. Enhanced Trade Opportunities: With a simplified payment system, Zambia can expand trade ties within Africa, stimulating economic growth and diversification. This supports the African Continental Free Trade Area (AfCFTA) goals of boosting intra-African trade.

The Broader Impact

Africa Working Together PAPSS is uniting African nations under a shared vision of economic collaboration. The system has already connected over 115 banks across Africa, allowing businesses and consumers alike to operate in an integrated financial environment.

PAPSS is transforming Africa’s economic landscape by enabling real-time cross-border payments in local currencies. For Zambia, it means new opportunities for growth, cost savings, and strengthened trade ties across the continent. As Zambia becomes an active participant in this new payment ecosystem, it stands to gain from an Africa that is not just trading with the world but actively trading with itself.

• 2022 National Payments Systems Annual Report - Bank of Zambia

Disclaimer: The information provided in this article reflects my personal opinions and is intended for informational purposes only. It should not be considered financial or investment advice. Please consult a qualified financial advisor before making any financial?decisions.