President William Ruto has urged local banks and payment service providers to join the Pan-African Payment and Settlement System (PAPSS) developed by the African Export –Import Bank (Afreximbank) to accelerate trade within the continent.
Speaking when he opened the 3rd Kenya International Investment Conference (KIICO) in Nairobi, President Ruto said the system is key in resolving currency disparities that exists in the continent, a factor that is to blame for the low African intra-trade.
“Afreximbank has built a mechanism where all our traders can trade in local currency and we leave it to Afreximbank to settle all the payment in local currency. We do not have to look for dollars. Our business people, trader will concentrate on moving goods and services and leave the odious task of currency to Afrexim bank,” said President Ruto.
PAPSS which has been developed by Afreximbank and African Continental Free Trade Area (AfCFTA) Secretariat seeks to link African central banks, commercial banks and financial technology firms in order to carry out faster and less costly transaction within the continent.
According to the International Monetary Fund (IMF), only 12pc of payments of intra-African payments were cleared within the continent in 2017.
“Without a single payment platform, payment instructions from one African country to the other typically passes several intermediary financial institutions leading to increased cost, complications, problems and unnecessary currency fluctuations and ends up being a whole ecosystem of confusion,” he reiterated.
The use of hard currencies such as the dollar to settle payments has seen most of 42 African currencies weaken against the dollar, a move that has increased public debt and raised prices of imported goods surge leading to high inflation that has been witnessed in the continent.
Additionally, private sector layers in African have been urged to avail funding to bridge the infrastructure gap and enhance connectivity in Africa.
“In our engagement, the government should work together with private sector, civil societies and other actor to ensure that the Africa Continental Free Trade Area (AfCFTA) does to fail,” urged President Azali Assoumani of the Union of Comoros who also serves as the Chairperson of the AU Assembly of Heads of State and Government.
Private sector funding is expected to help in development of additional airports, ports, roads and rail in order to boost African intra-trade that currently lags behind at 17pc compared to 40pc in Asia, 60pc in America and 70c in Europe.
“The private sector is absolutely critical to the implementation of the AfCTA. In Africa the private sector is estimated to account for about 80pc of total production, 67pc of investments, 75pc of credit available in the market and of course employs 90pc of people of working age,” added Wamkele Mene, Secretary General, AfCFTA.
Kenya, Uganda, Ethiopia, Eritrea and Rwanda are currently in talks on how to consolidate air transport and have a regional airline to seamlessly move goods and people within the region.
“We have agreed that going forward, the ministers of trade will work together with ministers of finance in respective countries so that as we finish deferent levels of tariff negotiations then our finance ministers and our customs authorities can take the next steps and publish the tariff books so that they can start to have effective meaning,” said Moses Kuria, Cabinet Secretary for Trade, Investments and Industry.
The three day conference which is being attended by more than 2000 delegates is expect to end on Wednesday.
