Kenya faces an anxious wait for the outcome of its bid to become the regional headquarters for the newly established pan-African payments system in Nairobi.
President William Ruto, who has been a strong advocate for Kenya’s involvement in regional trade, recently expressed his willingness for Nairobi to become the host city for the payment platform’s headquarters.
The Pan-African Payments and Settlement System (PAPSS) was officially launched in January of last year.
The payment platform allows companies in Africa to pay for intra-African trade transactions in their local currency, which is a significant advantage as Africa currently has about 42 individual currencies.
This system is a collaborative effort between the Africa Continental Free Trade Area (AfCFTA), the Africa Import-Export Bank (Afreximbank), the African Union (AU), and various African central banks.
According to Mike Ogbalu, the CEO of the platform, the final decision regarding the hosting country will be determined by the Association of African Central Banks (AACB), which consists of all the chiefs of the central banks in Africa.
The Association draws membership from all African Central Banks Governors. “We have been working with the AACB and at the last engagement that we had what they had said is that they will communicate to PAPPs the recommendations that they have in terms of the guidelines
“We are still waiting for that recommendation.”
President Ruto had said: “Kenya is a champion and we have been asked to host the headquarters of the Pan African Payment Systems in Kenya.”
“Because we are leaders in the technology space and because we are promoters of the continental free trade area and any institution that supports the integration of our continent, we have gladly accepted to host the headquarters of the pan-African payment system headquarters in Kenya.”
The new payment platform was formally launched in January last year. It is a centralised payment and settlement system for intra-African trade in goods and services.
According to Afreximbank President Benedict Oramah, the innovative system has the potential to save businesses in Africa $5 billion (Sh755 billion) in transaction costs annually, if fully embraced.
The key to these savings lies in the elimination of the need for traders and investors to convert their respective currencies into the US dollar, which in turn reduces the strain on local currencies.
This is particularly significant given the challenges faced in obtaining US currency locally due to the recent depreciation of the shilling.
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Kenyan businesses across various sectors have expressed their frustration in accessing sufficient amounts of dollars, resulting in delays in making payments to overseas suppliers. In response to these concerns, President Ruto has pledged to address the dollar crisis.
Some Kenyan traders have even been forced to downsize their operations due to the inability to reliably source enough dollars.
Currently, when a buyer in Kenya wishes to purchase goods from a seller in Uganda, he or she is required to pay in a third currency from outside the continent, such as the US dollar, Euro or British pound.
However, the new system aims to facilitate instant payments, eliminating the need for traders in Kenya and other regional countries to convert their local currencies into hard currencies.
This development is set to streamline and simplify trade transactions within Africa. Central Bank of Kenya (CBK) Governor Kamau Thugge says the new system is timely and could help alleviate the foreign exchange currency shortage.
He stated that the platform would enable Kenyan traders to tap into opportunities from the African Continental Free Trade Area (AfCFTA).