Africa’s ambitious free trade project is set to expand its pilot payment system to 31 countries this year, as it seeks to boost intra-regional trade and economic integration.
The African Continental Free Trade Area (AfCFTA), which came into force in 2019, aims to create a single market for goods and services across the continent, with a population of 1.3 billion people and a combined GDP of $3.4 trillion. The bloc has already launched a Guided Trade Initiative (GTI) in seven countries, including Egypt, Ghana, Kenya, and Rwanda, to test the operational and legal aspects of the trade regime.
One of the key components of the GTI is the Pan-African Payment and Settlement System (PAPSS), which enables cross-border payments in local currencies, reducing the reliance on hard currencies and transaction costs. The PAPSS, developed by the African Export-Import Bank (Afreximbank), is expected to facilitate trade worth $5 billion annually and save $5 billion in foreign exchange fees, according to the AfCFTA Secretariat.
The PAPSS will be rolled out to 24 more countries in 2024, covering all the regions of the continent, said Wamkele Mene, the Secretary-General of the AfCFTA Secretariat, in an interview with Bloomberg. He added that the system will also be linked to the regional payment platforms of the Economic Community of West African States (ECOWAS) and the Southern African Development Community (SADC), creating a seamless network for intra-African transactions.
The expansion of the PAPSS is part of the AfCFTA’s efforts to address the challenges of non-tariff barriers, such as infrastructure gaps, customs delays, and regulatory hurdles, that hamper trade flows within Africa. Currently, intra-African trade accounts for only 14.4% of the continent’s total exports, compared to 52% in Asia and 72% in Europe, according to the UN Economic Commission for Africa (UNECA).
The AfCFTA also aims to promote industrial development, value chain integration, and economic diversification, as well as to enhance the competitiveness of African economies in the global market. The bloc has recently adopted a Protocol on Investment, which sets the rules and standards for attracting and protecting intra-African investments. The Protocol is expected to boost investor confidence and foster a conducive business environment in the continent.
The AfCFTA’s vision is to make Africa a destination for sustainable and inclusive investments, in line with the Agenda 2063, the continent’s long-term development framework. The bloc is also working on other protocols, such as intellectual property rights, competition policy, and e-commerce, to further enhance the trade and investment landscape in Africa.
Despite the challenges posed by the Covid-19 pandemic, the AfCFTA has maintained its momentum and optimism, as it enters its third year of operation. The bloc has also received support from various partners, such as the World Bank, the European Union, and the United States, which have pledged to provide technical and financial assistance for its implementation.
As the AfCFTA continues to advance its agenda, it hopes to inspire and empower millions of Africans to reap the benefits of free trade and economic integration, and to contribute to the continent’s prosperity and peace.
Source: Bloomberg
