FILE PHOTO: A man uses an iPhone 7 smartphone to demonstrate the mobile payment service Apple Pay at a cafe in Moscow, Russia, October 3, 2016. REUTERS/Maxim Zmeyev

The Africa Export-Import Bank has added 11 African central banks to its flagship Pan- African Payment and Settlement System (PAPSS) and expects the rest to join by next year, a key step in its drive to cut costs and simplify trading across the region’s 55 territories.

“Trade goes well where payments can be made easily, and this is why we can only see trade pick up if we see improvement in efficient payments,” John Bosco Sebabi, PAPSS deputy CEO told CNBC Africa’s Godfrey Mutizwa this week.

Over 80 percent of intra-African payments currently go through either Europe or the United States, a process Afreximbank estimates costs as much as $5 billion in fees and compliance costs. It says PAPSS, a partnership with the African Union, will provide an alternative in which participants will transact in their own currencies without the need for a third party currency like the U.S. dollar.

Key participants in the system include central banks, which will act as regulators and clearance agents, commercial banks, fintechs, payment service providers and their customers comprising businesses across the region.

“The issue here is not the exclusion of the U.S dollar but to be able to ease this. For those in Zimbabwe or Rwanda, for example, PAPSS will debit their accounts in Zim dollars, credit their accounts in Rwanda francs and then the central banks work it out in any currency convenient to them,” Sebabi said.

The Africa Union launched the Africa Continental Free Trade Agreement in January 2021, the youngest and largest trading bloc in the world after rapid ratification creating a common market with a combined gross domestic product of $3.4 trillion for the continent’s 1.3 billion people.

The region has the lowest intra-regional trade volumes in the world at about 18 percent, compared with Europe’s 70 percent and Asia’s 59 percent. Sebabi expects PAPSS to gain traction quickly.

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“This will rollout very, very quickly. We have got 81 commercial banks on board, mostly from the West African monetary zone,” he said.

Southern African participants include Standard Bank, the continent’s largest bank by assets. People “will make payments within as little as 7-10seconds, with a maximum of 120seconds. This payment system has the ability to further advance intra-African trade ties.”