Africa’s reliance on the dollar for cross-border transactions may soon diminish as the Pan-African Payments and Settlements System (PAPSS) under the African Continental Free Trade Area (AfCFTA) gains traction.
This payment system, launched in 2022, is set to reduce the need for transaction clearance through U.S. and European banks, a process that costs African businesses up to $5 billion annually in processing fees, according to Tunde Macaulay of Standard Bank Group.
Currently, more than 80% of cross-border payments from African banks are routed offshore. PAPSS aims to address this by facilitating intra-African trade in local currencies, potentially bringing an additional $50 billion of informal trade into the official economy.
Currently, intra-African trade constitutes only 16% of the continent’s commerce, compared to over 60% in the EU.
With 47 countries ratified and a market potential of 1.3 billion people, AfCFTA could become the world’s largest free-trade area by 2030.
However, the system could face resistance from the U.S., as President Donald Trump has pledged penalties for countries moving away from the dollar in trade.
