The Pan-African Payment and Settlement System seeks to liberate the continent from the dollar without waiting for a common currency – but there are hurdles to overcome. File photo
As South Africa and its continental neighbours grapple with currency instability, downgraded credit ratings and fragile economies, a quiet financial revolution is taking shape, one that could determine the future of intra-African trade and the continent’s financial autonomy.
At the heart of this is the Pan-African Payment and Settlement System (PAPSS), a homegrown technical platform launched to allow African countries to trade in their own currencies without relying on the US dollar or the euro.
But is Africa ready to trade with itself?
PAPSS vs The dollar trap
The PAPSS, developed by the African Export-Import Bank (Afreximbank) in partnership with the African Continental Free Trade Area (AfCFTA) Secretariat, promises to slash transaction costs and enable instant cross-border payments. The idea is politically attractive: let a South African importer pay in rands while a Kenyan exporter receives shillings all in real time, with no need to route funds through New York or Frankfurt.
In theory, this could unlock vast economic potential. Africa currently settles more than 80% of its cross-border payments through external correspondent banks, often in the US or Europe. This reliance not only incurs high costs and delays but also exposes African trade to global shocks, compliance bottlenecks and foreign exchange constraints. The PAPSS aims to change that by enabling direct currency-to-currency transactions within the continent.
Yet the challenges facing the PAPSS and its backers are formidable. Afreximbank, the system’s main financier and strategic driver, is under pressure. A string of African sovereign downgrades by international credit agencies has heightened scrutiny of Afreximbank’s loan book and its exposure to high-risk borrowers. Ghana, Kenya, Nigeria and Ethiopia have faced rating downgrades in the past two years, raising concerns about the quality of collateral and repayment capacity.
This creates a credibility problem: can a regional institution with increasingly fragile clients underpin a pan-African payment infrastructure? Afreximbank’s growing liabilities, if not offset by capital injections or improved repayment profiles, could stall the rollout of the PAPSS and erode confidence among participating states.
A digital detour around a single currency
Africa has long toyed with the dream of a single currency. The Abuja Treaty of 1991 set out a roadmap toward an African Monetary Union. But political differences, economic disparities, and the complexity of ceding monetary sovereignty have stalled the project for decades.
Instead of a single currency, the PAPSS champions interoperability: the capacity for different financial systems, currencies and platforms to communicate and transact with each other seamlessly. In essence, it’s a digital workaround. Rather than replace the rand, naira or cedi, the PAPSS enables these currencies to speak to each other in real time.
This approach is technologically feasible, politically palatable and potentially transformative. But it demands more than just software. Interoperability requires legal harmonisation, institutional cooperation and robust digital infrastructure. For example, payment messages must conform to common standards such as ISO 20022; anti-money laundering procedures must be synchronised; and all actors must trust the system’s settlement finality.
As of mid-2025, the PAPSS is live in parts of West Africa and has integrated with 13 central banks and 28 commercial banks. It has signed partnerships with MFS Africa, one of the continent’s largest digital payment networks, and the Arab Monetary Fund’s BUNA system, extending its interoperability to the Middle East.
Yet the system remains in pilot mode in many regions. South Africa, despite having one of the most advanced national payment systems on the continent, has not joined the PAPSS. The South African Reserve Bank has taken a cautious stance, citing the need for security, legal clarity, and risk mitigation.
The credibility gap: Afreximbank under strain
The credibility of Afreximbank is central to the PAPSS’s success. The bank has earned praise for its role in facilitating trade finance and responding to crises, such as its $3 billion Covid-19 response facility. But its balance sheet is under strain. With several borrower countries facing liquidity crunches and International Monetary Fund bailouts, Afreximbank’s ability to support the PAPSS in a sustained, scalable manner is uncertain.
Global investors have taken note. Yields on Afreximbank bonds have risen, reflecting perceived risk. Meanwhile, Western partners have raised questions about the bank’s exposure to politically unstable regimes and non-performing loans. These dynamics complicate Afreximbank’s role as the financial bedrock of the PAPSS.
This matters because credibility is currency in financial markets. Central banks, commercial banks, and fintech firms will only integrate into the PAPSS if they believe it is backed by a solvent, transparent, and technically robust institution. Any hint of fiscal fragility could deter adoption and send participants back to the familiarity of the dollar.
Currency instability
Currency volatility is perhaps the greatest threat to the PAPSS. In 2024 alone, the Ghanaian cedi fell 25% against the dollar, while the Nigerian naira lost more than 35% of its value. Inflation, budget deficits, and political instability continue to plague many African economies.
This instability has real consequences. When currencies are volatile, businesses are reluctant to price goods in local money. Exporters demand hard currency, and importers hedge their bets. The PAPSS, by enabling local-currency settlement, assumes that market participants have confidence in the relative value of domestic currencies. But this is often not the case.
Moreover, the legacy of hyperinflation, capital controls, and bank insolvencies in parts of Africa has left a deep scar. Trust in digital financial infrastructure cannot be separated from trust in national macroeconomic policy. If businesses doubt that today’s kwacha will hold value tomorrow, they will bypass PAPSS regardless of its technical appeal.
An ambivalent South Africa
South Africa’s ambivalence toward the PAPSS reflects a broader tension. On one hand, the country is committed to regional integration and expanding intra-African trade. On the other, its sophisticated financial ecosystem, anchored by the National Payment System, is wary of being linked to less stable regimes.
The reserve bank has long promoted interoperability within its own borders and maintains strong oversight of domestic payment providers. But integrating with the PAPSS means embracing a shared digital infrastructure, with all the attendant risks: inconsistent regulatory enforcement, lower cybersecurity standards, and potential exposure to volatile currencies.
Nevertheless, South Africa’s participation could be a game-changer. As the continent’s second-largest economy and a financial hub, its endorsement would lend credibility and accelerate adoption. The key may lie in phased integration, beginning with controlled corridors and bilateral settlements.
The SME factor: Who benefits?
One of the PAPSS’s strongest arguments is its potential to empower small and medium-sized enterprises (SMEs). These businesses, which form the backbone of African economies, are often priced out of cross-border trade because of high banking fees, currency conversion costs and regulatory red tape.
By simplifying payments, reducing costs, and enabling local currency use, the PAPSS could democratise trade. SMEs in Lesotho could source raw materials from Uganda without involving US-based banks. But this will only happen if the PAPSS becomes truly accessible. User interfaces, compliance processes and dispute resolution mechanisms must be tailored to small businesses, not just large corporates.
The road ahead
The PAPSS offers a tantalising glimpse of what an integrated African economy could look like: fast, frictionless and financially sovereign. But realising that vision requires more than technology.
First, digital infrastructure must improve. Many African countries lack the bandwidth, cybersecurity protocols, and cloud services to support real-time payments at scale. Second, regulatory harmonisation must be accelerated. Disparate licensing regimes and data protection laws can obstruct cross-border fintech cooperation.
Third, the issue of political will remains. The success of the PAPSS depends on the willingness of African governments and central banks to invest in a shared future. This includes difficult reforms: liberalising capital markets, building credible institutions, and curbing fiscal indiscipline.
Finally, trust must be earned. The PAPSS must deliver consistent results, enforce its rules impartially, and protect users from fraud and abuse. Only then will businesses switch from legacy systems to a truly African financial network.
The PAPSS seeks to liberate the continent from the dollar without waiting for a common currency. It bets on digital innovation as a substitute for monetary union. And it entrusts regional institutions like Afreximbank with a task usually reserved for global giants.
Whether it succeeds will depend on how well Africa manages its contradictions: political instability vs. integration, sovereignty versus cooperation, ambition versus capacity. For now, the PAPSS remains a work in progress but one well worth watching.
Rafia Akram is a lecturer in mercantile law.