The secretary-general of the African Continental Free Trade Area (AFCFTA) secretariat, Wamkele Mene, says Africa will “one day have a common currency” via a proposed “Pan-African Payment and Settlement System (PAPSS).” He adds that such a currency will help “ease constraints of settling intra-African trade in foreign-denominated currency.”
Challenges Ahead
In comments recently carried by regional news outlet This Day, Mene admits that challenges will be encountered before the dream of a common currency is finally realized. However, to illustrate his own conviction that this objective will be achieved soon, Mene points to the situation before the realization of AFCFTA when “people never thought that there would ever be a free trade area in Africa.”
AFCFTA is a free trade area that was founded in 2018 with trading commencing about two years later on January 1, 2021. The free trade area was created by the AFCFTA agreement among 54 of the 55 African Union nations. Using the history of AFCFTA’s creation as the basis for his enthusiasm, the secretary-general added:
But we now have it [AFCFTA]. And so I am confident that one day the African continent will have a single currency. Though there are a range of issues to be considered regarding macro-economic convergence. Thankfully, there are departments in the African Union (AU) to deal with the complexities about how we get to a single currency for the African continent. But certainly, it is a positive step that will facilitate intra-African trade.
Cost of Currency Conversion
In the meantime, the report also quotes Mene sharing some new details about the proposed Pan-African Payment and Settlement System (PAPSS) whose pilot phase commenced in June 2021. According to Mene, this trial stage enables “trading within the free trade area to be done in the local currencies of each member state.” On why such a payment system is needed, the secretary-general explained:
“We have 42 currencies in Africa. The cost of converting currencies amounts to $5 billion a year. This is a very big amount of money that can be seen as revenue foregone. So we want to reduce and eliminate this cost to converting currencies in Africa for the purpose of trading.”
Although only six countries are part of the pilot phase so far, Mene says he is hopeful that “the platform will be available for all African countries that want to switch on to it by the end of this year.”
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