Africa’s money is finally moving closer to home

African trade has always moved faster in theory than in practice. Goods and services cross borders every day, but the money behind them has often taken a longer route – through offshore correspondent banks, hard currencies and unnecessary delays. Even simple transactions between African countries have typically required conversion into US dollars or Euros and days to settle, adding cost and discouraging many smaller businesses from trading regionally at all. AfCFTA set out to change that reality, but policy alone was never enough. Trade at scale depends on infrastructure that works and systems that allow value to move directly, efficiently and within the continent.

For decades, slow settlement, high fees and currency risk acted as a quiet brake on intra-African trade. Regional commerce remained possible, but complex and uncertain, particularly for small and medium-sized businesses. The result was a continent trading far less with itself than its economic potential would suggest. The Pan-African Payment and Settlement System (PAPSS) is designed to remove that friction. By allowing transactions to settle directly in local currencies, it shortens the distance between buyer and seller and keeps value within Africa’s financial system.

“It fundamentally changes how trade works on the continent,” says Thulani Babeli, Consultant at Elenjical Solutions. “For years, African countries have had to trade through external systems. When payments move directly between local currencies, faster and at lower cost, cross-border trade becomes viable for far more businesses.”

The benefits extend beyond speed and cost. Faster settlement improves trust between counterparties and lowers the risk associated with cross-border transactions, particularly for smaller firms that have historically operated at the margins of formal trade.

One of the most significant developments linked to PAPSS is the planned creation of a pan-African currency marketplace. African currencies have long suffered from fragmented liquidity and opaque pricing, often shaped more by offshore markets than by real trade flows within the continent. A shared FX marketplace introduces a different dynamic. Financial institutions across Africa will be able to quote, trade and settle currencies within a single framework, improving transparency and helping to build liquidity where it has historically been thin.

“Many African currencies are still priced in environments that have little to do with African trade itself,” says Shivaskar Naidoo, Analyst at Elenjical Solutions. “A continental FX marketplace allows currencies to be priced within Africa, based on real demand between African economies. That improves confidence for banks and businesses alike.”

For South Africa, the implications are clear. The country has one of the continent’s most mature financial systems, with established FX markets, strong governance and deep institutional expertise. In a more integrated African FX environment, South African banks are well positioned to act as liquidity providers and market makers, supporting regional trade while strengthening their own role across the continent.

Trade integration is not only about wholesale markets and balance sheets. Retail commerce, tourism, e-commerce and remittances all depend on payment systems that function smoothly across borders. In this context, the development of a pan-African card scheme is a quieter but important part of the picture.

Global card networks dominate African markets, but they were not built with intra-African trade in mind. Transactions often default to hard currencies; fees remain high and settlement can be slow. A continent-wide card scheme allows payments to settle locally, reducing cost and complexity for consumers and merchants.

“For consumers and small businesses, the difference is very practical,” says Babeli. “When payments are instant and settle locally, cross-border trade stops feeling exceptional and starts to feel routine.”

Despite its financial sophistication, South Africa has so far taken a cautious approach to PAPSS adoption. Regulatory pressures have understandably dominated recent years. With those easing, attention is beginning to shift.

“There is a relatively small window where institutions can still influence how this ecosystem develops,” Babeli says. “Early participation means helping to shape standards and build liquidity. Waiting too long means adapting to decisions already made elsewhere.”

AfCFTA provides the vision of a single African market. PAPSS is laying the underlying foundations – FX, payments and settlement – that make that vision workable. Its success will not be measured in announcements, but in whether African trade becomes easier, faster and more predictable over time. As currencies begin to trade more freely with each other and payments settle closer to where value is created, the centre of gravity shifts. African commerce becomes less dependent on external systems and more defined by its own needs. Borderless trade will not arrive overnight but the foundations are being laid.

Original Article – Africaneyereport.com