The Secretary-General of the African Continental Free Trade Area (AFCFTA) Secretariat, Wankele Mene, stated that Africa will “one day have a common currency” through the proposed “Pan-African Payment and Settlement System (PAPSS).” He added that this currency will help “alleviate restrictions on intra-African trade settlements denominated in foreign currencies.”
Challenges for the future
In a recent comment made by the regional news outlet This Day, Mene acknowledged that there will be challenges before the dream of a common currency is finally realized. However, in order to show his belief that this goal will be realized soon, Mene pointed out the situation before the realization of the African Free Trade Area. At that time, “people never thought that there would be a free trade area in Africa.”
AFCFTA is a free trade zone that was established in 2018 and will start trading on January 1, 2021, about two years later. The free trade zone was established in 54 of the 55 African Union countries in accordance with the AFCFTA agreement. The Secretary-General used the history of AFCFTA as the foundation of his enthusiasm, adding:
But we now have [AFCFTA]. So I believe that the African continent will one day have a single currency. Although there are a series of issues that need to be considered in terms of macroeconomic convergence. Fortunately, the African Union (AU) has a department responsible for handling the complexities of how we implement a single currency for the African continent. But there is no doubt that this is a positive step to promote intra-African trade.
Currency conversion cost
At the same time, the report also cited some new details shared by Mene, regarding the proposed Pan-African Payment and Settlement System (PAPSS), which will begin its pilot phase in June 2021. According to Mene, this experimental phase enables “trade in the free trade zone to be conducted in the local currency of each member country.” As to why such a payment system is needed, the Secretary-General explained:
“We have 42 currencies in Africa. The cost of converting currencies is as high as $5 billion per year. This is a very large amount of money and can be seen as a loss of income. Therefore, we hope to reduce and eliminate the exchange of currencies in Africa for transactions the cost of.”
Although only six countries are in the pilot phase so far, Mene said that he hopes that “by the end of this year, all African countries that wish to switch to the platform can use the platform.”
Do you think the common currency in Africa is coming soon? Tell us what you think in the comments section below.
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