Kristina Roberts
Africa is taking big steps to create its own payment systems that do not depend on the US dollar. This move is meant to make trade between African countries cheaper and easier. For a long time, African businesses had to use dollars to trade with each other, even if they were neighbors. This made things more expensive and complicated. Now, with new systems like the Pan-African Payment and Settlement System (PAPSS), African countries can trade using their own local currencies instead of dollars.
The idea of using African currencies for trade is not new, but it is finally becoming a reality. PAPSS, which started in 2022, allows businesses in different African countries to pay each other directly in their own money. For example, a company in Kenya can buy goods from Zambia and pay in Kenyan shillings, while the Zambian seller receives payment in Zambian kwacha. This avoids the need to convert money into dollars first, which saves a lot of costs.
Mike Ogbalu, the CEO of PAPSS, explained that the goal is not to completely remove the dollar but to make trade easier for African businesses. “If you look at African economies, you’ll find that they struggle with availability for third-party global currencies to settle transactions,” he said. Right now, African banks often rely on foreign banks to handle payments between countries, which adds extra fees and delays. By using local currencies, Africa could save up to $5 billion every year in unnecessary costs.
Trade within Africa is much more expensive than in other parts of the world. According to the United Nations, trading between African countries costs 50% more than the global average. One reason for this is the high cost of using dollars for payments. Another reason is poor infrastructure, like bad roads and slow ports. But if African countries can trade directly in their own currencies, it will help businesses grow and create more jobs.
Not everyone supports this move away from the dollar. US President Donald Trump has warned countries against trying to stop using the dollar in trade. The US government wants the dollar to remain the world’s main currency because it gives them economic power. However, many countries, including China and Russia, are also looking for ways to reduce their dependence on the dollar. Africa’s decision to build its own payment systems is part of this global trend.
South Africa, which is leading the G20 group of major economies this year, is also pushing for more use of local currencies in trade. The country wants to encourage African nations to rely less on the dollar and more on their own money systems. This could help African businesses become more competitive and strengthen the continent’s economy.
PAPSS is growing quickly. When it first started, only 10 banks were part of the system. Now, over 150 banks in 15 African countries, including Kenya, Zambia, and Tunisia, are using it. Mike Ogbalu said that the number of transactions is increasing, though he did not share exact numbers. The World Bank’s private lending arm, the International Finance Corporation, has also started giving loans to African businesses in local currencies instead of dollars. This is another sign that Africa is serious about reducing its reliance on the US dollar.
Experts say that using local currencies for trade will help African economies grow. Daniel McDowell, a professor at Syracuse University in the US who studies international finance, said, “The existing financial network that is largely dollar-based has essentially become less effective for Africa, and costlier.” By creating their own payment systems, African countries can keep more money within the continent instead of losing it to high transaction fees.
Africa trades much more with countries outside the continent than with its own neighbors. A report by MCB Group, based in Mauritius, showed that 84% of Africa’s trade is with other continents. This is because trading within Africa is difficult and expensive. If African countries can make trade easier and cheaper, businesses will buy more from each other, which will help the whole continent grow.
The success of PAPSS and other local payment systems could change how Africa does business. Instead of depending on the dollar, African nations can use their own currencies, making trade faster and cheaper. While there are challenges, like opposition from the US government, many African leaders believe this is the right step for the continent’s future.
In the end, Africa’s move to create its own payment systems is about taking control of its economy. By using local currencies, African businesses can save money, trade more easily, and build stronger economies. This is an important step for a continent that has often been left behind in global trade. With systems like PAPSS, Africa is showing that it can find its own solutions to its problems—and that is something worth celebrating.
