The Payment System That Could Reshape African Fashion Trade
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The Pan-African Payments and Settlement System (PAPSS) was launched in January 2022 and is designed to enhance African trade by facilitating instant and secure cross-border transactions in local currencies. The Pan-African Payment and Settlement System (PAPSS) is a financial market infrastructure established by the African Export-Import Bank (Afreximbank) to facilitate cross-border transactions within Africa. This system eliminates the need for payments to be processed through correspondent banks outside the continent, ensuring more efficient and cost-effective transactions. PAPSS enables instant or near-instant fund transfers between businesses and individuals in different African countries. Its primary objective is to enhance intra-African trade and financial transactions, providing a seamless and secure payment framework that supports economic integration and business growth across the region. It is a key component of the African Continental Free Trade Area. By facilitating cross-border payments in local currencies, PAPSS enhances trade efficiency which is crucial for the burgeoning African fashion industry.
The Pan-African Payments and Settlements System (PAPSS) is set to revolutionise the financial landscape of Africa, within every industry including the fashion industry in Africa. Its implementation will significantly impact the African fashion industry in the long term, which has long struggled with fragmented payment systems, currency exchange challenges, and logistical hurdles. According to a report published by Joy Business Online in 2024, 50% of African business leaders are unaware of the Pan-African Payments and Settlement System (PAPSS).
Though the African fashion industry has seen significant growth over the past ten years financial barriers have been a constraint in most instances. The existing cross-border payment systems are often slow, expensive, and reliant on external financial institutions. PAPSS addresses these challenges by enabling real-time transactions in local currencies, reducing reliance on intermediaries like banks, and lowering transaction costs. A designer in Accra can sell to a consumer, fashion buyer, or concept store in Nairobi or Johannesburg without dealing with currency conversion complexities or exorbitant transfer rates.
The rise of e-commerce and digital payments has transformed the fashion industry worldwide, and Africa is no exception. However, one of the key challenges for African fashion e-commerce platforms has been payment processing inefficiencies and delays. Many fashion businesses in Africa have had to rely on international payment gateways such as PayPal, Stripe, and Amazon Pay to transact businesses with their international consumers which do not cater to local markets efficiently. PAPSS provides an opportunity for these payment platforms to integrate a system that prioritises local currencies, enhancing accessibility for both businesses and consumers in Africa. Moreover, digital payment adoption is increasing across Africa, with mobile money services playing a pivotal role in financial inclusion. PAPSS is expected to complement these financial services by offering a streamlined and interoperable payment system, making it easier for fashion brands to scale their online presence and tap into a wider consumer
A key challenge for the African fashion economy is the overreliance on imported fabrics and manufacturing from outside of the African continent. PAPSS can enhance regional trade by making it easier to source textiles, raw materials, and accessories within Africa. Countries with strong textile industries, such as Ethiopia and South Africa, can efficiently supply to fashion businesses across the continent, fostering sustainable local production in the African fashion industry.With increased intra-African trade facilitated by PAPSS, the fashion industry can also reduce its carbon footprint. By sourcing materials locally rather than importing from overseas, African fashion brands can champion sustainability while creating more job opportunities within the continent.
The future of the Pan-African Payments and Settlement System within the African fashion economy is promising. By reducing financial barriers, eliminating transaction rates, and fostering intra-African trade, PAPSS will unlock new opportunities and growth for designers, retailers, manufacturers, and consumers within the African fashion ecosystem. If PAPSS becomes more widely adopted, it will play a crucial role in shaping a self-sufficient and globally competitive African fashion industry. With a simplified payment infrastructure, Africa’s fashion economy has the potential to significantly contribute to the economic growth of Africa and the core mandate of the African Continental Free Trade Area to be the largest free trade area in Africa.