BUSINESS REPORTER
The Common Market for Eastern and Southern Africa (COMESA) and the African Export-Import Bank (Afreximbank) have signed a US$1bn deal to facilitate the smooth transit of goods across Africa in a major boost for the growth of intra-African trade.
The African Collaborative Transit Guarantee Scheme (AACTGS) will provide a continent-wide single-technology enabled transit guarantee scheme.
Afreximbank president Benedict Oramah and COMESA Council of Regional Customs Transit Guarantee (RCTG Carnet) chairperson Elirehema Doriye signed the agreement.
It will provide transit bonds covering the full range of borders that goods are required to cross. This will be done in collaboration with the African Union, COMESA and other regional economic communities.
Oramah described the launch of the scheme as a milestone in Africa’s journey towards deepening regional integration and a key tool for delivering on the vision of the African Continental Free Trade Area (ACFTA).
“It will accelerate trade, reduce the cost of trading, release capital for businesses investment, improve the bankability of intra-African trade, and in the end, reduce prices for consumers. With this scheme, the Cape to Cairo road project will become a financially viable cross-continental trade route,” Oramah said.
Through the scheme, Afreximbank will ensure that, when goods do not complete their transit, sums are paid in line with the duties and taxes that would have been required, thereby enhancing tax collection for African nations.
In addition, the transit guarantees provided by the bank will enable businesses to release working capital otherwise tied up as collateral against transit bonds, while also accelerating the movement of goods across borders.
By speeding up transit times and reducing costs, the scheme will provide a boost to African manufacturers, ensuring they can easily access the inputs they need for their business and enabling them to pass savings on to consumers.
Currently, African states require businesses transiting goods through their countries to secure transit bonds, which protect against the risk of transit goods being disposed-off in the transit countries.
However, the limited implementation of regional transit guarantee schemes means that traders are required to obtain national bonds for each border they cross. As a result, transit costs in African countries are 63% higher compared to the average in developed countries and 135% higher than in Europe.
Studies show that the average costs of freight as a percentage of the total value of imports is 11.4% compared to 6.8% in developed nations.
Transit costs in the region are estimated at around US$450 per truck per day. By implementing an effective transit guarantee scheme the continent will save more than US$300m per year.
Doriye said the implementation of the regional RCTG will be accelerated beyond COMESA and promote the implementation of the AfCFTA among its members by joining the continental scheme.
“Reaching an Agreement might not be that easy implementing the Agreement is equally challenging and, in this regard, I would like to assure you that COMESA Council of RCTG will provide the necessary support to ensure the successful implementation of the Agreement,” he said.
The Afreximbank has also established a US$1bn AfCFTA Adjustment Facility to support countries from significant tariff revenue losses as a result of the implementation of the AfCFTA Agreement.
COMESA Secretary General Chileshe Kapwepwe noted that the reduction or elimination of tariffs would greatly reduce the transaction costs across the continent
“It is however imperative that the tariff reduction should be complimented with trade facilitation instruments, such as, the Regional Customs Transit Guarantee- RCTG Carnet -to reduce the high transit and transport costs and boost productivity,” Kapwepwe said.
