By Antony Mutunga
The Common Market for Eastern and Southern Africa (COMESA) has signed an agreement with the African Export-Import Bank (Afreximbank) for the implementation of the COMESA Regional Customs Transit Guarantee/bond Agreement.
The agreement is part of a larger deal setting stage for the implementation of the Afreximbank African Collaborative Transit Guarantee Scheme (AACTGS), a programme designed to facilitate the smooth transit of goods across Africa through a continent-wide single-technology enabled transit guarantee scheme.
According to Afreximbank President, Prof. Benedict Oramah, the scheme is a milestone in Africa’s journey towards deepening regional integration.
“It is a key tool for delivering on the vision of the African Continental Free Trade Area, the scheme will facilitate the seamless flow of goods in a connected Africa. 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. The launch of the scheme in the COMESA region is a momentous occasion, but is also just the first step in a programme designed to be implemented across the entire continent. With this scheme, the Cape to Cairo road project will become a financially viable cross-continental trade route,” Oramah said.
Following the implementation of AACTGS, the Afreximbank, in conjunction with the AU and other regional blocs, is set to become a regional and continent-wide guarantor, providing transit bonds covering the full range of borders that goods are required to cross. As well, the bank will not displace existing operators but will work with them on a risk-sharing basis thereby boosting their capacity to issue bonds at a local level.
Additionally, the bank will also 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. Finally, 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.
The Bank is now set to begin the implementation of its Sh109.6 billion ($1billion) Continental Transit Guarantee Scheme, of which about Sh21.9 billion ($200 million) is earmarked for the COMESA region.