Comesa, AfreximBank seal US$1bn deal to cushion states

THE Common Market for Eastern and Southern Africa (Comesa) and AfreximBank) have signed a US$1 billion agreement to implement a regional customs transit guarantee scheme to support countries under the African Continental Free Trade Area (AfCFTA).

Under the historic regional trade deal, which came into force in January this year, countries have agreed to ensuring that 99 percent of their tariffs are removed to promote intra-African trade.

Realising that countries will lose a significant amount of revenue from the continent that was coming through the tariff regime, the two entities have agreed to implement the Comesa Regional Customs Transit Guarantee Scheme, commonly known as RCTG-CARNET.

“This marks the beginning of the implementation of the bank’s US$1billion AfCFTA adjustment facility to support countries from significant tariff revenue losses as a result of the implementation of the AfCFTA agreement of which about US$200 million is earmarked for the Comesa region,” said Comesa in a latest media update.

The Comesa trading bloc consists of 21 member States that include Zimbabwe, Zambia, Malawi, Eswatini (Swaziland), Lesotho, Namibia, Egypt, Kenya, Rwanda, Djibouti, Cote D’Ivoire and Ethiopia.

AfreximBank president and chairman, Professor Benedict Oramah, and the RCTG-CARNET representative, Dr Elirehema Doriye, signed the agreement during a virtual ceremony last week.

The agreement sets the stage for the implementation of the Continental Transit Guarantee Scheme using the Comesa RCTG under which the Afreximbank will be the regional and continent-wide guarantor.

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.

“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,” said Comesa.

In addition, the transit guarantees provided by AfreximBank 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, it is hoped that 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.

Presently, 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 percent higher compared to the average in developed countries and 135 percent higher than in Europe,” said Comesa.

Prof Oramah described the launch of the Comesa-AfreximBank collaboration on RCTG Carnet as a milestone in Africa’s journey towards deepening regional integration and a key tool for delivering on the vision of the AfCFTA that 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 Comesa RCTG scheme, the Cape to Cairo road project will become a financially viable cross-continental trade route,” Prof Oramah was quoted as saying.

Dr Doriye was also quoted saying by joining the continental scheme, the implementation of the Comesa RCTG will be accelerated beyond Comesa and promote the implementation of the AfCFTA among its members.

“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.

Comesa secretary general Ms 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,” she said in a statement delivered by the bloc’s assistant secretary general for administration, Dr Dev Haman.-ebusinessweely.clz.w