Afreximbank Launches $1 Billion Scheme to Facilitate Intra-African Trade

One-billion-dollar African Collaborative Transit Guarantee Scheme (AACTGS) was launched by the African Export-Import Bank President Benedict Oramah during the Intra-African Trade Fair (IATF) on Sunday.

"Today, at the IATF2023, Professor Benedict Oramah, President of Afreximbank led the launch of the Afreximbank African Collaborative Transit Guarantee Scheme (AACTGS), a groundbreaking project that aims to propel Africa towards continental integration and economic prosperity," the Afreximbank stated on X (formerly Twitter).

According to the bank, committing $1 billion to support this transformative scheme will save Africa around $300 million annually in transit costs.

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Under AACTGS, working with the African Union (AU), COMESA (Common Market for Eastern and Southern Africa) and other regional economic communities, Afreximbank will become a regional and continent-wide guarantor of transit bonds. The bank will work with operators on a risk-sharing basis, thereby increasing their ability to issue bonds locally, the bank stated.

Through this scheme, Afreximbank will ensure that the money is paid in accordance with the necessary duties and taxes in case the goods do not complete their transit. This will increase tax collection for African countries. By reducing transit times and reducing costs, the scheme will also provide a boost to African producers, ensuring they have easy access to the inputs they need for their businesses and allowing them to save money for consumers.

"We are happy that this innovative collaboration between the Bank and COMESA has yielded the desired results of issuing a single transit bond that makes it possible for the movement of goods across the continent without hindrance," Oramah quoted as saying by the Zimbabwean newspaper The Herald.

Of the $1 billion, approximately $200 million was earmarked for the COMESA region, according to Afreximbank.

Afreximbank also provided $300 million to Nairobi-based reinsurance company ZEP Re to enhance COMESA's Regional Customs Transit Guarantee (RCTG) pool. RCTG is part of efforts to facilitate intra-African trade. According to the UN, its purpose is to provide a uniform basis for transit traffic throughout the region, where only one guarantee is used for the transit of goods through all transiting Member States.

"This substantial financial injection underscores our commitment to bolstering the capacity of the COMESA RCTG Pool, which will instil confidence in traders and businesses, thereby paving the way for increased trade volumes in the region and creating a conducive environment for investment, innovation, and economic growth," said Oramah.

Moreover, in accordance with the scheme, in October the bank announced the issuance of "the first-ever multi-border transit bond" worth $10 million in favor of Innovate General Insurance (IGI) of Zambia, Afreximbank stated. The bond was "expected to provide counter guarantees and boost IGI’s capacity to issue bonds to Clearing and Forwarding Agents in Zambia."

At the fair, Oramah also announced the signing of a "revolutionary" $30 million Container Guarantee Facility with BSMART System Solutions, a Malaysian mobility services company. With this support, the company will establish 38 Integrated Customs Designated Stop Areas (ICDSA) in the East African Community region.

The main objectives of the ICDSAs are to stimulate economic growth in countries, improve socio-economic conditions, and improve cargo security and transit controls. Afreximbank will provide BSMART support of up to $1.3 billion and act as a financial advisor to the project, the newspaper reported.

"This will revolutionise the way we manage containers, ensuring their safe and timely transit while minimising risks and enhancing security measures," Oramah said. "The provision of financial guarantees for containers will encourage investment and make international trade more accessible and inclusive for businesses of all sizes."

Afreximbank is a pan-African multilateral financial institution created in 1993 that aims to "stimulate a consistent expansion, diversification and development of African trade, while operating as a first class, profit-oriented, socially responsible financial institution and a center of excellence in African trade matters," according to the bank.

In July, Afreximbank spoke out about supporting the global course towards de-dollarization and transition to national currencies with the help of the pan-African payment system, which, as was said earlier in June, another 15-20 African countries were ready to join.