Tuesday, 23 October 2007

Comesa’s single-document transit scheme to cut costs

Special Correspondent

Member countries in the Common market for East and Southern Africa have taken a step closer to economic integration with the introduction of a single document on customs guarantee for transit traffic within the bloc.

The volume of trade and business within the Comesa region is expected to grow following the launch of the Regional Customs Transit Guarantee Scheme by cutting down transport costs and delays in cancellation of transit bonds.

Speaking during the launch of the Comesa Carnet in Mombasa, Assistant Secretary General (programmes) Sindiso Ngwenya said transport costs alone accounted for about 40 per cent of the value of goods being transported within the region.

“Anything being put in place to reduce this cost will greatly enhance the region’s competitiveness and generate more income for the people,” he said.

The issue of competitiveness can not be addressed unless something was done urgently about the escalating cost of doing business in the region which is limiting direct foreign investment.

Mr Ngwenya said the new scheme allows transporters to use one document from the country of origin without waiting for clearance from customs officials at border points. This will eradicate the Customs bonds that companies have to lodge with their respective revenue authorities.

“Recent estimates show that over $1.2 billion worth of Customs bonds are tied up in guarantees, which adversely affects the economy. Even if we are able to reduce the cost by just 20 per cent, our businesses will reap huge profits that will trickle down to the producers at the grass root,” he said.

The piloting of the scheme will be followed by an evaluation of the entire system ahead of the Comesa Head of States Summit in May, 2008.

Kenya Revenue Authority Deputy Commissioner Kevin Safari said the practice of raising cash or bank guarantee or insurance bond in each country of transit was cumbersome and time consuming.

“Nationally executed bonds, for instance, have tied up colossal sums of money belonging to importers, clearing and forwarding agents and transporters which, if released could be used for productive purposes,” he said.

A recent study, he said, indicated that a general 10 per cent increase in transport costs will lead to a reduction in trade by about 20 per cent.

Mr Safari said the launch of the scheme has come when players in the cargo business have been waiting for its implementation since the adoption of the Common External Tariff for the Comesa Customs Union during the 12th Summit of the Heads of State and government held in Nairobi last May.

However, the challenge now rests with the National Customs Administration in the Northern Corridor countries to put in place necessary administrative mechanisms to ensure the successful piloting of the Comesa scheme.

Burundi, Djibouti, Ethiopia, Kenya, Madagascar, Malawi, Rwanda, Sudan, Uganda and Zimbabwe — have already ratified the scheme.

Kenya Reinsurance Corporation assistant director Jadiah Mwarania said the new system will cut down cases of tax evasion significantly as it will be easier to monitor the movement of cargo. Kenya Re is co-ordinating the scheme.

SDV Transami regional commercial manager Giancarlo Bonanno said his company has about Ksh3 billion ($44.7 million) in bonds tied up with the KRA for guarantees.

“We are one of the major players in the transportation of cargo to the East African countries. So we are well-placed to appreciate the interest and the benefits of the Comesa Carnet Piloting Scheme,” he said.

A senior official of the East African Freight Forwarders Association (FEAFFA) John Bosco Rusagara said the bond was long overdue.

“This is going to cut time wasted by about 70 per cent once the scheme is fully operational. In fact, we expect the border offices to be removed because it will be much easier to transact business through online acquittals,” he said.

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