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Thursday, 18 March 2021

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Egypt could join in a new USD 1 bn continental transit [assurance] scheme from AfreximBank, which is designed to encourage trade across Africa by improving tax collection and cutting back on trade costs. The new scheme will “help remove bottlenecks” in implementing the new African Continental Freetrade Zone (AfCFTA) and could be a boon for trade through the Cairo-Cape Town highway, AfreximBank’s Managing Director for Intra-African Trade Kanayo Awani tells The Africa Report. AfreximBank recently launched the scheme with a pilot USD 200 mn agreement to cover the COMESA region, which includes Egypt. Afreximbank aims to issue the first transit bonds in 3Q2021

What is the scheme? The plan will see AfreximBank act as a regional and continent-wide guarantor for trade by providing transit bonds covering the full range of borders that goods are required to cross, Awani said. Transit bonds are a kind of ins. given to freight shippers to protect against the risk of goods being disposed of in transit countries.

What’s the benefit? Without regional transit assurance schemes, traders are required to obtain national bonds for each border they cross, driving up transit costs. Africa currently has no regional transit framework, pushing transit costs in African countries such as Egypt to be more than 150% higher than the average in Europe. Transit assurance provided by the African lender would enable businesses to release working capital otherwise tied up as collateral against transit bonds, while also accelerating the movement of trade exports. The scheme will also ensure that when goods make a U-turn, the duties and taxes due would still be settled.

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