News
Regional SMEs to benefit from Sh6.7bn project
Written by Steve Mbogo
Business Daily Africa
A truck crosses the Malaba border point. By expanding one-stop
border
posts and electronic transfer of customs information,
the USAid
programme
aims
to
reduce
custom clearance times
by 30 per cent.
April 21, 2009: Small and medium companies stand to benefit from a Sh6.7 billion US donation to help improve a range of projects geared to make business processes in the region easier.
The funds, donated by USAid, will be used to show enterprises how to export to the US market, automate custom procedures across the East Africa region, and help come up with legal requirements of private/public sector partnerships among other projects.
Kenya’s position as the largest supplier of goods and services in intra-regional trade will get a major boost when issues related to customs clearance and transport streamlining are improved.
Kenya, for instance, is eyeing the signing of a Most Favoured Nations agreement with the Democratic Republic of Congo (DRC) later this year as an entry point for the country’s SME exporters, and the new project will help make it easier to do trade with such countries.
Companies supplying goods to the DRC have often complained of the high cost of transport because goods have to pass through Tanzania and Zambia. The new funds will be used across the East and Central Africa region, USAid said. The fund is under what is known as the Competitiveness Trade Expansion Programme (Compete)
Substantial amounts of the fund will also be used to fund agriculture related projects, with an aim to increase food production and value adding of agriculture produce in the region.
Chief of Party at the Compete Africa project Stephen Walls said targets in this area include specially coffee, cotton, textiles, and production of staple foods. Other targets include livestock, leather processing, horticulture, tourism and transport.
Part of the money will be used to set up the East and Central Africa Global Competitiveness Hub, which is planned to assist local companies access international trade opportunities.
“Compete will assist custom units to meet World Customs Organisation standards, streamline custom procedures and develop and implement new methods for increasing transit efficiency in the region,” said a statement from USAid. “By expanding one-stop border posts, introducing a regional bond guarantee scheme and electronic transfer of customs information, this programme aims to reduce custom clearance times at selected borders by 30 per cent.”
Transit cargo traffic
This effort will compliment the other launched recently by COMESA, known as customs bond guarantee scheme, which will help reduce transit costs that are associated with the current practice of nationally executed customs bond for transit cargo traffic.
Traditionally, when goods cross the territory of a COMESA member state, the customs authority of each state apply their national controls which involves complicated procedures, high physical inspection rates and determination of the guarantees.
The processes, which are repeated in every member country of transit, lead to long delays, expenses, and fines or penalties. Long transit times inevitably increase transport costs and high interest rates on working capital.
The new programme will be implement over a period of four years. USAid has selected Chemonics International, Dexis Consulting Group, Global Business Solutions, and Prime International to be implementers.
The new programme comes when the US is planning a re-launch of the AGOA Trade programme, which offers preferential duty free trade accesses for selected African products into the US market.
While the programme has been on for several years, African countries have failed to take advantage and export some of the products, like specially coffee and hand-made artifacts that are still in demand in that market.
The annual forum for AGOA will be held in Nairobi in August, and President Obama is expected to take the opportunity as a launch pad for his administration’s non-oil trade relations with Africa.
US ambassador Michael Ranneberger said that in order for the Complete programme to succeed, Kenya’s coalition government must fast track political and economic reforms so that the country is taken seriously by international investors.
“Those seeking to trade and invest want to know that they are doing so in a stable and progressive environment,” he said.
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