The African Export-Import Bank (Afreximbank) says it is set to launch a US$1bn continent-wide transit guarantee scheme, having agreed last month to pilot the programme in the Common Market for Eastern and Southern Africa (Comesa).

In March, Afreximbank said it would begin issuing transit bonds in Comesa member states after it finalised an agreement to join the bloc’s Regional Customs Transit Guarantee (RCTG) scheme.

With US$200mn earmarked for support in Comesa, an Afreximbank spokesperson says that eligible applicants will include exporting and importing corporates, freight forwarders and clearing agencies, and “reputable financial institutions” seeking to reinsure their transit guarantee exposure.

Afreximbank notes that the deal extends further than it simply signing up to the RCTG, and that it marks a stepping stone for the bank to launch its broader US$1bn Afreximbank African Collaborative Transit Guarantee Scheme (AACTGS).

An Afreximbank spokesperson tells GTR: “The onboarding of the bank on the Comesa RCTG Scheme has de facto launched the AACTGS.”

Alongside Comesa, the spokesperson says that the bank is now also considering a request for support from the East African Community, and that engagements with the South African Development Community are “ongoing”.

The aim of the AACTGS is to allow goods to move freely and under a single transit guarantee within regional economic communities (RECs), or even between RECs, the Afreximbank spokesperson adds.

The bank says that because of the current “limited implementation of regional transit guarantee schemes”, traders are required to obtain national bonds for each border they cross.

With governments wary of losing out on taxes or duties, such bonds are used to mitigate the risk of companies potentially mislabelling goods as being for transit, only to then illegally sell them domestically.

But there are knock-on effects for companies, with Afreximbank noting that transit costs in African countries are 63% higher compared to the average in developed countries and 135% higher than in Europe.

Speaking about the transit guarantee programme, Afreximbank president Benedict Oramah says: “A key tool for delivering on the vision of the African Continental Free Trade Area, the scheme will facilitate the seamless flow of goods in a connected Africa. It 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.”