First Digital Free Trade Area in Africa set for Rollout in 2018 (Contd))

Breakthrough
Exporters from Uganda say this is a breakthrough in
regional and international trade, even though it comes with new risks and
challenges, especially member states that have not yet provided for e-CO laws.
“The risks are there but they can be mitigated.
There must be software to prove that the electronic certificate of origin is
authentic so that tax authorities can read it,” says Chris Kaijuka, the
managing director of grain exporting company AfroKai Ltd.
Mr Kaijuka welcomes the innovation but adds that he is
keen to test the effectiveness of the electronic certificate of origin in
solving some of the import-export hitches that traders face in the market.
Diminished role for banks?
The financial services sector for counterparties makes
easy money in international trade deals — globally totaling to $100 trillion
— because the importing party in most cases does not know or trust the
exporting company.
Within the Comesa region alone, some $450 million is
paid to commercial banks annually to confirm letters of credit.
But the bloc’s chief executive argues that soon this
will be a thing of the past because the Comesa digital FTA has
“applications that can connect Customs, commercial banks, ministries of
finance and central banks in real time, even when it comes to
remittances.”
“Let’s say you are an exporter from Zambia and
you are exporting to Egypt, it will be accounted for because all these parties
will be able to access that information simultaneously and this is through the
block chain application,” says Mr Ngwenya.
But a source at KCB Bank Uganda — one of the largest
providers of trade finance — told The EastAfrican that it is too early for
these innovations to reduce the role of commercial banks to the periphery in
international trade.
Enabling laws
In 2014, the Comesa Council of Ministers decided that
member states that were ready to accept and use the e-CO should do so by July
31 of that year.
The Council further directed member states whose legal
systems did not provide for e-COs to enact enabling laws as soon as possible
with the view to replace the manual certificates of origin with the electronic
certificates in a bid to speed up the process of certification and facilitate
trade in real time.
The Council also wanted the designed digital
applications to ensure that they integrate small and medium enterprises – which
make up over 90 per cent of the employment base in Comesa for its 492 million
citizens, according to the bloc’s data.
The question for AUC now is, why wouldn’t this
initiative be the whole Africa?