COMESA Director of Trade and Customs Dr Francis Mangeni: Trade opportunities between Mauritius and Zambia
Keynote speech by Dr. Francis Mangeni, COMESA Director of Trade and Customs, at the Enterprise Mauritius’ Buyer-Sellers Forum of 23-24 March 2017 at the Intercontinental Hotel in Lusaka
Mauritius and Zambia have complementary trade visions
Mauritius is increasingly pivoting its commercial diplomacy into Africa and vigorously seeking business opportunities, as Honourable Mr Vishnu Lutchmeenaraidoo, the Mauritius Minister of Foreign Affairs and International Trade passionately informed the business community on 17 March 2017 in Port Luis; find out more here. Zambia has for some time now prioritised diversification of the economy and of export markets away from copper exports. There is, then, room for mutually supportive economic engagements between the two member states of COMESA, which, with increasing trade and investment, will assist in jobs and wealth creation, and therefore peace and prosperity.
In making the best of all available opportunities, the two member states can fully utilise the COMESA rule-based Free Trade Area, trade facilitation programs, industrial and infrastructure programs, as well as the financial institutions.
COMESA is the largest regional market in Africa
COMESA is the largest regional economic community in Africa, offering the business community the best bet for overcoming the diminutive size of national economies. In fact COMESA is one third of Africa as a whole. Table 1 below shows this.
Table 1: Comparing African regional economic communities
Tunisia has applied to join COMESA, a process expected to be concluded this October 2017. Somalia and South Sudan too are expected to be members; indeed the COMESA Summit has already decided, at its Summit in October 2016, that these two countries are eligible for membership and that membership negotiations with them should commence. Algeria has signalled its strong interest as well.
Making up a third of Africa, the vastness of COMESA should be complemented with its dynamism and high trade growth. Intra-COMESA export of goods has risen from $1.5 Billion in 2000 to about $10 Billion in 2016, excluding small scale (informal) trade estimated by UNCTAD and ECA to be about 40% of total trade. These figures are still not impressive in absolute terms, but the growth is remarkable. What is even more remarkable is the potential as well as the possibility of introducing wholly new products and industries through innovation.
If M-Pesa is anything to go by, new products and industries can span whole new economies and achieve social economic transformation. Kenya’s ICT sector contributed 12.1% to its GDP in 2014. And by May 2015, M-Kopa had connected 200,000 homes in Kenya, Uganda and Tanzania to a solar power system which is purchased with a deposit of Kenya Shillings 50, about half a dollar, and paying the rest of the price in weekly little installments. New high technology content products will be critical in social economic transformation through increasing intra-regional trade, creating jobs and wealth, and addressing overarching public policy objectives of universal access to basic needs.
The private sector will need to work closely with innovators and academia, to commercialise usable inventions with industrial application; and this can be up-scaled and streamlined where Henry Etzkowitz’s Triple Helix approach is used in policy formulation and implementation, to ensure that government, the private sector, and academia work coherently. Bongo Hive in Lusaka is a good start as a technology and innovation hub.
The Tripartite as half of Africa is a lucrative trade and investment destination
According to the Mckinsey Global Institute’s Lions on the Move 2.0, of September 2016, Africa yields the highest returns on investment in the world, and consumer and business-to-business spending is already estimated at $3.9 Trillion, and projected to grow to about $5.6 Trillion within the next eight years by 2025. COMESA is part of this good news. The COMESA-EAC-SADC Tripartite Free Trade Area, launched on 10 June 2015 in Sharm-el-Sheikh has a combined GDP of $1.3 Trillion. Both Mauritius and Zambia are, in effect, in the Tripartite already, because they belong to both COMESA and SADC, two blocs which together cover the Tripartite. The Tripartite makes up half of Africa in geographical, demographic and economic terms.
Besides, most of the world’s fastest growing economies are in Africa, as shown in Table 2 below.
Table 2: Fastest Growing Africa’s Economies
Cote d’Ivoire -8.5%
Tanzania – 6.9%
Senegal – 6.6 %
Djibouti – 6.5%
Rwanda – 6.3 %
Kenya – 6.0%
Central Africa Republic – 5.7%
Sierra Leone – 5.3%
Uganda – 5.3%
Source: AfDB, Africa Economic Outlook 2016
Opportunities – the bilateral trade potential is huge
A cursory look at Zambia’s leading imports from Mauritius and the rest of the world shows the indicative scale of potential trade.
Intra-COMESA trade potential is equally huge in a range of products
A survey the Secretariat has undertaken, in 2015, indicated that total potential for intra-COMESA trade in goods alone already stands at $82.4 Billion. Intra-COMESA trade in services is currently estimated at $38 billion. In addition to both Mauritius and Zambia being in the COMESA FTA, both countries have completed negotiations and submitted schedules of specific commitments in four priority sectors, namely, transport, communication, financial and tourism services. This means that trade and investment in these four sectors is now facilitated through the possibility of internet supply of the services, or supply through physical investment or by natural persons.
The COMESA FTA is rule-based, enabling long-term business planning
The COMESA Free Trade Area has been in force since 1 November 2000. Mauritius and Zambia are members. Under the Treaty, members of the FTA are to eliminate duties and quota restrictions to goods originating in other members, and to ensure that non-tariff barriers are eliminated when they occur – Articles 46 to 49. The COMESA Court of Justice has reconfirmed that the FTA rules are binding and breach of them can be corrected, in the case of Polytol v Mauritius, where the Court specifically went ahead to decided that customs duties collected in breach of the FTA provisions should be refunded. The FTA is indeed rule-based, and provides predictability and certainty for good business.
Rules of origin are flexible
The Protocol on COMESA Rules of Origin sets out five criteria on the basis of any of which a good can be considered to be originating – wholly produced, foreign material not exceeding 60%, value addition of 35%, change in tariff heading, and good of particular economic importance. The Protocol is supplemented by a comprehensive manual. The Treaty and the Protocol together with the Manual is available on the COMESA Website (and on tralac’s COMESA resources page).
Non-tariff barriers are speedily removed when they occur
COMESA as a region has been very successful in addressing non-tariff barriers. Out of a total of 202 reported since the year 2008, 195 non-tariff barriers have been removed. Two of those that remain have been outstanding since the year 2003, while the rest are new and should be eliminated easily. What is more is that on a daily basis, the Secretariat receives enquiries and assists to address potential non-tariff barriers to assist ensure that consignments at ports or borders are cleared, and that products are produced with a view to being properly traded on the COMESA market. The Secretariat routinely provides information on market opportunities and regimes that apply in given member states. This is done over email, phone or skype, or through letters and formal communication.
Non-tariff barriers can be reported by anyone online at tradebarriers.org or by SMS, or by a letter to the Secretary General of COMESA. The Secretariat will then quickly intervene to assist, through technical advice, arranging consultations, organising on-the-spot verification missions, and preparing discussion at formal technical and ministerial level meetings.
Trade facilitation instruments have reduced the cost of doing business
COMESA has prioritised trade facilitation. In addition to simple and flexible rules of origin as well as a dynamic system for elimination of non-tariff barriers, instruments for trade facilitation include the Single Administrative Document/Customs Document, Automated System for Customs Data, the Yellow Card, Regional Customs Bond Guarantee Scheme, Carriers Licence, among others. For more on this, please see Francis Mangeni, Trade Facilitation in Eastern and Southern Africa, in Key Issues in Regional Integration, Volume 3.
For instance, it now takes 20 minutes for accredited clients (approved economic operators) to cross the Chirundu one-stop-border post between Zambia and Zimbabwe which is a valve for transit trade through Zambia, with eight neighbouring countries, or two hours where advance declaration is used, or up to two days where documents are lodged on arrival; whereas before, it used to take anything up to nine days to cross that border.
Or take another example, it used to take up to 22 days for cargo to move from Mombasa in Kenya to Kigali in Rwanda; it now takes four to six days with the removal of roadblocks and the introduction of automation and integration of customs procedures and documentation covering the Regional Customs Transit Bond Guarantee and pre-clearance, and the administrative arrangement of positioning customs officials of Uganda/ Rwanda in Mombasa as the port of arrival into the region under the Single Customs Territory initiative.
It is to be noted that a sitting truck costs $250 to $400 per day, a cost that has been saved through this much reduced dwell time on the roads and at borders.
COMESA Institutions are continental and facilitate trade and investment
One of the trail blazing successes of COMESA as an organisation has been its superb institutions and specialised agencies, established over the years to facilitate trade and investment.
The Trade and Development Bank provides trade and project finance
These include a trade and development bank providing trade and project finance to governments and the private sector. The Bank has financed the purchase of aircrafts (Rwandair and Ethiopian Airlines), hotels (The Radisson Blue in Lusaka), and energy and a raft of other projects indicated here.
The Africa Trade Insurance Agency covers terrorism and other political risks
The African Trade Insurance Agency provides cover for non-commercial risks such as political risk, political violence terrorism and sabotage, as well as surety bonds and reinsurance. The Re-Insurance Company provides re-insurance and facilitates the operations of the Yellow Card Scheme. The Regional Payment and Settlement Scheme overseen by the COMESA Clearing House, with the Central Bank of Mauritius serving as the Settlement Banks, facilitate intra-regional payments to be completed within 24 hours.
Other institutions include the Competition Commission, which addresses anti-competitive practices and facilitates acquisitions and mergers in the COMESA region. The COMESA Regional Investment Agency facilitates investment into the COMESA region, including through providing information on investment opportunities to investors within and beyond the region. The COMESA Business Council is the voice of the private sector and mobilises economic operators in the region, and links them up through virtual and physical buyer-seller fora.
Way forward – create a standing virtual market and a data base for continuous business
The upshot of all these many words is that there is merit in this business-to-business forum and a promise of prosperity for the two countries through trade and investment. Why this be a one off? Without a single reason for this, the potential trade and investment opportunities argue for a continuous and standing forum, virtual, for business taking into account the dynamic and continuous nature of business; or at least regular physical business-to-business meetings.
Trade and investment opportunities in Mauritius and Zambia and in COMESA at large through value chains, should be vigorously pursued by the private sector, utilising COMESA rules and programs as enablers. In addition, every effort should be deployed to create new high technology content products through innovation. Government, innovators and academia, and the private sector would do well to work as a coherent team, to achieve the much required social economic transformation of our societies, in order to achieve the public policy goals of creating jobs and wealth, and ensuring peace and prosperity in our communities.
This document has been published with permission from COMESA.