Increased trade between China and the Common Market for Eastern and Southern Africa (Comesa) member states shielded the trade bloc from external shocks triggered by the Eurozone crisis.

The trade, which has been rising in terms of volume and revenues, is also believed to have played a role in cushioning the region from the global financial crunch.

This year, Comesa’s economies are projected to grow by 5.4 per cent, up from 5.1 per cent last year, a trend attributed to the thriving trade relations with the Chinese.

In the recent past, the Asian country has focused on improving its trade relations with the African continent, surpassing many Western nations.

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China has already surpassed the United States as Africa’s biggest trading partner. Bilateral trade grew from $10.6 billion in 2000 to $160 billion in 2011, according to the Chinese government. Chinese investments on the continent total $13 billion.

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In the past 10 years, Comesa’s bilateral trade with the Asian nation has been growing at an average pace of 33.6 per cent per year.

“Since the beginning of the financial crisis in 2008, we have found that the regional market has been able to grow faster, mostly due to cross-border trade as well as China’s emergence as an alternative market for our exports,” said Sindiso Ngwenya, secretary-general of Comesa.

The impressive growth in Sino-Comesa trade was revealed last week in Kigali during the official launch of Regional Payment and Settlement System (REPSS) by the Committee of Central Bank Governors of the Comesa region.

The Asian country is not only providing a new market for Comesa exports but is also involved in many other development projects on the continent. These are in construction, mining and the service sector, among others.

“Comesa has been resilient in the face of the global financial crisis due to the high prices that China and others are paying for our commodities,” added Mr Ngwenya.

Besides the China factor, growth in Comesa is also driven by increased intra-regional trade among member countries.

Sub-Saharan African countries are also considering the idea of merging Comesa, the East African Community (EAC) and the Southern African Development Community (SADC) to create one super trade bloc that will increase cross-border trade among African countries.

According to the 2010 report, Comesa intra-regional trade amounted to $600 million per year through the correspondent banking system.

Intra-Comesa imports, including Rwanda’s 4.98 per cent ($415 million), have surpassed $800 million while intra-Comesa exports have exceeded $900 million, Rwanda’s share being 0.91 per cent ($83 million).

The region has also registered growth as a result of economic diversification as well as the rapid explosion of the service sector.

However, all has not been rosy for Comesa, especially in the industry sector, given that the region produces raw materials instead of value added or finished products as is evident in the cotton sector.

To further increase trade within the continent, the African Union is urging the Association of African Central Bank Governors to fast-track the process of establishing the Central Bank of Africa that would also oversee the establishment of a continental currency.

The AU is also pushing for the establishment of other financial institutions, among them the African Monetary Fund, African Investment Bank as well as a Pan-African Stock Exchange.

“In as much as we appreciate the progress made at the continental and regional levels, Comesa inclusive, we all know that the pace of regional integration has been rather slow, particularly monetary co-operation and integration,” said the continental body’s Dr Maxwell Mkwezalamba.

Dr Mkwezalamba added that the slow pace is due to lack of political will, sometimes where countries fail to ratify some of the legal instruments adopted. He also attributed the delay in the lack of financial resources and lack of capacity in African institutions.

Central bank governors hope that, when adopted by commercial banks in their respective countries, the REPSS will ease trade in the region.

READ: Importers to adopt Comesa’s payment, settlement scheme

Through this system, transactions will be channelled from the importer’s bank through the respective central bank to the exporter’s central bank using the REPSS platform and finally to his or her commercial bank.

Pioneered REPSS

The central bank of the country of the importer will transfer the funds to that of the exporter’s through REPSS at the Comesa clearing house, with the Bank of Mauritius as the settlement bank, and transactions being carried out in dollars and euros.

The four Comesa states that have pioneered the use of REPSS are Rwanda, Sudan, Swaziland and Mauritius but, to ease trade among member countries by ensuring a 24-hour regional payment system for importers and exporters, other countries are expected to follow suit soon.

Estimated transaction costs account for up to five per cent of the trade value on average, with one per cent paid for letters of credit confirmation. With REPSS, confirmation of letters of credit will be free while every transfer will be charged at 0.25 per cent.

“With REPSS, importers and exporters in Comesa region will have a faster, safer and more secure way to pay each other for goods and services at a much lower cost than the usual correspondent banking,” said Rwanda Central Bank Governor Claver Gatete.

The regional payment system is also open to any other country beyond Comesa for exports and imports through respective central banks.