Egypt softens stand on value addition for Comesa goods

Egypt has dropped its demands for a higher threshold for value addition on goods produced and traded within in the region, paving way for smoother negotiations aimed at merging three African trading blocs.

Egypt had sought to have the threshold on value addition set at not less than 45 per cent instead of the 35 per cent recommended by other countries eyeing to transform the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (Comesa) into a seamless market by next year.

In a petition to the Comesa Council of ministers and backed by the highly influential Egyptian Business Council, the country argued that a higher threshold for value addition would help encourage regional investment by ensuring members competed based on what they were capable of producing locally than rely on parts shipped from external markets.

Heads of State from Comesa, however, revealed at the weekend that Egypt had since dropped its demands and accepted to carry on with the current limits on value addition to products.

“Egypt’s adoption of the 35 per cent value addition threshold under the Comesa Rules of Origin to be in line with all the rest of the member States,” the Heads of State said in a joint communiqué at the close of the just concluded summit meeting in Malawi.

Kenya is among countries from Comesa that had questioned the viability of the 45 per cent threshold for value addition, saying most producers from the region did not have the capacity to support such high levels of product upgrade.

“The reality is that even within EAC alone most members don’t have the capacity to value add beyond the 35 per cent limit and upward adjustments to the 45 per cent mark would leave them with nothing to export at least for now,” Mr Richard Sindiga, the chief economist at the Ministry of EAC Affairs in Nairobi said.

A shake-up of the value addition limits would have had an effect on the country’s export products to Egypt including tea, tobacco, tyres, chemicals, oils, sisal, as well as fruits and vegetables. Fresh cut flowers, dried flowers printing inks also form part of the shipments to Egypt.

Data showed that the threshold on value addition is uniform at 35 per cent across the Sadc, EAC and Comesa and forms part of the Rules of Origin (ROO) that only grant goods wholly produced or substantially transformed within the region access to the benefits of the tariff-free trade regime.

Across the three blocs the ROO recognise goods produced wholly or partially from materials imported from outside the partner states as long as the value of the imported materials does not exceed 60 per cent of the total cost of the materials used in the production of the goods.