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Informal Cross Border Trade in Africa in a Time of Pandemic

By John Stuart
07 Apr 2020
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Informal Cross Border Trade in Africa in a Time of Pandemic

Informal cross-border trade (ICBT) forms a significant part of intra Sub-Saharan African (SSA) trade. It contributes income, provides jobs and empowers women in some of the most fragile and impoverished communities on the continent. For this reason, any threat to ICBT in SSA is a threat to the most vulnerable and needs to be taken very seriously. Such a threat has now arisen in the form of the Covid-19 pandemic: a global economic retreat of nations and shutting of borders and social contact.

The table lists some of the measures adopted by a selection of SSA countries at time of writing (5 April 2020), according to the Al-Jazeera news agency. This is not an exhaustive list and does not take into account restrictive measures that may be adopted over the coming months and weeks, as nations assess the threat from the pandemic on an ongoing basis. Of the countries listed, nine of them have closed land borders, most of them as blanket closures. This situation, and the potential development of increasing restrictiveness over the next months, forms the backdrop of this blog.

Country
Restriction
Botswana
No visa on arrival and no non-resident arrivals from certain countries allowed
Burkina Faso
International airports closed
Cameroon
Land air and sea borders closed indefinitely
Congo, Rep.
Borders and airports closed
Cote d’Ivoire
The country’s borders have been closed since March 25
Djibouti
On March 15, Djibouti said it was suspending all international flights
Ethiopia
Land borders shut to nearly all human traffic
Gabon
Entry banned for non-residents for list of countries
Gambia
Border with Senegal closed for 21 days
Ghana
Closed all borders from March 22
Rwanda
Closed borders on March 22, except for cargo and returning citizens
Sudan
Closed all airports, ports and land crossings on March 16
Zimbabwe
All borders closed on March 22, except for returning residents

The definition of ICBT is rather loose, due essentially to the nature of the practice itself. The definition is intended to capture trade that happens outside of the formal channels, which would be those of customs authorities. This could be trade in raw or processed goods, and entry, exit or both could be illegal. In other words, the goods could exit the source country legally and enter the target country illegally, or vice versa, or both border crossings could be illegal.

There have been several attempts by researches to estimate the magnitude of ICBT flows. One study[1] estimated that ICBT amounted to 30-40% of total intra-regional trade in the SADC region and 40% in the COMESA region. The volume of ICBT flows vary by country. In Uganda, informal exports flowing to its five regional neighbours were estimated at 86% of its official exports to these countries in 2006[2]. There are however, countries where this proportion is markedly higher and exceeds 100 % of formal exports. In Rwanda, for example, the Ministry of Trade and Development estimated that informal exports to neighbouring countries were more than 50% higher than formal exports in 2011[3]. It has also been argued that ICBT is especially important to fragile and conflict-affected states (FCS)[4], for example the Central African Republic. This is as a result of the ability of ICBT to offer traders a market outside of the fractured and possibly failed domestic market.

Those individuals and firms that make up the market for ICBT are divided into individuals, informal businesses and formal businesses. The most vulnerable are the individuals and informal businesses. Of these, as has already been pointed out, the majority of traders are women (60-70% as estimated by the African Development Bank[5], although other sources estimate this at an even higher level[3]). In addition, women are especially vulnerable as traders since they are exposed to gender-specific risks and headwinds. In general, ICBT traders lack formal education as well as capital, and have to fund their trading activities from their own capital.

The types of goods that are traded in ICBT are varied. Across Africa, low quality locally manufactured and re-exported goods from Asia, with values not greater than US $1000, are commonly traded in ICBT. Among the items that are re-exported are contraband items such as counterfeit goods, fuels and pharmaceuticals.

There is some variation in locally traded non-processed goods, with agricultural goods and foodstuffs being prominent in all regions. In central Africa, jewellery and minerals are also traded; and in Southern Africa – handicrafts.

Why is ICBT so predominant in many SSA countries? A parallel tralac blog will explain the economic rationale behind this trade, based on the existence of optimal market sheds and ‘time to market’ considerations[6]. However, even where these aren’t a consideration, the costs of formal clearance for informal traders can be prohibitive, due to regressive duties structures and complex clearance procedures. In addition, a particular problem faced by small-scale traders, as a consequence of their relative disempowerment, lack of education and lack of political power, is their vulnerability to exploitation by corrupt officialdom[3].

The drivers of IBCT are varied, and policy makers have of late begun to respond to the needs of small scale cross border traders by implementing simplified trade regimes[7]. However, the advent of the Covid-19 pandemic and the consequent closure of borders in SSA threatens to throttle these informal markets at a time of general global economic malaise.

One of the countries that has closed its borders – Cameroon – has communities that are heavily reliant on ICBT. Bouët cites an estimate for ICBT in 2008 which puts its value at about 96% of official trade[8]. The main destinations for these exports are Equatorial Guinea, Chad and Gabon. However, whilst the communities bordering Equatorial Guinea and Gabon are not predominantly impoverished, the communities bordering Chad have 60-80% of the population living below the poverty line[9].

Data for Rwanda estimates that ICBT to its four neighbours (Democratic Republic of Congo (DRC), Kenya, Tanzania and Burundi) is about 59% of total exports to these countries, while informal imports total to a much lower figure – just 4% of the total.[8] This underscores the relative reliance of Rwandan small scale cross border traders relative to their neighbours. Yet now Rwanda has closed all its land borders. In addition, unlike with Cameroon, all of the communities on Rwanda’s borders live on the 60-80% or worse poverty threshold. In particular, communities bordering DRC and Burundi have 80-100% living below the poverty threshold.

The countries cited above are just two examples of fragile and vulnerable communities now facing existential threats due to the measures taken to combat the spread of Covid-19. Although the pandemic itself is a cause for serious concern, policy action needs to be nuanced to take into account the very strait conditions under which many rural and informal SSA communities live. To fail to do this will ensure that the economic impacts of the response to Covid-19 threaten to far outweigh the direct threats of the disease.


[1] Nshimbe, C. and I. Moyo (eds.), 2017. Migration, Cross-Border Trade and Development in Africa: Exploring the Role on Non-State Actors in the SADC Region. Cham: Palgrave MacMillan

[2] Lesser, C. and E. Moise-Leeman. 2009. Informal Cross Border-Trade and Trade Facilitation Reform in Sub-Saharan Africa. OECD Trade Working Paper No. 86

[3] Bugingo, E. 2018. Empowering Women by Supporting Small-Scale Cross-Border Trade. ICTSD Bridges Africa

[4] Brenton, E. and C. Soprano. 2018. Small-Scale Cross-Border Trade in Africa Why It Matters and How It Should Be Supported. ICTSD Bridges Africa

[5] Guy, J. and G. Ajumbo. 2012. Informal Cross Border Trade in Africa: Implications and Policy Recommendations. Africa Economic Brief: African Development Bank

[6] This blog, which is part of the same series as the current blog, is entitled ‘Hitting where it hurts – pandemic border closures and SSA’s most vulnerable informal cross-border traders’.

[7] Fundira, T. 2018. Informal Cross-Border Trading – Review of the Simplified Trade Regimes in East and Southern Africa. tralac Trade Brief No. US18TB03/2018. Stellenbosch: tralac

[8] Bouët, A. et al. 2018. Informal Cross-Border Trade in Africa – How Much? Why? What Impact? Washington: IFPRI

[9] The World Bank’s poverty headcount includes all population living on or below US$ 1.9 per day. These figures for Cameroon were drawn from Signorelli, S. and C. Azzarri. 2016. Poverty and Climate in Africa South of the Sahara: an Empirical Analysis. Washington: IFPRI

About the Author(s)

John Stuart

John Stuart

John Stuart is an economist and policy analyst with special interests in trade, economic integration, data visualisation and economic modelling. He began his career in academia at Rhodes University and later the University of Cape Town, after which he entered private consulting first with AFReC (Pty) Ltd and subsequently with PBS (Pty) Ltd. Besides economics research and teaching, he has experience in project management, general management, public sector performance management, systems analysis and entrepreneurship. He holds an M. Com degree in Economics from the University of Natal (Durban).

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