Building capacity to help Africa trade better

How can the AfCFTA assist Small Scale Traders?


How can the AfCFTA assist Small Scale Traders?

How can the AfCFTA assist Small Scale Traders?

When thinking about international trade, pictures of cargo ships carrying multi-coloured crates or large haulage trucks cruising along an empty highway are usually evoked. While the large-scale trade of goods these images represent forms an integral part of the African economy – informal cross-border trade is responsible for the livelihoods of many communities throughout the continent. The image of individuals carrying large woven plastic bags full of groceries and clothing across a bridge, or long lines of crowded buses loaded with large boxes and bursting suitcases harnessed onto the roof outside of a border post do not immediately come to mind when we think of intra-Africa trade, but the activities of small-scale cross border traders play just as important a role in the African economy.

Small-scale cross border trading activities account for an estimated 40% of regional trade in Africa.[1] Though it is difficult to capture the exact data of informal cross-border trade of goods and services undertaken by unlicensed or unregistered individuals, several studies suggest that for certain basic consumer products, the value of informal trade may meet or even exceed the value of formal trade.[2] Because of the flexibility this economic activity affords, and the earning opportunities offered due to the high you unemployment rates in many African countries’, women make up the largest share of informal traders, representing 70% to 80% of small scale traders in some countries.[3] In Sub-Saharan Africa, for example, small-scale cross border trade is considered the most important source of employment among women, providing 60% of non-agricultural self-employment.[4]

Despite the valuable economic role these trading activities play, the trade facilitation needs of small-scale cross border traders are often not readily accounted for in the formation of trade policy on regional and national levels by African states. Many of the major challenges facing these traders are caused by the deficient implementation of regional trading protocols. States may fail to make national laws to complement the regional protocols, ensuring customs officials at border posts are aware for the various processes formulated to remove certain non-tariff barriers (NTBs) to trade. Studies have shown that the underutilisation of some trade agreements may, in fact, be due to customs officials’ lack of knowledge resulting in frustration of trade. This makes even formal cross border activities cumbersome, inefficient and expensive; with the worst impact being experienced by the small-scale traders who do not qualify for the benefits such as fast-tracked import processes or risk insurance offered to licenced traders.[5]

The restrictions on movement across borders because of heavy lockdowns declared by governments to curb the spread of COVID-19 have taken a particularly heavy toll on small-scale cross border traders whose services are not recognised as essential – despite the integral role they play ensuring access to consumer goods. It has been noted that one of the negative spill-over effects of restricting small-scale cross border trading is the interruption of trade flows of staple foods and other agricultural products into rural villages where populations rely heavily on food items supplied through informal channels.[6] Thus, along with the lack of income of small-scale cross boarder traders, the issue of food security also arises.

Because of the inconsistent implementation of trade agreements, women small -scale cross border traders especially are also vulnerable other risks and challenges at border posts. These include arbitrary confiscation or theft of their goods, corrupt propositions from customs officials and sexual abuse from border authorities.[7]

With the African Continental Free Trade Area (AfCFTA) now in its operational phase, it is of great interest to consider whether the issues of small-scale cross border traders have been or can be addressed through the trade facilitation related protocols in the Agreement Establishing the AfCFTA (the Agreement).

On a regional level, in 2016 the Common Market for Eastern and Southern Africa (COMESA) has implemented a Simplified Trade Regime (STR) to formalise and improve the performance of small-scale cross border traders and enable them to benefit from the regional preferential treatment when importing or exporting goods within the region.[8] The STR simplifies the procedures for clearing goods through Customs, enabling small-scale cross border traders to benefit from the import duty exemption on traded goods on the Common Lists. So far, in countries that have purposefully implemented the STR, this initiative has reduced the cost and time of clearing goods. Likewise reports of cases of harassment, random seizure and the loss of goods appear have reduced since implementation of the STR.[9]

The existing Regional Economic Communities (RECs) are considered the building blocks of the AfCFTA, which aims to enhance intra-African trade through continental economic integration. Based on the acquis principle, the RECs like COMESA will continue to operate following the establishment of the AfCFTA. To avoid any conflicting protocols between the AfCFTA and the RECs, Article 19 (2) of the Agreement stipulates that RECs that have achieved higher levels of economic integration at the time of the AfCFTA coming into force will continue to operate as they had been. Indeed, this provision allows for the more integrated RECs to continue implementing trade facilitation policies, existing as islets of deeper integration within the AfCFTA system. As such, initiatives like the COMESA STR will be upheld by more support and can be continuously improved under the AfCFTA as there is no risk of its interruption. This may also offer further opportunities for streamlining trade facilitation across the continent, encouraging other RECs to implement similar strategies.

The implementation of the AfCFTA also provides an opportunity for African states to re-imagine intra-African trade by engaging various stakeholders on a national level. The success of the Agreement is largely dependent on each Member State’s commitment to realising and effectively implementing the greater community objectives as counties have agreed to. International obligations created on the continental level can only be fulfilled through creating and supporting national frameworks aimed at creating a conducive regulatory environment for effective economic integration. This can be achieved through governments engaging and including civil society, particularly any groups and organisations that represent the interests of small-scale cross border traders, and local authorities in discussions and forums focusing on the AfCFTA. Since 2019, the African Union (AU) and the United Nations Economic Commission for Africa (UNECA) have made concerted efforts to facilitate workshops between government, private sector stakeholders and civil society aimed at engaging in drafting the national policies for the recognition and implementation of the AfCFTA throughout the continent.[10] However, in many countries, it is large companies that are at the forefront of the national AfCFTA agenda.[11] Governments should make more conscious efforts to engage with small business and small-scale trader groups and representatives alike in these forums to ensure they are adequately recognised and catered to on a national level.

Likewise, governments must ensure that customs authorities receive the necessary training, as they are the conduit through which effective trade facilitation will be realised. So far, many of the AfCFTA awareness workshops have targeted high-ranking customs officials who are not usually the individuals at the border posts, and therefore, not best placed to contribute meaningfully to guidelines and implementation strategy that would best suit the needs of importers and exporters at all levels of enterprise.[12] Capacity building in this regard will be a key aspect in enhancing the efficiency of trade across borders and ensuring policy implement to protect the needs of small-scale traders is effective.

As noted in the UNECA Assessing Regional Integration in Africa (ARIA IX) Report: “it is not enough that the AfCFTA be negotiated, concluded and ratified. It must also be effectively implemented to change lives, reduce poverty and contribute to economic development in order to fulfil its overall purpose and highlighted objectives”. Of paramount importance to achieving these goals is the need to support small-scale cross boarder traders, who play an invaluable role in the African economy and social fabric of continent. As a majority are women- it is imperative that their specific needs and personhood as vulnerable groups be recognised and protected to ensure they are not excluded from partaking in meaningful economic activities. This will only be achieved through active support of the existing trade facilitation schemes aimed at small-scale cross border trader, national engagement with the relevant stakeholders and training of the authorities responsible for the practical application of national and continental trade policy.

[1] https://unctad.org/news/what-future-women-small-scale-and-informal-cross-border-traders-when-borders-close

[2] http://ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/133030/filename/133241.pdf

[3] See footnote 1 above.

[4]  pdf Unleashing the Potential of Women Informal Cross-Border Traders to Transform Intra-African Trade | UN Women Factsheet (1.90 MB)

[5] https://www.afronomicslaw.org/category/analysis/low-levels-customs-officials-awareness-recipe-underutilization-afcfta

[6] See footnote 1 above.

[7] https://www.reuters.com/article/us-zimbwabwe-women-traders/desperate-zimbabwean-women-flock-to-cross-border-trade-despite-risks-idUSKCN0PV21I20150721

[8] https://www.comesa.int/comesa-ms-ponder-how-to-keep-the-simplified-trade-regime-running-amid-the-pandemic/

[9] https://www.comesa.int/addressing-bottlenecks-affecting-simplified-trade-regime-in-the-great-lakes/

[10] https://archive.uneca.org/stories/all-set-workshop-validate-zimbabwe%E2%80%99s-afcfta-implementation-strategy

[11] See footnote 5 above.

[12] Ibid.

About the Author(s)

Kimberley Nyajeka

Kimberley is a trade and investment lawyer based in Harare, Zimbabwe. She holds an LL.M. in International Trade and Investment Law, with Diploma of Advanced Studies in International and Economic Law (TRAIL+) from World Trade Institute (University of Bern). She also holds a BA and LL.B from Rhodes University (South Africa). She currently works in a boutique law firm specialising in corporate and commercial practice, notably M&A, transaction financing and legal advisory. Her primary areas of research interest are in International Economic Dispute Settlement (Trade and Investment Arbitrations), Economic Development Policy building, Financial Regulation, Trade in Services and E-commerce.

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