Building capacity to help Africa trade better

Why informal cross border trade remains important


Why informal cross border trade remains important

Why informal cross border trade remains important
Photo credit: AP

The buying and selling of goods and services between businesses in neighbouring EAC Partner States with the seller being in one Partner State and the buyer in the other, for example a company or an individual business person in Rwanda selling to a company in Burundi.

Cross Border Trade (CBT) plays an important role in poverty reduction as it provides trading opportunities for a good number of people, for example women, are the most active traders along Rwanda’s borders.

The EAC Partner States are recognizant that women make a significant contribution towards the process of socio-economic transformation and sustainable growth and that it is impossible to implement effective programmes for the economic and social development of the Partner States without the full participation of women.

Studies that were conducted indicate that 74% of informal cross-border trade is conducted by women and for the majority it is their only source of income. In addition, women trade predominately in lower value, low profit products.

Gender patterns in the composition of traded goods have been noticed: women sell mainly foodstuffs, for example, manioc flour, tomatoes, corn, onions, fish etc alongside a few other specific products like palm oil, while men sell a wider variety of products, often with a higher value like secondhand clothing, beer, household items and other fastmoving consumable goods.

However, some cross border women traders across the region do not use available formal systems/structures for most of their transactions most of them do not really understand the benefits gained through signed EAC treaties and protocols and thus miss many of the best opportunities by not utilising them, for example, when they opt to pass through the porous borders (panya roads) carrying locally produced goods from the neighboring Partner State indicate that they are not aware of the issuance of the certificate of origin on official borders.

This makes it difficult for regional trade policy initiatives such as under East African Community (EAC) and the Customs Protocol to have any significant impact on this informal trade by women.

The women show little evidence of knowledge regarding the Customs Protocol and even less motivation to use it to facilitate trading activities.

Currently, returns from cross border trade have been realized. Rwanda’s total cross border trade flows amounted to Rwf 375.4 billion in 2013, an increase of 19% over 2012 of which total cross border exports accounted for Rwf 159.3 billion and total cross border imports accounted for Rwf 216.1 billion with growth rate of 50% and 3% respectively.

Rwanda’s cross border trade deficit reduced by 45 per cent in 2013 compared to 2012.

EAC has offered a number of facilities to the cross border traders particularly through Simplified Trade Regime (STR) especially the small traders who regularly transact in values lower than 2000 dollars. This regime enables them import their goods duty free.

STR has its instruments like Simplified Certificate of Origin, list of common trade goods with neighboring countries and these instruments can benefit them by facilitating their business with in the EAC region. Simplified Certificate of Origin ensures that Customs border posts bordering with our neighboring countries facilitate small scale cross-border traders.

STR facility has impacted a lot on women in cross border trade and entire border communities in general.

There is reduction of transaction costs and elimination of Non-Tariff Barriers for example reduced documentation required to cross the border, increased trade volumes due to increased Market from EAC population estimated to be 140 Million people.

Other benefits include capacity building through sharing best practices with fellow women traders within the EAC, ability to buy goods cheaply from other Partner States, ease of investment in other Partner States, increased job opportunities, among others.

The Government of Rwanda, through responsible institutions, in a bid to promote cross border trade has continuously engaged stakeholders that are national, bilateral and regional and establishing national cross-border trade coordination and monitoring committee which have significantly reduced the cross border trade challenges, especially Non-Tariff Barriers.

Trade information desks were established at some borders aimed at improving visibility and provision of information to stakeholders.

One Stop Border Post (OSBP) which combines activities of two countries at a single location to remove unnecessary obstacles which hinder legitimate trade, extended working hours: Moving from 12 working hours to 24/7 operations among others

However, there is also need to support the activities aimed at raising awareness to increase the knowledge of traders in cross border trade to better equip and empower them to assert their rights if faced with arbitrary or incorrect application of rules, reforms and new developments.

The writer is the Director General, Coordination of EAC Affairs at the Ministry of EAC Affairs.

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