Tracking informal cross-border trade in eastern and southern Africa
A presentation by Juliet Wanjiku from the Regional Strategic Analysis and Knowledge Support System for East and Central Africa (ReSAKSS-ECA), shows that effective tracking of informal cross-border trade through accurate trade data collection and its management will enhance greater food security, and also lead to effective formulation and implementation of domestic and regional trade policies among the Eastern and southern Africa countries.
She was presenting on behalf of her co-authors, Maurice Juma Ogada and Paul Maina Guthiga at COMESA Research Forum in Entebbe, Uganda on ‘Tracking Informal Cross Border Trade in Eastern and Southern Africa’.
This annual research forum took place on 10-14th August, 2015. It aims to strengthen the participation of the government, leading policy research think tanks, academia and the private sector in regional integration agenda and specifically provide a COMESA forum for sharing and discussing regional integration research findings.
Informal cross-border trade (ICBT) is as a form of trade that is unrecorded in official statistics, and is conducted mainly by small businesses in the region. ICBT involves unrecorded trade transactions undertaken across the borders at both official and un-official route. In addition, ICBT includes under-reporting, false classification and under-invoicing of legal goods. In addition to seeking to evade taxes or fees imposed by governments, traders also try to avoid administrative formalities in areas such as health, agriculture, security and immigration, which are perceived as costly, complex and time consuming.
Informal cross-border trade constitutes approximately 60% of the regional trade and it is improving the livelihoods of many populations through job creation as well as combating food insecurity in the region.
Despite its enormous benefits, this trade is a threat in the region. It may offer unfair competitive advantage to informal sector traders over formal businesses. It also leads to loss of revenue through evasion of taxes by traders and affects the health of the populations in the region because many of the traders avoid safety checks on their commodities at the border.
While the available data is incomplete to provide a precise indication of the magnitude of this trade, as well as hinder effective formulation of domestic and regional policies that enhance trading and development in the region. This study found that ICBT has increased steadily from 2010-2014 in the region.
She recommends that:
Regional government to invest in informal trade data collection: complement tools used to collect trade data, harmonize data collection protocols and share data collected.
Partnership between various agencies involved in data collection to be strengthened.
ICBT be integrated into regional trade strategies
The regional economic communities such as COMESA and EAC and member states to mainstream ICBT in national and regional economic policy dialogues.