Harare – Informal cross-border trade (ICBT) constitutes a major form of informal activity across Africa.
In the Southern African Development Community (SADC), it makes up an estimated 30-40 percent of total intra-regional trade with an estimated value of US$17.6 billion with women typically representing up to 70 percent informal cross-border traders.
Such statistics have prompted Comesa to conduct a study on how formalisation of ICBT can enhance economic growth.
“This project is intended to increase formal small-scale cross-border trade flows in the COMESA/tripartite region, leading to higher revenue collection for governments at the borders as well as increased security and higher incomes for small-scale cross-border traders,” the bloc that brings together Eastern and Southern African states said.
The study report was presented to member states for validation in an October 7 virtual meeting attended by senior government representatives from the ministries and departments responsible for trade, finance, gender, SMEs and border management issues. Countries represented were DRC, Ethiopia, Kenya, Malawi, Zambia and Zimbabwe.
According to the study conducted by Dr Evarist Mugisa, these six countries and Tanzania had sizeable informal economies serving as sources of livelihoods for millions of people. However, the size of the informal economy was unclear due to the lack of reliable data, but estimates suggest it exceeds official economic activity.
“An important component of the informal economies of these countries is ICBT, which involves small scale traders who carry goods across borders evading all regulatory requirements,” Dr Mugisa observed. “The immediate impact of this is that governments do not receive the tax revenues on these transactions. ICBT also distorts the trade policy in these countries.”
The proliferation of informality in these countries is driven by a wide range of factors, including poverty, a restrictive business environment, the failure of government policies to translate into development and create decent employment opportunities in the formal sector, and the poor performance of the economies, among others.
“The study also found that challenges faced by ICB traders vary; but they include burdensome customs and border procedures, poor or lack of border infrastructure (storage facilities or accommodation, poor transport infrastructure, etc), lack of understanding of the trade formalities and procedures due to illiteracy and lack of information.”
Among key recommendations in the study were: to offer technical assistance and quality support services to informal traders and build greater trust between the private sector and border agencies; promote broad regulatory and administrative reforms; simplify official administration for businesses and tax administration and rationalisation of business registration and licensing regimes,” said Comesa.
The study also recommended that governments reduce the cost of trading formally and enhance the efficiency of border controls to improve compliance with existing regulations as well as the Comesa Simplified Trade Regime.