Informal Cross Border Trade (ICBT) is described by the International Trade Centre as a trade that is neither taxed, nor monitored by any form of government, to the extent that it is not included in the gross national product (GNP) and gross domestic product (GDP) of a country.
Mainly practiced by the employed and the unemployed, ICBT is estimated to be contributing 70% of employment in Sub-Saharan Africa and constitutes the majority of activity carried out in most of the African countries.
It is considered to be making up an estimated 30% to 40% of total trade done amongst country members of South African Development Community (SADC) with an estimated value of $17.6 billion.
For example in Zimbabwe, ICBT has created job opportunities for more than 5 million people engage in informal economy.
Rwanda’s total cross border trade was worth Rwf 375.4 billion in 2013.
In the meantime, women represent up to 70% of ICBT in Africa trading mostly basic luxury commodities produced in other countries.
Food and Agriculture Organisation (FAO) country representative to Rwanda, Attaher Maiga, says there is need for data generating to support women in the contribution to formalising the informal trade, which will be specifically emphasised in a two-day workshop to be held in Kigali, Rwanda from May 24 to 25.
He said that addressing the specific needs of women traders is hampered by the limited availability of data able to demonstrate the scale of the informal market and women’s contribution to informal trade.
“Making informed decisions about the required support for women engaged in informal trade will depend on improving the generation of sex-disaggregated data within agricultural trade surveys necessary to develop tailored programme responses,” Maiga said.
Notably, ICBT is done by both the employed and the unemployed, small, medium enterprises and some large firms and even employees in need of adding on their salaries. More generally, ICBT provides access to goods that are unavailable domestically to meet domestic demand.
More often, traders engage in informal trade because of barriers to entering the formal sector, including difficulty in getting access to traveling documents or trading licenses, excessively long waiting times at borders, overcharging by customs officials, and lack of knowledge of official procedures.
In spite of procedures taken by Regional Economic Communities and milestones achieved towards formalisation of the trade in Africa, there are still structural and legal inadequacies when it comes to ICBT.
Corruption in the form of bribes solicited by officials in order to smuggle goods, sexual abuse, confiscation of goods and lack of knowledge on customs border procedures due to illiteracy are among challenges faced by traders who do trade informally.
Lack of skills, education and training are among barriers to traders who need to formalise ICBT in Africa. High tax rates, tax administration complicated business registration and trade licensing are barriers that tend to prevent informal traders from formalizing their activities.
Other constraints to a formalised trade in Africa are: Limited access to technology, poor infrastructure and limited capital.
Governments are concerned about the negative aspects of ICBT as it `presents unfair competition to domestic industries and significant revenue loss for governments. Products traded informally are often counterfeit goods sold at lower prices, not subject to import taxes, and simply cheaper than locally manufactured equivalents.
Participants at the workshop will ponder all the outlined concerns. What will come out of it might provide pointers to remedies or will pass as many other workshops before this one.