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Tracking Informal Cross Border Trade in Eastern and Southern Africa

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Tracking Informal Cross Border Trade in Eastern and Southern Africa Tracking Informal Cross Border Trade In Eastern And Southern Africa By Julliet Wanjiku, Maurice Juma Ogada and Paul Maina Guthiga Presentation at COMESA Research Forum, 10 – 14 August 2015, Kampala, Uganda Presentation outline • Introduction • Implications of informal trade in ESA Region • Data Sources • The Magnitudes of Informal trade in selected countries in ESA region • Limitation of ICBT trade data • Summary • Recommendations Introduction • Informal cross border trade (ICBT) refers to unrecorded business transactions undertaken across the borders. • ICBT includes goods moved through unofficial and official trade routes (under-invoicing of cargo i.e., reporting lower quantity, weight or value of goods and mis-classification i.e. falsifying the description of products). • ICBT constitutes a major proportion of regional trade (almost 60%), a substantial volume remains unrecorded. Introduction cont.….. • Small transactions of ICBT at different border routes add up to a large volume and may exceed formal sector cross-border trade between certain countries. • Further, data on ICBT is very scant – not available, incomplete. • Yet, evidence based trade information is important for investment and policy decisions • There is thus need to estimate national trade statistics more accurately for appropriate policies - Formal + informal trade. Implications of informal trade in ESA Region • Non-existence of informal trade data leads to unreliable trade statistics which may hinder effective formulation and implementation of domestic and regional trade policies. • Development agenda can only attain positive feedback by use of available reliable data which so far is compromised by the lack of informal trade data. • Governments lose a lot of revenue through evasion of taxes and duties. • ICBT affects public safety and environmental protection policy measures. Agricultural commodities traded informally escape sanitary and phytosanitary controls e.g. quality standard of maize – Moisture content • ICBT enhances greater food security • Source of employment thus reducing poverty and improving livelihood. Data Sources • The study used secondary data on ICBT in ESA region collected by UBOS, EAGC, FEWS NET and ACTESA. • The four agencies were chosen because of their consistency in monitoring ICBT over the years of reference. • Countries covered: Burundi, Democratic Republic of Congo, Djibouti, Ethiopia, Kenya, Malawi, Rwanda, Uganda, Tanzania, Zambia and South Sudan. • Staple food commodities: Maize grain, Rice grain, Maize and wheat flour, Beans and pulses, Cassava, Onions, Tomatoes, Live bovine animals, Milk and cream, Bovine meat, Fish and crustaceans. • Data availability informed the choice of countries and commodities of analysis. Selected Borders being monitored in ESA Many borders are porous and not being monitored 1=Lwakhakha; 2= Malaba; 3= Busia; 4= Mutukula; 5= Kikagati; 6= Cynika 7= Katuna; 8= Bunagana; 9= Ishasha DRC; 10= Ishasha; 11= Mpondwe; 12= Ntoroko; 13= Goli; . 14= Vurra; 15= Paidha; 16= Oraba; 17; Nimule; 18= Namanga; 19= Isabania; 20= Oloitoktok; 21= Moyale; 22= Mchinji; 23=Songwe/ Kasumuru; 24=Mulungu/ Kigoma; 25=Zombe/ Kaseya; 26=Nakonde/ Tunduma; 27=Chirundu; 28=Muloza (Mulanje district); 29=Nayuchi; 30=Tengani; 31=Marka; 32=Mwanza; 33=chadiza; 34=Beitbridge; 35=Chirundu; 36=Momkambo; 37=Kasumbalesa; 38=Mkumaniza; 39=Nyamapanda; 40=Machipanda The Magnitudes Of Informal Trade in Selected ESA Countries It is difficult to give exact magnitudes of informal cross border trade because of its unrecorded nature Estimated intra-regional Informal export of food staples in ESA 900,000.00 800,000.00 700,000.00 600,000.00 500,000.00 400,000.00 Metrictons 300,000.00 200,000.00 100,000.00 0.00 2010 baseline 2011 2012 2013 2014 Year Data source: UBOS, EAGC, FEWSNET, ACTESA Informal trade in the ESA region consistently grew during the period of reference Informally traded staple food commodities in ESA in 2014 Tomatoes Wheat Flour Fish and 2% 1% Onion crustacean 2% 1% Maize Flour Rice grain Beans & dry Cassava 3% 10% legumes 24% 1% Maize grain 56% Data source: ACTESA, UBOS, FEWSNET and EAGC Maize grain, beans & dry legumes were the most traded commodities in 2014. There was also significant informal cross-border trade of rice. Informal intra-regional maize exports in ESA 160000 140000 120000 100000 80000 60000 Metric tones Metric 40000 20000 0 Burundi Congo DR Ethiopia Kenya Malawi Rwanda South Tanzania Uganda Zambia Sudan 2008 2009 2010 2011 2012 2013 Data source: UBOS, EAGC and FEWSNET Uganda, Tanzania and Zambia are the main countries with high potential for informal cross border trade in maize in ESA region. Informal intra-regional staple food exports in ESA in 2014 (MT) Product Burundi Djibouti Dr Congo Ethiopia Kenya Malawi Rwanda South Tanzania Uganda Zambia Total Sudan Grains & pulses 263 27 2935 1837 20721 11268 9296 780 119000 501635 18486 686247 Beans & dry legumes 2219 954 3808 422 9199 86 16835 185283 3643 222448 Maize grains 263 1 399 883 2890 8367 58 4 37186 315928 13041 379022 Rice grains 26 317 14023 2479 38 690 64979 423 1802 84777 Livestock products 33 124 19 148 132 14442 14898 Bovine meat 0 11 0 23 1 294 329 Milk and cream 2 98 17 118 21 1198 1453 Fish and crustacean 31 16 1 8 109 12950 13116 Processed flour 438 10 1 357 7489 1 14 126 1282 32512 1902 44130 Maize flour 201 4 1 1 6 1 13 122 18 29813 1902 32082 Wheat flour 236 6 0 356 7482 1 4 1264 2699 12048 Roots & tubers 1579 0 4 13 405 5043 7045 Cassava 1579 0 4 13 405 5043 7045 Vegetables 508 323 30 287 136 4 1952 12914 16153 Onions 219 30 269 48 2 1714 6020 8302 Tomatoes 508 105 18 88 1 238 6894 7851 Grand Total 1208 37 4872 2224 28622 11268 9468 1071 122770 566546 20388 768473 Data source: ACTESA, UBOS, FEWSNET and EAGC Limitation of ICBT trade data • Informal trade data mainly does not exist in the region • Where it exists, the data is mostly incomplete in terms of commodity coverage or location of data collection points • Furthermore, the available informal trade data are collected by only a few agencies on a regular basis. • These include the Uganda Bureau of Statistics (UBOS), MAS group and ACTESA • Not all components of informal trade are captured (‘panyas’, night trade, under-declared goods) • Methodological tools used by agencies differ: e.g. use of weighing scale etc. • Making informal trade data very incomplete Summary • Few agencies in the region are monitoring the informal sector trade • A lot of the trade data remain unrecorded. • The missing informal trade data leads to unreliable trade statistics which may affect effective formulation, implementation and monitoring of domestic and regional trade policies. • Various development agencies cannot clearly tell the impact of any trade related policy initiatives in the region. • Governments lose revenue annually in unpaid custom taxes and duties. • From the data available, this study found that ICBT has been on an upward trend. • However, the data available are incomplete and may not provide precise indication of the magnitude of this trade. • But a good indication of the direction of this trade is provided. Recommendations • Investment by national governments in informal trade data collection. • Make data collection more efficient, cost effective and ensure coverage of more borders. countries should consider possibilities of working together and share data collection work for common borders and share data amongst themselves • Harmonizing data collection methodologies and protocols for all agencies involved in data collection. • Strengthen partnership between various agencies involved in data collection • Complement tools used to collect informal trade data with additional tools such as focus group discussions to validate the results. • The regional economic communities such as COMESA and EAC and member states should mainstream ICBT in national and regional economic policy dialogues. • ICBT should be integrated into regional trade strategies. Thank you .
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