Informal Cross-Border Trade
Informal cross-border trade, which is trade that occurs outside of formal, legal mechanisms, plays an important role in the economies of East Africa. It not only acts as an accelerator of economic development, but also regional development.
Generally speaking, informal cross-border trade can encourage entrepreneurial activity, regional trade, contribute to greater food security, income earnings and employment opportunities for poor households at border points. However, in the longer term, it could have negative economic and developmental effects. These include unfair competition for formal traders, incompliance with health, safety and environmental standards as well as losses to government revenues through lost taxes and duties.
With the establishment of the One Stop Border Posts (OSBP) at Namanga, it is anticipated that cross-border trade should be made easier for informal traders, especially women, and small-scale enterprises. However, the current uniformity of the taxes levied on traders by the governments at both borders makes it difficult for those with little capital to do business, forcing many to act outside the law.
What the EAC has done for Cross-Border Trade
The Partner States of the East African Community (EAC) have committed themselves to enhancing and strengthening partnerships with the private sector organizations (PSOs) and civil society organizations (CSOs) in order to accelerate sustainable socio-economic development and political cooperation.
The EAC integration process is proceeding steadily with the implementation of the Customs Union through the finalization of the Single Customs Territory (SCT), improved inter-connectivity through Information and Communication Technology (ICT), the establishment of One Stop Border Posts, reducing Non-Tariff Barriers (NTBs) and increased harmonization of taxes.
Under the Common Market, there is increased ease for the movement of people, goods, services and capital. Progress is being made towards increased trade in services through the negotiations of Mutual Recognition Agreements. In terms of improving the livelihoods of women cross-border traders, the EAC has developed a Gender Strategic Plan 2012-2016, which has been under implementation to date.
Overall, the EAC has implemented numerous policy frameworks and is currently developing many more in order to ease and encourage trade within the region.
The Contribution of Civil Society: From Informal to Formal Trade
Regionally, CSOs, PSOs and other interest groups have contributed significantly in complementing the work of the EAC Secretariat, Organs and Institutions as well as those of the Partner States.
In their efforts towards people-centered and market driven integration, CSO’s have played a major role in policy development and reform. Some examples of their contributions are the 4th EAC Development Strategy (2012/2016), promoting cross-border legal practice, advocacy for the extended jurisdiction of East African Court of Justice (EACJ) to handle cases on business and the East African Bribery Index 2013, to name a few.
These efforts have contributed tremendously towards improved cross-border trade, increased intra-regional trade, movement across borders, the removal of a number of NTBs, harmonization of standards, increased transparency and improving the livelihoods of informal cross-border traders.
However, challenges still exist which are hampering effective cross-border trade and private sector development. These include the slow pace of implementation of the commitments made by EAC Partner States, lack of enforcement mechanisms for the removal of NTBs and inadequate sensitization and awareness creation to cross border traders on the trading requirements, among others.
Civil Society Rising to the Challenge
CSO’s are rising to these challenges to private sector development. Trias, an international NGO working in partnership with the local chamber of commerce in Northern Tanzania, convened a one day Belgian Non-Governmental Actors’ Forum in Namanga on entrepreneurship. The Forum enabled these actors discuss the role of CSOs in private sector development and improvement of cross border trade. IIDEA (the Incubator for Integration and Development in East Africa) also supports a number of cross-border projects, such as the Pastorial Women’s Council’s (PWC) Empuan project that which empowers the Masaai women cross-border traders at Namanga.
The contributions of civil society are remarkable. The challenges mentioned above have motivated civil society to further their roles in private sector development and cross-border trade in the following areas:
- CSOs and Business Membership Organizations (BMOs) have and need to play a key role in mobilizing and organizing cross-border traders to engage better with border agencies.
- Civil society have committed to engage in key decision making processes. This not only entails dialogue with policymakers, but also amongst themselves and the private sector.
- Civil society has and will continue to research on opportunities and constraints of cross border-trade.
- CSOs and BMOs have and need to continue to facilitate strategic and evidence-based advocacy between traders and border agencies. This is crucial because cross-border traders/groups lack convening power and experience in advocacy. .
- CSOs and BMOs need to provide technical assistance to cross-border traders on micro-credit, product development, market identification, Trade Rules and Regulations (e.g. Rules of Origin).
- Financial support through donations, microfinance and incubation of business initiatives is another crucial role civil society plays and needs to continue performing in order to promote private sector development and transitions from informal to formal trade.
- Civil Society has and needs to continue building solidarity amongst cross-border communities. It is only when these communities are truly united that they can achieve forward momentum towards bigger markets, transfer of skills/knowledge and eventually contribute to EAC integration.
- CSOs and BMOs should act as watch dogs at border points to ensure that government are actually facilitating and supporting cross-border traders adequately.
The role of civil society in promoting cross-border trade and private sector development at Namanga is crucial in bridging the gap in government service provision. As such, IIDEA proposes that the following actions take place:
- Continuous involvement of CSO’s and BMO’s in private sector development, particularly through cross-border trade.
- There is a need for multi-stakeholder collaboration and partnership amongst border communities, agencies and NGO’s.
- Partner States need to fast-track efforts to harmonize policies and liberalize economies in order to facilitate cross-border trade in the region.
- There is a need for trade data to guide evidence-based policymaking.
- Border agencies should collaborate with CSO’s to sensitize traders on EAC trade policies and regulations.
To date, projects such as PWC’s Empuan Project with financial support from IIDEA and the Maisha Bora project implemented by Trias and its partner organizations have seen promising results at Namanga. Therefore, governments should continue to provide an enabling environment for these actors to make a positive impact towards improving cross-border trade and private sector development in East Africa.