Stepping up action on simplified trade regimes for a more inclusive AfCFTA and common African market

Abstract

Among its many objectives, the AfCFTA seeks to promote inclusive trade, particularly for women and youth. This paper discusses the role of Simplified Trade Regimes (STR) in promoting inclusive trade among women and youth in existing regional schemes, and some of the lessons these experiences offer for the AfCFTA. The paper begins with a brief overview of the characteristics and scale of small-scale (informal) cross-border trade (ICBT) in Africa. The following section discusses some existing approaches to support such traders, before focusing on the concept of STRs: where they currently exist (principally between COMESA countries), their stated objectives, and main characteristics. The third section then discusses the challenges of STR schemes, the interests and incentives of different public and private actors, the heterogeneity of ICBT, and how they are implemented and their impacts in practice. The final section draws conclusions and policy implications for a potential future continental STR under the AfCFTA.

Introduction

In Sub-Saharan Africa, informal cross border trade (ICBT) represents a large proportion of trade and an important source of non-agricultural self- employment, especially among women. Intra-African trade through the AfCFTA has the potential to promote gender equality by facilitating trade among these traders. However, to date, the integration of these groups into trade policies has been challenging. Women face various barriers to trade, while youth face difficulties in accessing formal employment and decent jobs, forcing them into entrepreneurship and small businesses in the informal sector (UNCTAD 2021).

While reducing tariffs under the AfCFTA will arguably lower the incentive for some informal cross border trade, more could be done to support these marginalized and economically vulnerable actors, leading some of Africa’s RECs to introduce measures targeted at informal, small-scale trade. The Common Market for Eastern and Southern Africa (COMESA) adopted a STR in 2010 (COMESA 2021), with standards for the treatment of small-scale cross-border traders to facilitate quicker clearance of goods, reduce costs and improve data capture. These measures have helped to address some of the challenges faced by informal cross-border traders, albeit with varying uptake and usage.

This chapter examines the place and role of STRs in the current intra-African trade landscape, and some of the lessons for the AfCFTA in promoting more inclusive trade for women and youth. The paper begins with a brief overview of the characteristics of informal cross-border trade in Africa, with a particular focus on those linked to gender. The subsequent section discusses approaches to support or address informal trade, before focusing on the concept of STRs: where they currently exist (principally between COMESA countries), their stated objectives, and main characteristics. The third section discusses challenges of STR schemes, the interests and incentives of different public and private actors, the heterogeneity of ICBT, as well as their roles in practice. The final section draws conclusions and policy implications for a potential future continental STR under the AfCFTA.

 

The Scale and Challenge of Informal Cross-Border Trade (ICBT)

Defining ICBT

While there is no single definition of ICBT, a large share of intra-African trade is informal, small-scale and unrecorded, so that “the informal economy remains pervasive and constitutes a significant share of the total economy” (UNCTAD 2021). Examining a wide range of cross-border studies and extrapolating from those, UNECA (2021) estimates that the share of informal cross-border trade between neighbouring countries in Africa represents between 30 to 72 percent of their overall trade. While a wide range, even the lower bound estimate represents a substantial volume of trade and thus of traders.

This trade plays a key economic role because of the flexibility and the earning opportunities it offers, given the high unemployment rates in most African countries (Nyajeka 2021). Women make up the largest share of informal traders, representing 70 - 80 percent of small-scale traders in some countries (Zarrilli and Linoci 2020). ICBT thus not only contributes to inclusive growth and poverty reduction (albeit unrecorded in official statistics), but also serves as an employer of last resort where formal employment opportunities are not available (UNCTAD 2021).

Gendered Challenges of ICBT

The over-representation of women in the informal economy reflects a series of structural impediments to their participation in more decent, and less precarious, jobs (Kelleher 2020). Access to trade-related information, services and resources in support of women’s trading activities remains weak (UN Women 2022, APRM 2022), while according to Mbaye and Gueye (2018), the prospects of moving into more formal activities are also worse for women, who often have limited access to finance, productive resources, training and skills than men. Moreover, women cross-border traders remain especially vulnerable to abuse, harassment, and confiscation of goods at the border by officials (Brenton et al. 2013, World Bank 2020). The marginalization and vulnerability women face when trading across borders reflects wider gender disparities.

Multiple studies cite gendered abuse faced at borders. Efforts to stem this include training initiatives targeting customs officials (who are mostly men), to promote gender-sensitive attitudes, improve the understanding of business operators’ rights and obligations, and reduce the incidence of harassment, bribes, undue confiscation of goods, or verbal abuse (UNCTAD 2019). Likewise, traders are encouraged to use more formal trade channels by providing facilities like transport, storage and refrigeration infrastructure (especially for perishable agricultural commodities), or improving water and sanitation facilities, among others. Provision of child-care services is also increasingly seen as being important - a recently established ‘Safe Trade Area’ at the Busia border between Kenya and Uganda seeks to provide this, among other facilities, to protect cross-border women traders (TradeMark Africa 2023) - as women traders often do not have access to quality child care facilities*. However, even in some cases where these services exist, workers are reportedly not able to utilize them because of high costs taken in the form of fees (Sabaa and Quarshie-Twum 2022).

* Another example is the Busia Childcare Centre, a collaborative initiative among the Busia Women Cross-border Association, the County Government of Busia, and the Collaborative Centre for Gender and Development with support from Mastercard Foundation and the University of Nairobi Women Economic Empowerment Hub. The project seeks to redistribute the disproportionate burden of unpaid care work on women through providing day-care for children between 0-4 years of age to enable traders to access quality affordable childcare and free mothers to engage in income generation activities including trade, entrepreneurship and employment. The project is also intended to assist in redistributing the burden of childcare. For more information.

Making regional and continental trade regimes more inclusive of women therefore implies addressing a complex set of challenges.

 

Approaches to Supporting Informal Traders

Various approaches are being applied to engage with and support women informal traders through the RECs. These include regional gender policies, trade policies and NTB reporting mechanisms, all of which could, in theory, be used to make trade more inclusive for women and youth. In addition, efforts have been made by various RECs to design simplified trade regimes (STRs) with a view to lowering the burden of using official trade channels. This section discusses each of these in turn.

Regional Gender Policies

Some RECs have adopted gender policies and strategies to ensure gender equality and promote women’s economic empowerment within RECs. The aim of these is often to inform long-term changes in structural gender power relations and norms, roles and statuses, with specific actions or objectives focused on trade.

Examples include the following:

• Article 17 of the Southern African Development Community (SADC) Gender Protocol obliges Member States to adopt policies and make laws that ensure equal access and benefits for women and men in trade and entrepreneurship, taking into account the contribution of women in the formal and informal sectors (SADC 2008).

• Other REC efforts include the EECOWAS Plan of Action on Gender and Trade, which attempts to address challenges faced by women in trade by making policies work for women (ECOWAS 2015). Priority actions include training and capacity-building for women traders on their rights, custom processes, and trade negotiations, as well as training and capacity-building for customs officers and other border management regulation officers (Ibid.).

• The EAC Gender Policy commits to creating an enabling environment for increased access and control of productive resources and economic benefits in both formal and informal activities, and places obligations on Member States to support and promote participation of women in small, medium and large enterprise development and cross-border trade (EAC 2018).

Though notable, these general strategies rely on implementation of complementary gender-inclusive legislation across various sectors, which remains a challenge in many countries. Gender policies may also not directly address the complexities of ICBT at the border, and often lack enforcement mechanisms to check their implementation.

 

Regional Trade Agreements and Programmes

RECs have programmes that deal with trade facilitation and regional integration more generally. Although the main focus is formal trade through regional trade agreements, the role of ICBT is often acknowledged in official policy documents and programmes.

The EAC and COMESA Treaties recognize the importance of women as a vital economic link between agriculture, industry and trade. Their member countries undertake to increase participation of women in business and promote special programmes for women in small and medium sized enterprises (EAC 1999, COMESA 1993). The COMESA Treaty makes specific reference to creating an enabling environment for effective participation of women in Common Market trade and development activities. Similarly, the ECOWAS Treaty refers to promoting medium- and small-scale industries, while Article 63 focuses on addressing constraints faced by women traders (ECOWAS 1993). The ECOWAS Common External Tariff (CET) removes the main differences in tariffs towards the outside world, thus partly lowering the incentive that had existed for informal trade from low tariff ECOWAS Member States to those with higher tariffs (ECOWAS 2016). Similarly, the Economic Trade Liberalization Scheme (ETLS) allows for the simplification of processes in goods that are often traded by actors involved in ICBT (ECOWAS 2012).

Aside from recognizing informal trade in REC treaties, trade facilitation programmes have been adopted to increase the transparency and predictability of trade transactions and cross-border transport as one of its outcomes (WTO 2017), and to promote the role of women in trade. Examples include TradeMark Africa in the East Africa region (TMA, 2023), the Trade Facilitation West Africa Programme (TFWA), and the Great Lakes Trade Facilitation and Integration Programme (WB 2022), all of which have programmes aimed at supporting and informing female cross-border traders.

Although the role of small-scale informal traders - and women in particular - is acknowledged in formal trade policy discourse, trade agreements and trade facilitation measures are principally focused on recorded trade by larger operators.

NTB Reporting

The biggest gains from the AfCFTA are expected from the reduction of non- tariff barriers (NTBs) and from trade facilitation, which are estimated to raise intra-African trade by “between 50 and 132 percent [with] GDP gains of between 1 and 4 percent” (World Bank Group 2020). NTBs include cumbersome bureaucracies, lengthy clearance processes, unclear rules and corruption (UNCTAD 2019). Monitoring and addressing challenges related to NTBs is one avenue to reducing the incentives for ICBT.

Some RECs have adopted NTB reporting mechanisms to address some of these challenges - like COMESA, EAC and SADC which, under the tripartite free trade area, adopted an online NTB reporting mechanism to enhance transparency and easy follow-up of reported and identified NTBs. But not all RECs have a unified approach to monitoring and eliminating NTBs at the regional level. For example in ECOWAS, multiple classifications of NTBs and tools exist simultaneously, such as the mechanism by Borderless Alliance; International Trade Centre’s Trade Obstacle Alert Mechanism (TOAM); and the AfCFTA NTB online tool (Olayiwola 2020). This duplication need not be a problem in and of itself, but other challenges suggest only moderate effectiveness due to high costs of reporting (by businesses), and the challenge of eliminating NTBs by national governments once identified. In addition, it is unclear if the private sector is sufficiently aware of these tools to make effective use of them.

Questions therefore remain as to the effectiveness of such monitoring mechanisms in terms of stimulating, facilitating or incentivizing national-level governments to comply with regional and continental agreements and their effects on informal cross-border traders.

The above three approaches, though commendable, face various challenges, as they apply to trade more generally and are not specific to ICBT. As such, some RECs have adopted procedures to simplify trade rules to respond to the specific needs of informal cross border traders.

STRs

Simplified Trade Regimes are specifically targeted at small-scale cross-border trade, with an explicit or implicit objective of encouraging formalization of informal cross-border trade. They present a number of trade facilitation- related benefits, such as providing information on trade with other Member States in the regional FTA, reducing some administrative and procedural hurdles at the border through easing clearance costs, and eliminating delays associated with clearing products (TRALAC 2022). Studies indicate the relative costs traders face when exporting the same goods are inversely proportional to their size, with large formal exporters carrying the lowest costs and small-scale traders carrying the highest (Imani Development 2022). The STR can help small-scale traders access the same benefits and preferences that large formal traders take advantage of, drastically lowering the costs of goods crossing the border.

Generally, the design of STRs comprises four main instruments and one common administrative pillar, namely: a simplified customs document, a simplified certificate of origin, a common list of products, and a threshold for the value of the consignment, with Trade Information Desks staffed by officers responsible for administrative processing and verification of the eligibility of goods for the STRs (Mafurutu 2022). COMESA and the EAC have adopted STRs based to some degree on the five pillars in Figure 1, presented along with brief explanations.

 

Figure 1: Key Pillars of the STR Mechanism

Pillar	Remarks
1. Common list	Product coverage is as per the agrees bilateral list(s) of goods that are eligible for the STR
2. Threshold	Maximum value for consignments that can be imported or exported under the regime by the intended beneficiaries
3. Simplified Customs Document	Simplified customs document for use in import and export clearance
4. Simplified Customs Certificate of Origin	Simplified certificate of origin that covers qualifying goods
5. Trade Information Desk	Trade information (help) desks, and trade information officers at participating country border posts

Source: Rwatida Mafurutu (2022); SADC Simplified Trade Regime: Tracing development and implementation progress, TRALAC Trade Brief, June 2022.

 

Lessons from COMESA STR

As one of the earliest STRs, implementation of the COMESA STR started in 2010. The rationale was to simplify the requirements for small-scale trade to help small-scale traders (a term used in COMESA as opposed to ICBT traders, and used in this section) benefit from the COMESA FTA. By simplifying and speeding up trade and customs processes, it was designed to improve the experience at the border for small-scale cross-border traders, and transform and mainstream ICBT into formal and legitimate cross border trade, while helping improve intra-regional trade data through more accurately and efficiently capturing informal trade (Muqayi 2015).

The COMESA STR has a threshold of $2,000 for the value of goods eligible to use the STR. It uses a bilateral form of Common Lists for the STR, which means the list of goods is negotiated and agreed between the two neighbouring States that share a common border. This in turn implies that the STR is applied differently at different borders of the same country. In contrast, the EAC has adopted a common regional approach in its list of goods eligible for its STR. Given the overlap in membership of these regional blocs, the need for information sharing for countries that fall in both RECs is imperative for small scale/informal traders to be able to take advantage of STRs.

Discussions have sought to expand the STR range to include “imports from countries participating in the COMESA FTA” and not just those with a shared border (Gakunga 2019). Subsequently a COMESA decision by the Council of 2019 extended this, allowing all goods meeting the rules of origin from a COMESA FTA Member State to enjoy preferences under the STR, as long as they are on the importing country’s common list (Imani Development 2022).

Recognizing the challenge that the Simplified Certificate of Origin still posed to small-scale traders, this was removed from the required documentation list to reduce compliance barriers in several COMESA Countries (COMESA 2014). This is due to the fact that small scale traders in border towns had difficulties in accessing such certificates, usually only issued in capital cities. Not requiring a simplified certificate of origin has been shown to greatly simplify the trade and increase STR uptake. As such, the Simplified Customs document is the only document currently required for the STR in COMESA (Imani Development 2022, COMESA 2014).

Several studies point to a relatively positive uptake of the COMESA STR, given the benefits it provides users in terms of shorter processing times, tax/duty relief, and (to an extent) protection from extortion and abuse (especially for women traders), as the formalization offered by the STR helps reduce trader’s reliance on informal routes, which can be extremely dangerous (Imani Development 2022).

Nevertheless, effective implementation of the COMESA STR has faced challenges, including reports from traders of not being aware of the STR or how to use it, and not fully understanding what benefits it provided (Imani Development 2022, APRM 2022). Furthermore, common lists are often out of date, and the negotiation of new lists can take significant time and are not updated frequently enough to take into account seasonal availability of agricultural goods, yet this is a significant portion of the goods traded by small-scale traders.

Administratively, there are concerns that STRs reduce the tariff revenue collected at the border, which may lead to opposition from countries reliant on this revenue. A study by Imani Development notes that “fieldwork at Kasumbalesa found that customs on the DRC side were concerned that implementing the STR would cost them up to $250,000 per day, which is one of the reasons why implementing the COMESA FTA and the STR is opposed” (Imani Development 2022). Such concerns for revenue loss have resulted in abuse by customs officials who need to meet revenue targets.

Aside from the challenges related to implementation by border officials, it is necessary to also examine aspects of how an STR interacts with the existing system at border crossings. For example, concerns have been raised about the abuse of STRs by traders through aggregation of goods. Anecdotally, this is a concern at the border between DRC and Rwanda in the Great Lakes Region, where - although COVID-19 restrictions led policymakers to encourage aggregation of small-scale traders’ goods into single shipments - authorities suspect large companies of misreporting their shipments as multiple small- scale consignments (Byiers et al. 2023).

In summary, STRs simplify procedures for certain categories of goods but still require traders to actively use them and depend on correct implementation by border officials. This creates a gap between the current operation of STRs and their full potential.

Beyond Narrow STRs

Beyond the current narrow interpretation of STRs, questions revolve around how to overcome other border-related procedures, such as those related to sanitary and phytosanitary (SPS) procedures and other taxes, which may hinder small-scale traders from using the formalized system as opposed to informal ways of crossing the border. Zarelli and Lenoci (2020) propose that STRs could be adapted to better respond to the specific needs of informal traders by waiving requirements for certificates of origin (already undertaken within COMESA), relaxing requirements for other documentation on trade of essential goods, or expanding the lists of goods eligible for STR treatment. The assumption is that improving or simplifying the STR would encourage the uptake of the scheme and hence contribute to draw informal traders towards formalization.

Efforts are ongoing in COMESA to address the SPS-related challenges by introduction of a ‘Green Pass’, an initiative aimed at reducing trading requirements by simplifying and consolidating SPS/TBT (technical barriers to trade) measures and border verification procedures. It has been piloted for fish trade originating from Luangwa District in Zambia and traded across several borders. So far, DRC, Zambia, Zimbabwe have validated the implementation modalities of the Green Pass. This initiative, if effectively implemented, has the potential to reduce time and trade costs related with clearing SPS at borders.

Even though small-scale traders are exempt from paying tariffs for goods under the STR common list and within the threshold, other border taxes - such as VAT, excise duties and other local taxes - remain burdensome for such traders in terms of the time and cost implications for small traders. Where the possibility exists for traders to pay a small informal payment to cross a border, such requirements remain a hurdle to utilization, particularly if enforcement is weak. As discussed below, one of the challenges for addressing small-scale or ICBT is therefore the heterogeneity of the actors involved, whether traders or officials, but also frequent lack of clarity on what ICBT-focused policies seek to achieve.

Policy Implications for STRs and the AfCFTA

Multidimensional ICBT

While the above policies and strategies have undoubtedly helped protect and support traders in some cases, the difficulties faced relate to a range of definitional and conceptual issues.

A first concern relates to the purpose of engaging with ICBT. “While some see ICBT as a problem that needs [to be] ‘stamped out’, others see it as a result of over-regulation with rigid rules and so advocate institutional reforms” to ensure a conducive regulatory environment (Kahiya and Kadirov 2020). The STRs discussed above, while often accompanied by projects to protect and empower women, are ultimately aimed at enhancing state revenues, and/or promoting compliance as a route to formality while protecting health and security (Karkare et al. 2021). They assume that once aware of their rights, traders - especially women - will be less susceptible to bribes and abuse of the rules, and thus be more willing to trade through more formal channels (Brenton et al. 2013).

However, the persistence of ICBT is well illustrated by Croke et al. (2020), who use an experimental approach to measure the effects of training and capacity-building on women traders and officials in the border regions of the DRC and Rwanda, where the COMESA STR is in operation. As they report, although the self-reported incidence of bribes and harassment declined in response to training and capacity-building, women were found to be more likely to cross the border before the official border operating hours to avoid informal payments rather than voice their grievances (Ibidem), thus creating ‘informed avoidance’. That is, better information is not enough to encourage more formal compliance, even with STRs.

Part of the challenge is the wide heterogeneity of actors engaged in small-scale or ICBT. Karkare et al. (2021) summarize the range of definitions and characteristics of ICBT as reported in Figure 2, where the behaviour of small- scale traders is likely to vary by the nature of the trader, their own incentives for trading, the types of goods, the wider regulatory environment, and how the border officials behave, all of which together will determine how border trade takes place in practice.

 

Figure 2: Range of Characteristics of ICBT

1	Actor type - ranging from small-scale traders engaging in survivalist activities, or large organized traders bridging the formal and informal spheres
2	Motivations or incentives - avoidance of taxes and regulatory scrutiny to profit or avoidance due to more ‘legitimate’ reasons such as high costs
3	Type of goods traded - licit/legal goods such as fruits and vegetables, highly regulated goods like rice or chemicals, or illegal goods like drugs and arms
4	Regulatory environment - registered or unregistered firms, whether registered for trade, whether the goods are regulated or not etc.
5	Compliance institutions - cumbersome or complicated procedures that can easily make one’s operations informal
6	Mechanisms through which ICBT takes place between traders and border agents

Adapted from: Karkare et al. (2021).

The outcomes of cross-border exchanges depend on the interaction of traders and officials, whereas Figure 3 illustrates that full compliance is only one of many likely combinations, depending on the motivations of both the trader and the border agent.

In contrast to the assumption that informal traders would formalize if tariffs were reduced or they were better informed, this highlights that although outcomes may be affected by access to knowledge of procedures, ease of procedures, and time costs, compliance nonetheless entails costs, and border agents can also stand to gain from non-enforcement if this leads to informal payments. In Figure 3, full compliance is only likely in two out of nine of the outcome possibilities that emerge, and even then, requires well-motivated and well-functioning border agents and willing traders. Almost all other outcomes are a mix of negotiation, potentially leading to compliance but also towards payment of bribes, thus helping illustrate the persistence of ICBT, even in the presence of STRs and other supportive policies (Karkare et al. 2021).

Figure 3: Motivations and Outcomes of Trade-Border Agent Interactions

Source: Karkare et al. (2021)

This analysis helps illustrate the three ‘conceptual fallacies’ that Galliens and van den Boogaard (2023) identify, namely a) that there is a binary distinction between formal and informal economic actors; b) that all informal economic actors are alike; and c) that formalization necessarily spurs a set of positive externalities. If these assumptions do not hold, as seems to be the case, a different approach is required.

Further, as Karkare et al. (2021) discuss, the relations between trader and border agent can vary by the type of goods traded and the wider context of a border post. This could relate to whether or not it is in a conflict zone where traders can offer useful security information, or the level of government engagement in a region. Gallien et al., (2019) provide the example of Tunisia, where the government’s implicit acceptance of informal trade in the country’s southern region was in recompense for the limited provision of state investment.

Overall, there is therefore a growing awareness of the need to understand the dynamics around ICBT through greater contextual political economy analyses, and not only identifying STR products on a border-by-border approach, but indeed how relations are maintained between officials and traders

Adapting Approaches

Simplified procedures, with an expanded meaning of STRs, may be needed to capture not only the common lists and thresholds, but also simplified SPS and other border-related impediments to trade. Following the example of COMESA, the possibility of omitting certificates of origin in the AfCFTA STR for goods on the common list could be pursued. Simplified procedures may affect the decision of some informal traders to comply with formal trade rules, but this will be undermined if the remaining requirements entail greater time costs and/or exposure to bribe-seeking border agents. It may require direct interventions to have more direct effects, e.g. cheap certification processes near the border to facilitate compliance. Concerning taxes, a suggestion is to link traders to a unique tax number that would allow border officials to monitor traders and ensure that there is no abuse (Imani Development 2022). However, the discussion above suggests the need to combine such efforts with wider approaches.

Despite the work of Croke et al. (2020), informing actors may indeed help to change incentives for informal trade. This includes publicly available information, preferably in the languages of the border town in addition to the countries’ official languages (APRM 2022). At the AfCFTA level, use of the eTradeHubs portal could be a useful tool in supporting women-led small businesses by providing timely information, trade management tools and supply chain information related to the AfCFTA, including on documents, licences, permits, certificates, fees to be paid, and estimated processing times (ICC 2021).

Efforts under the AfCFTA should build upon best practices such as the Trade Information Desks used in COMESA to assist small-scale traders understandnhow to use the STRs. However, as the above discussion suggests, informing traders of the rules may nudge them towards compliance only where they seek to be compliant (and the risks of non-compliant approaches are high enough). Some RECs have established Charters for Cross-Border Traders that enshrine a basic set of rights and obligations for traders and officials, and ultimately aim to improve behaviour at borders and to promote the gradual formalization of ICBT by creating two-way accountability between border agents and traders. Third party oversight of the compliance-enforcement dynamic is necessary to monitor adherence to the obligations of such charters, which will be key when designing the continental STR. A notable example, as seen in Tanzania, is by establishing dedicated gender desks and champions as an avenue for women in ICBT to report cases of harassment and assault (APRM 2022, Charles 2023). Indeed, with the caveat that outcomes still depend on the motivations of traders and officials (Figure 3), a combination of the above may be effective; more Safe Trade Areas as mentioned above could help overcome some of the risks of ICBT by providing a permanent location for traders, some collective oversight and protection, and indeed mutual accountability between traders and officials along the lines of the Cross- Border Charters.

Technology-enabled innovative approaches are key to understanding and assessing ICBT. Leveraging digital solutions to leverage the potential of ICBT may be able to complement the positive practices of STRs. For example, information sharing via the eTrade Hubs app or the ‘Sauti’ platform – a mobile-based platform empowering East African micro, small and medium sized businesses with business information – and/or the use of QR-codes could provide opportunities to ease clearance of goods and also address delays. Similarly, biometric and facial recognition technologies could be used for border immigration purposes to avoid delays associated with rights to entry. After all, goods move with people, and enabling quick clearance of both is imperative.

Finally, continental efforts to develop a common definition of ICBT or small- scale trade may help to move away from the perception of small-scale or ICBT as simply being lost revenue. At present, efforts are underway to agree on a common data collection framework that would allow for a better understanding of actors and drivers and would enhance policies supporting small-scale cross border traders (UNECA 2023). Informal cross-border trade data can inform the formulation of appropriate policies to leverage its potential impact on job creation and the development of MSMEs, through the linkages between formal and informal trade. Monitoring ICBT is essential for determining sensitive products and corresponding tariff reduction modalities for which a country should actively seek enhanced market access under the AfCFTA, though like the STRs discussed, this might best take place at a border-by-border level. Individual studies have often been carried out under individual projects, but there a few cases emerging of continual monitoring. Though outliers in some senses, the World Bank (2020) cites Rwanda and Uganda as offering good examples of monitoring this form of trade, although the differences in approaches used mean figures are not directly comparable. This underlines the need for an agreed definition and approach to measurement to help design future policy measures.

Conclusion and Policy Implications

Although youth and gender inclusion is addressed through a range of regional policies (e.g. on gender, trade facilitation and NTBs), Simplified Trade Regimes are specifically targeted at small-scale traders and appear to have met with some success at the border posts where they have been adopted. These allow for traders to trade with far lower bureaucratic demands than regular systems, thus allowing for formal recognition of the trade, and in that regard, protection of traders.

While most policy responses to the phenomenon assume it stems from a lack of information on the part of traders or border agents and/or the high cost of compliance, this chapter highlights the importance of understanding the motivations of both traders and border agents in understanding where and how non-compliance with trade regulations can arise. As the discussion also highlights, studies have shown that even with lower time, bureaucratic and financial costs, better informed traders can also lead to ‘better evasion’.

While a continental STR through the AfCFTA may therefore not be a panacea for this complex area of trade, the political momentum behind the AfCFTA might usefully be built upon to offer such a scheme, in a common continental form, perhaps building on the COMESA and/or EAC schemes. This would provide a basis for countries trading within and between RECs to put the system in place at key border posts where small-scale trade represents a high proportion of daily trade traffic. At the same time, the discussion above suggests that this should be done in conjunction with other efforts to protect traders, through information as well as facilities and Cross-border Trade Charters, which at the same time may also help make this trade more visible and thus raise mutual accountability between traders and officials.

In moving towards a Common African Market (CAM), which would imply offering freedom of movement of people, goods and services, this would perhaps reduce the incentive for informal cross-border trade by lowering price differentials across borders, and removing border controls. However, in this way, the ‘problem’ of informal cross-border trade would simply become akin to informal economic activity within a single economy. Until then, the AfCFTA process is that which has most political visibility and support, and thus ought to be used to agree on and promote continental norms and basic structures to help protect and support small-scale traders at key borders.

 

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