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What the AfCFTA can do for Botswana’s informal cross border traders

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After much anticipation, the African Continental Free Trade Area (AfCFTA) launched on 1 January 2021. Hailed as a catalyst for continental integration, the agreement aims to “create a single market for goods and services, facilitate the movement of persons, and promote industrial development and sustainable and inclusive socio-economic growth on the continent”.

However, experts caution that full implementation of the historic pact, signed in March 2018 at the AU Kigali Summit, may take years to materialise. The previous deadline for operationalising the AfCFTA was 1 July 2020, but it was pushed out to the new year after the pandemic made in-person negotiations impossible. If implemented fully, the agreement is expected to provide an economic boost of US$3.4 trillion to the continent, which is even more critical given the socioeconomic impact COVID-19 is having across Africa. Nevertheless, the truth remains that it will only live up to its potential if the benefits from intracontinental trade are inclusive for all Africans. While the AfCFTA promises to boost intra-Africa trade as whole, little is said on the impact it will have on Informal Cross Border Trade (ICBT) which is pre-dominantly led by women.

Globally, ICBT is defined as trade between neighbouring countries conducted by vulnerable, small, unregistered traders. The Southern African Development Community (SADC) defines it as “businesses operating in goods and services that trades across the border, which have no official export/import license or permit within a defined threshold and frequency”. For Africa’s most vulnerable people such as women and youth, who usually constitute the majority of informal cross border traders, ICBT plays a crucial role in the absence of sufficient formal economic opportunities. However, there is a lot of work to be done at the policy level to ensure that it is a beneficial and sustainable activity for African women. In West and Central Africa, women represent nearly 60 percent of informal traders. In addition, as recognised by the USAID Southern Africa Trade Hub project, women comprise an estimated 70 percent of informal cross border traders in the Southern Africa region. ICBT, which has proven to be more responsive to food crises and shocks when compared to formal trade, is largely practised by the officially unemployed and micro, small and medium-sized enterprises (MSMEs), and is therefore also important for strategies of inclusion.

Gender impacts

In major border posts within Southern Africa, ICBT has discrete gender impacts as women account for a high percentage of informal traders. Despite this, ICBT can contribute to improving livelihoods and increasing regional integration across the continent. In Botswana, ICBT is almost exclusively women’s trade. The customs and immigration officials at the borders observed most informal cross border traders crossing the Botswana-Kazungula-Ferry border with Zambia to be women. Although every border is unique in several ways, a report completed by USAID Southern Africa, citing Botswana and Malawi as examples, revealed that women informal cross border traders face many obstacles that men seldom face.

These include sexual harassment, coercion and using wild animal corridors in order to avoid the strict formal borders (eg in Northern Botswana) and avert regulations and customs. Other impediments encountered include an extensive knowledge gap between the traders and the officials who process them at the border, which often leads to misunderstandings as well corruption among front-line customs and police officers. This knowledge gap also promotes bribe-seeking by some officials, according to both women and men informal cross border traders. Remarkably, if the two bordering countries are not members of the same Regional Economic Communities (RECs) such as SACU, COMESA and SADC, they will differ in ways of valuing certain goods as well as their tariff and taxation policies, which creates confusion and opportunities for corruption. Finally, due to infrastructure discrepancy, border conditions for the traders vary from bad to health-threatening, including unsanitary or non-existent toilets, contaminated food and water and exposure to malaria.

Using AfCFTA to informal cross border traders’ advantage

Although the AfCFTA does not incorporate a separate chapter on trade, ICBT and gender, the preamble of the agreement contains explicit reference to the importance of gender equality for the development of international trade and economic cooperation. Furthermore, article 3(e) emphasises the promotion of gender equality as one of the general objectives of the AfCFTA. The inclusion of an ICBT chapter in AfCFTA will help to address some of the key challenges for this sector.

There are three ways that the AfCFTA can support women informal cross border traders and promote their participation in trade: (1) Improvement of physical infrastructure and free movement of informal cross border traders; (2) Non-Tariff Barriers (NTBs) and reduction of tariffs; and (3) supporting the formalisation of ICBT.

Improvement of infrastructure and free movement of people

The recent completion of the multimillion-dollar Kazungula project is a step in the right direction towards addressing Botswana and Zambia’s infrastructure deficit. The projects falls in line with Botswana’s efforts to scale up existing infrastructure aimed at strengthening rural-urban links and developing trade corridors. This will entail upgrading the poor border conditions for informal cross border traders and enabling them to access basic human rights necessities. Generally, border posts do not have adequate supply of hygienic water, sanitation and catering facilities. The deficits in basic infrastructure cause inconveniences and health risks to informal cross border traders, particularly women. Malawian women traders complained about the unhygienic situation of the water and sanitation facilities, the lack of hygienic catering facilities and the absence of toilets, especially at border posts in neighbouring countries. And in countries such as Zambia and Botswana, where a fee is charged for use of toilet or bathing facilities, these facilities were in an awful state. The improvement of infrastructure in this regard would be greatly welcomed.

In view of the free movement of informal cross border traders, the market could potentially be translated into wealth creation for women in ICBT if countries focused on implementing the free movement of people in addition to the free movement of goods. Since the AU has a separate ‘Protocol on Free Movement of Persons, Right of Residence and Right of Establishment’ which was opened for signature in January 2018, this would serve as a noteworthy start and advantage for informal cross border traders. However, these traders may have to wait a while, since the Protocol has registered only 32 signatures and a mere 4 ratifications (Rwanda, Niger, Mali and Sao Tome and Principe). At least 15 ratifications are needed for it to enter into force. Botswana is one of the countries that are yet to sign or ratify it. This slow start stands in contrast to the AfCFTA (the sister agreement), which has garnered signatures from every African country except Eritrea and was subsequently ratified by 34 countries. To date, Botswana is part of the AfCFTA’s registered signatures but not the ratification of it. Meanwhile, 41 of the zone’s 54 member states have also submitted tariff reduction schedules. Previously, women informal cross border traders had operated by identifying countries that have removed visa requirements in the SADC and concentrated on trading in those countries or with those that issue visas at the port of entry.

Non-Tariff Barriers and reducing tariffs

Non-Tariff Barriers (NTBs), which are “restrictive regulations and procedures, other than tariffs, that add to the difficulty and cost of importing or exporting products”, hinder the smooth participation of women in trade and the potential for inclusive growth. NTBs can be classified into three broad categories: non-tariff trade measures (NTMs), infrastructure gaps and other trade-related transaction costs. Some continental initiatives have been launched in recent years to address infrastructure gaps, but they will take time to produce effects. Compared with other regions, indicators related to the quality of ports, air transportation and other measures of infrastructure efficiency are relatively low in Africa.

According to the World Bank, the reduction in ground transportation costs is especially critical to encourage intraregional trade, given the geography of the continent. The accessibility of NTB mechanisms to informal cross border traders is imperative as it creates openness and transparency. Governments ought to ensure that crystal clear guidelines and regulations governing trade are widely available at borders. For informal cross border traders in developing countries working with very limited margins, clarity on the documents required, appropriate fees and taxes, and the rules governing competition for goods, services and people and border crossings is essential.

By reducing tariffs, the AfCFTA will make it more affordable for informal traders to operate through formal channels, which offer them more protection. This can be further enhanced by introducing a Continental Simplified Trade Regime (CSTR), since cross border traders operating under such a regime would no longer be trading informally. In fact, officials within the COMESA STR refer to those using the scheme as “small-scale” traders rather than informal traders, which also helps to eradicate the perception of illegality. Furthermore, no duties are paid below a certain level ($1,000–$2,000) and documentation is simplified to a certain extent; however, the benefits apply only to a quite limited Common List of goods.

Supporting the formalisation of ICBT

Governments should recognise the role that women play in trade and ensure this is communicated to officials at all levels. National strategies for formalisation of ICBT are needed to complement the opportunities offered by the AfCFTA. In particular, African countries should design incentives to simplify tax administration and business registration, limit licensing and certificates to activities where it is justified (eg to protect health and safety), reduce registration fees and ensure they are not regressive and guarantee any statutory requirements are fully justified. Likewise, a visit to Botswana’s border posts from the highest levels of government and a discussion with women traders can provide a very clear signal of the importance that the country places on the activities of women traders, both to the traders and to the officials who regulate the border.

Conclusion Granted, ICBT is not unequivocally and ambiguously reflected in the AfCFTA agreement and the separate AU Protocol on Free Movement of People. However, indirectly, the AfCFTA has the potential to generate significant benefits for informal cross border traders. African countries are neglecting a significant proportion of their trade by disregarding women’s informal trading activities. In order to strengthen the notion that women informal traders are also an important client of ministries of trade and RECs, it is essential to address the subject of informality in mainstream trade policy making. If these and other gender-specific constraints are effectively tackled, ICBT can turn into a vibrant micro-entrepreneurial reality with significant potential to help alleviate poverty, contribute to food security and empower women in Africa.

BY CHAZHA LUDO MACHENG

Chazha Ludo Macheng is a graduate of Master’s in International Business degree from Wuhan University, China. This article was taken from the African Portal