WRITTEN BY Pemphero Banda
Informal cross-border trading commonly known as ICBT is a trade between neighboring countries, usually informal and typically conducted by vulnerable, unregistered, unqualified traders who deal with a diverse yet small stock of merchandise. Many African countries have seen the growth of ICBT in the last 2 decades. Over the years, this trade has proven to be a vital source of employment and livelihood for low-income and low-skilled individuals, in border districts as estimates suggest that more than 95 percent of the trade activities in Africa are undertaken through such unofficial trading systems as ICBT.
Some of the factors that motivate both men and women to join informal cross-border trading include but are not limited to economic constraints and unemployment. It has been shown that many people opt to join the trade because it does not require huge capital upfront. Traders are able to access the capital through their own personal savings, or funds borrowed from close family or friends. However, I will be naive If I do not acknowledge how the absence of registration of ICBT removes the opportunity for those involved in the trade to access loans from banks and other financial institutions to help boost their business.
Over the years, we have witnessed the importance of ICBT for both individuals, their communities, and governments. The first is that the traders provide consumers with cheaper alternatives to products found in the local formal market. Secondly, ICBT traders are heavily contributing to the economy of African countries in a number of ways namely:
- ICBT traders use profits made from the trade to feed their families and educate their children, which would have been a struggle to achieve without their involvement in the industry.
- ICBT traders contribute heavily to their country’s economy through job creation. In Zimbabwe, for instance, 37% of traders employ other people whose time they compensate for.
- Since ICBT traders must travel to their neighboring countries, commonly using road channels, they help transport companies/ bus companies make money through their travels.
- ICBT traders contribute to their economy through Value added tax (VAT) that they are expected to pay on every item they purchase for resale.
It brings so much hope to see the significance of informal cross-border trade for a nation’s food security, poverty alleviation, employment, and income creation for rural populations who would otherwise suffer from financial social exclusion. For an industry that has such an impact, it is imperative that we take time to understand the tenets of the trade to make sure that everyone capable of contributing to the industry should freely participate in it.
- Minde,J & Nankhumwa, T, (1998). Unrecorded cross-border trade between Malawi and neighbouring countries. AMEX International, Inc.
- Pavanello, S. (2010). Working across borders- harnessing the potential of cross-border Activities to improve livelihood security in the horn of Africa drylands. HPG Policy Brief 41. ODI: London
- Crush, J. (2017). Informal entrepreneurship and cross-border trade between Zimbabwe and South Africa. SAMP migration policy series No. 74