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The underestimation of informal trade in the calculation of intra-Africa trade flows

According to the latest estimates, the level of intra-regional trade in Africa is equal to 16.1%. However, it is also well known that the African economy is largely informal and, therefore, there are high volumes of exchanges occurring at African borders that are not captured by official statistics of Customs or National Statistic Agencies.

In this article, the United Nations Economic Commission for Africa (UNECA) recognises that leaving informal trade out of trade statistics, leads to an underestimation of intra-African trade, that probably is much superior to the declared 16.1% percentage. Indeed, understanding the scale of informal trade is particularly important, because it is instrumental in accurately monitoring intra-African trade, particularly in the context of the AfCFTA. 

A study published by the African Peer Review Mechanism, recently explored how the AfCFTA can expand benefits of intra-Africa trade to women informal cross border traders (who represent in some African countries 70% to 80% of such traders), inviting States to accelerate the collection of gender disaggregated data, adopt gender sensitive common lists of goods, mechanisms for training and capacity building to enhance the skills of women informal cross border traders so that these entrepreneurs are able to compete in a larger regional market.

Another UNECA study titled “Towards an estimate of informal cross-border trade in Africa” tried to estimate informal cross-border trade at the main African borders, reaching the conclusion that on average, informal trade in Africa represents between 7 and 16 percent of the formal intra-African trade flows, while the level of cross-border informal trade between African neighbouring countries can reach between 30 and 72 percent of formal trade. 

To date, the calculation of the level of cross-border informal trade in Africa is mostly based on Informal Cross Border Trade (ICBT) surveys conducted at national level by government agencies, mainly National Statistics Agencies or Central Banks, each of them using different methodologies and parameters for the calculation of such flows. 

Although some Regional Economic Communities in Africa have developed harmonised regional methodologies for determination of cross-border informal trade (this is the case for instance of the ECOWAS Informal Cross Border trade database of agricultural and food products), a common methodology that captures ICBT data in a uniform way over the continent is at the moment still lacking, despite the numerous studies available on possible methodologies that can be used for this purpose (an example is this study on the estimation of informal trade in Eastern and Southern Africa).

The absence of this common methodology obviously impedes the comparability of information on informal trade flows across Africa.

African Export-Import Bank (Afreximbank), in the African Trade Report 2020 also raised the need to improve the collection of ICBT data not only to understand the real volumes of intra-African trade, but also to establish a baseline for monitoring this trade’s formalisation during the AfCFTA’s implementation. On 24 June 2019, a grant agreement was therefore signed with UNECA to conduct a one-year pilot project to collect data on informal cross-border trade (ICBT) along the Abidjan- Lagos corridor, in West Africa. The outcome of the project was a report on “Enhancing the quality of informal cross-border trade in the Economic Community of West African States” published in April 2021. The report concludes with a proposal to use the Uganda Bureau of Statistics methodology for informal cross border trade data collection (which is currently the basis for informal cross-border trade data collection in the Eastern and Southern African regions), as a template for developing an African Union framework for data collection on informal cross-border trade flows

So far, however, such harmonised continental framework has not yet been developed. 

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