Allowing traders to flourish is one of the key ways to promote growth and create jobs across Sub-Saharan Africa. Cross-border trade is also essential for reducing poverty, since the poor, including many women, are intensively engaged in the informal production and trading of goods and services.

Despite its benefits, conducting cross-border transactions remains a tough business for small traders.

“Small traders face highly regressive costs and have little choice, but to trade informally,” said, John Keyser, Senior Trade Consultant at the World Bank.

In 2010, the Common Market for Eastern and Southern Africa established the Simplified Trade Regime to help traders who sell goods that do not exceed USD 1,000.00.

The Regime simplified several customs processes for traders, yet a host of registration and other requirements remain in place today. As a result, small informal traders pay 62% more in border costs than large formal traders.

Additionally, informal traders are trapped in this way of life, because should they attempt to transition to the formal market, they would pay more than double the border costs they face as informal traders.

To strengthen the rights of small traders and facilitate their cross-border transactions, the World Bank, in collaboration with the National Implementation Unit of the Ministry of Commerce, Trade and Industry of Zambia, hosted a workshop on September 19th to share the findings of the Diagnostics Trade Integration Study (DTIS) and to propose targeted areas of reform related to informal trade and trade facilitation.

The debate between local traders and policy makers, who attended the event in Lusaka, gave clear priorities for policy action.

First, the small traders called for urgent steps to reform the Simplified Trade Regime. Despite the vision for the program, this trading tool remains underutilized due to the small cost savings it provides and the social prejudice against small traders.

During the workshops, Zambian traders shared their own personal experiences and suggestions for reforming this trade program, including: increasing the ceiling on the value of transactions; broadening the scope of products covered; and simplifying (or dropping) other requirements that limit its use by small traders.

“While the government sees the program as successful, it is important to have discussions with the private sector to come to a mutual agreement about how to reform it,” said Yvonne Chileshe, Director of Foreign Trade at Zambia’s Ministry of Commerce, Trade and Industry.

During the event, the traders and government representatives supported a Charter for Cross Border Traders that aims at improving the treatment of traders at the border and increasing the efficiency of trade flows. The goal is to post and disseminate the Charter at border crossings to enshrine a basic set of rights to traders and obligations for officials.

The clarification of traders’ rights and the responsibility of the government and the international community to support and put in place concrete measures are essential steps to easing cross-border transactions, according to Nora Dihel, Senior Trade Economist at the World Bank.

Meeting participants suggested piloting the Charter at the border between Zambia and Malawi. The Charter’s main messages refer to the basic rights and obligations for traders and officials. Traders should be processed at the border efficiently, without discrimination or harassment; the physical check of traders must be recorded with the reason and outcome provided and all duties, fees, taxes and methodology are publically available at the border.

Also, documentary requirements should be clearly stated and publically available at the border and with  the support of the international community, governments commit to establish visible communication of basic rights and obligations in the local language at all border crossings.

Furthermore, the Charter clearly states that at least one agent or all senior officials or even 50% of officials should have received gender awareness training, and that traders at all border posts have access to register violation of basic rights. If such violations occur, strict disciplinary measures must apply against abusive officials.

“Even with efficiently functioning trade programs and charters in place, adopting a clear national logistics strategy, as well as a proactive approach to regional logistics, is imperative to lowering the high trade costs within the Zambia and across Southern Africa,” said Charles Kunaka, Senior Trade Specialist at the World Bank.

Delays at border crossings due to a lack of cross-border information exchange between border agencies and out-of-date or cumbersome transit regimes are some of the largest barriers to trade.

“Implementing regionally integrated transit systems and being proactive in interactions with neighbors to improve regional corridor performance can help reduce Zambia’s trade costs within the region and globally,” said Kunaka. This can be achieved through harmonization of infrastructure planning and policies governing logistics services.

Naleba is a rice farmer in the Eastern District of Butaleja in Uganda. He has been growing rice since 1982 at his Lwoba irrigation farm in Masulula village.

“We started with low production,” Naleba says. “Now we are reaching 1.2 tons per acre.”

According to Naleba, the last few years have seen high demand from Sudan. “There’s no rice in Sudan, so this is an opportunity to harness,” he says.

A new report from the World Bank shows how, in addition to produce, this “Pearl of Africa” can export manufactured goods to the region, as well as services like education, tourism and even transit. But, it says, transport and logistics, and non-tariff barriers remain a hefty challenge.

International experience suggests that it is hard for a small landlocked country like Uganda to move alone along the path to economic development. That is the challenge the country faces today, a challenge the World Bank and its government partners are seeking to address in the new Uganda Economic Update, the first in a series of bi-annual reports taking stock of the country’s economy. The report identifies challenges and proposes solutions to facilitate inclusive and healthy growth.

The new study suggests Uganda can earn an additional US$2.5 billion from non-traditional trading partners in the region, and close the trade deficit in the next five years, if it removes trade barriers with neighbors. Other messages;

- To maximize its trade potential, Uganda must look beyond the East African Community (EAC) to all of Sub-Saharan Africa

- Uganda can grow its economy by developing deeper links between its domestic producers and external markets

- To unleash the potential of service exports, Uganda should eliminate restrictions in the strategic sectors of tourism, transport and logistics, and education and professional services

- Uganda should diversify exports beyond food commodities, improve infrastructure and reduce transport costs

The country has performed well over the past two decades, the report says, brushing aside one of the world’s highest population growth rates, to record an impressive seven percent average gross domestic product (GDP) growth, and halving the number of people living in abject poverty from 56% of the population in 1992 to 24% in 2010.

Uganda’s economy has recently faced major challenges. Economic growth slowed to 3.4% and inflation soared and remained at double-digit levels under shocks for most of 2011 and 2012. This contrasted recovery of other economies in the region.

As stability returns, the economic outlook is positive, the report says. Growth will turn around as constraints abate and begin to raise the country’s growth potential, but the key vulnerability remains as Uganda continues to export far less than it imports.

A glimpse of hope to address these vulnerabilities is in regional trade.

According to Julius Onen, Permanent Secretary in the Ministry of Trade, Uganda has not suffered a significant decline in its trade because over 45% of the country’s commerce is within the regional market, EAC and COMESA, and the demand for the country’s products is fairly steady.

“Uganda’s strategic location at the hub of The Great Lakes region, gives it a comparative advantage in terms of moving heavy goods to the market,” says Onen. “This has also resulted into Uganda attracting investments from the region, particularly Kenya, which feels it has to be nearer to markets like DRC and Sudan.

Uganda has a comparative advantage in the trade of fruits, vegetables juices, grains and cereals, as compared to other countries in the region, but fortunes have been good and bad, according to Godfrey Ssali the Policy and Advocacy Officer of the Uganda Manufacturers Association.

“Good fortunes in that there has been growing demand from South Sudan and DRC,” Ssali says. “In the last 4 to 5 years the two destinations have been good trading partners for Uganda actually overtaking Kenya. The bad fortunes being the civil war and civil strife in South Sudan and DR Congo.”

Musa Waswa, a Ugandan businessman, frequently travels on Gulu-Nimule road from Kampala to Juba, a 24-hour journey that serves as a clear example of how trade can be improved.

“On two occasions, my truck full of fruits and vegetables has overturned along Gulu-Nimule Road,” says Waswa. “My truck overturned when I hit a pothole, the produce covered (blocked) the road. It took me almost three days to get out of there. By then all my fruits had either gone bad or were stolen.”

According to the Uganda Economic Update, Uganda must look beyond poor maintenance of roads and explore the cheaper railway and water transport options that are almost non-existent. Rail and water transport currently cater for only 10 percent of Uganda’s trade.

“To transport a container from China to Mombasa can cost one up to US$1000, but to transport the same container from Mombasa to Kampala can cost up to US$4000 to- US$4500. That shows you the real cost of transport,” says Ssali.

A plausible solution, Ssali adds, is for Uganda to better use the waterways through Kisumu, Mwanza, Portbell and Bukakata in Masaka, which would reduce traffic on the roads.

For small farmers like Hajji, his prosperity and that of future generations depend on it.

Source: World Bank