Harmonised methods for informal cross border trade data collection critical in monitoring intra-African trade
Informal cross border trade in Africa is known to be large and an important contributor to the livelihoods of millions of Africans but there are no agreed methods to accurately measure it, experts said at the first physical meeting of the Task Force on developing a harmonized methodology for Informal Cross-Border Trade Data Collection.
“Understanding the scale, magnitude and characteristics of Informal Cross-Border Trade (ICBT) will be instrumental in accurately monitoring intra-African trade, as well as the development of appropriate economic policy,” said Melaku Geboye Desta, Coordinator of the African Trade Policy Centre (ATPC) at the Economic Commission for Africa (ECA), at the opening of the meeting of the Task Force in Kampala, Uganda.
The Task Force was established by the African Union Commission (AUC), in collaboration with ECA and AFREXIMBANK, with a mandate to provide political and technical guidance to the process of developing the Continental Methodology for ICBT Data Collection and overseeing its implementation.
Mr. Desta noted that official trade statistics often capture formal trade and leave out informal trade, leading to underestimation of the magnitude of intra-African trade. The size of ICBT in Africa means that the level of intra-African trade is probably much higher than the 16 to 18 percent figure that is often used by experts, he said.
Acknowledging that there were some estimates of ICBT in Africa, Mr. Desta observed that the lack of agreed definition of ICBT and common methodological tools used by different national statistical agencies have made diminished the quality and utility of the resulting estimates.
Mr. Brian Mureverwi, Senior Trade Advisor at African Union Commission, speaking on behalf of Mr. Djamel Ghrib, the Director of Economic Development, Regional Integration and Trade at the AUC, said the African Union Commission places huge importance on trade statistics, as this informs evidence-based policy formulation.
“Informal cross border trade is prevalent in Africa, and hence the need to capture the structure, pattern and gender dimensions”. Mr. Mureverwi noted that to fully support the implementation of the African Continental Free Trade Area, it was important to capture the activities of SMEs at the border, since they immensely contribute to African economies. The ICBT data will be integrated into the African Trade Observatory, so that policymakers are able to make policy decisions that are informed by data.
Just like formal trade, informal cross border trade requires a common methodology, including its definition. Good international practice recommends the use of a common nomenclature in the collection and dissemination of trade statistics, with the aim of facilitating comparability of data. Towards this end, Task Force has been working on developing a harmonized methodology for ICBT data collection in Africa.
There is no universally agreed definition of ICBT as it has often been conflated with smuggling and other illegal practices. ICBT has been broadly defined to include informal (unregistered) traders or firms operating entirely outside the formal economy and the formal (registered) firms fully evading trade-related regulations and duties, for example, avoiding official border crossing posts. ICBT has also been defined to mean formal (registered) firms partially evading trade-related regulations and duties by resorting to illegal practices, for example, under-invoicing.
The Taskforce has held two virtual meetings to deliberate on the definition and the components of the ICBT methodology. The current hybrid meeting will build on already existing work on ICBT within the continent. For example, there is the Uganda Bureau of Statistics (UBOS) methodology for ICBT data collection which forms the basis of the harmonized methodology for ICBT data collection in the Eastern and Southern African regions, and the harmonized methodology utilized in the ICBT data collection pilot projects in the ECOWAS region by ECA and AFREXIMBANK.
Speaking at the opening of the Taskforce meeting, Antony Coleman, Principal Research Economist with the Afreximbank underscored the need for consistency in the definition, approach, scope and data collection to arrive at a harmonized ICBT data collection framework.
“We do know that intra-African trade is very low, but is it really low or its case that a huge segment of it is in the informal segment and therefore not captured,” Mr. Coleman asked, adding that, “To be able to capture the quantum of informal cross border trade that flows across the continent we only need to have a harmonized continental framework addresses that. Once we are able to do that we can then realize that indeed intra African trade is so huge and understanding African trade will also help us to improve on our trade statistics and balance of payments.”
The four day meeting of the Taskforce is expected to finalize the deliberations on the definition and key components of the methodology, by interrogating the existing ICBT methodologies. It will identify the similarities, differences and gaps that can be addressed in the harmonized continental methodology. In addition, the meeting will prepare the first draft of the Continental Methodology for ICBT Data Collection in Africa that will be submitted to the African Union Policy Organs for their considerations.