Informal trade in Africa hit by COVID-19 harder than other sectors


A new article published on the UNCTAD website analyses the economic effects of the coronavirus pandemic on women small-scale and informal cross-border traders in Africa.

In response to the global health crisis, African countries have increasingly introduced restrictive trade measures, like export bans or export licensing requirements. Although most of such states have restricted only movements of persons across borders, keeping them opened for trade, other countries have adopted more serious measures which uniquely allow the movement of essential goods (e.g. food and other supplies that people need to survive, such as medical supplies and gasoline), as well as aid and relief cargo. In more limited cases, borders have been completely shut down for commercial activities too.

In cases where cross-border trade has been permitted, those who earn a living by making regular trips between one side to another of the border have been seriously affected. This is the case of informal traders, whose livelihoods is now at risk, and of women traders in particular, as they represent the great share of informal trade, not only in Africa, as a recent study from FAO revealed.

Besides the immediate economic impacts on the livelihoods of cross-border traders, the inability to continue their business as usual is having wider negative spillover effects. Informal cross-border trade flows of staples and other agricultural products play a critical role in guaranteeing food security, especially in remote villages where the population relies more heavily on food items supplied through informal channels than on official distribution.

As a result, severe shortages of essential goods coming from across the border, combined with the consequences of stockpiling by those who can afford it, risk to seriously hamper food security in border communities and to intensify poverty. But before the measures restricting the movement of people at borders were implemented, many informal cross-border traders in Africa already stopped crossing borders because of the interruption of transport services or disruptions in food markets of neighboring countries and in supply chains.

There are however some ways in which the global threat of the pandemic could be turned into an opportunity for these highly vulnerable communities. In particular, governments’ efforts should be directed towards providing new incentives to support the migration of the sector into the “formal” sector, and helping such categories of traders to thrive.

Among policy measures that could serve such purposes there are, among others, improving access to finance/reduce financial exclusion, introducing programs aimed at developing entrepreneurial skills, or expanding simplified trade regimes to facilitate small-scale cross border trade.