The perverse relation between regional integration and informal trade in Africa

On 17 April 2021, the United Nations Economic Commission for Africa (UNECA) presented, at the 39th ECA Committee of Experts of the Conference of African Ministers of Finance, Planning and Economic Development held from 17 to 19 March 2021 in Addis Ababa, Ethiopia, a report with an assessment of the current status of regional integration in Africa.

The report shows a week level of Intra-African trade, estimated for 2018 at 16.1% (equal to a volume of commercial exchanges between African countries of 159.1 billion USD), with a slow growth from 2017, when such percentage was only 15.5%.

However, when the report concludes that this level of intra-regional trade is very low compared with other regional blocks, the report seems to ignore that the African economy is largely informal and that there are high volumes of exchanges occurring at African borders that are not captured by official statistics of Customs.

In particular, the comparison of Africa with highly formalised economies, such as the European Union (where the level of intra-regional trade reaches an outstanding 73 per cent) is not correct and absolutely insignificant. As a paper written a few years ago analysing informal trade in Benin argues, informal cross border trade is crucial to understand why the level of intra-Africa trade is low by world standards.

Informal Cross Border Trade (ICBT) surveys are conducted by most of National Institutes of Statistics of African countries. The Uganda Bureau of Statistics (UBOS) for instance, regularly conducts in collaboration with the Bank of Uganda (BOU) very reliable surveys to measure the level of informal trade at its borders. The 2018 report, for instance, shows levels of informal trade between Uganda and its neighbours that is some cases reach an informal to formal trade ratio of more than 40% (e.g., with Kenya). A recent paper published by the International Food Policy Research Institute (IFPRI) gives an overview of the level of informal trade in Uganda, Rwanda, Namibia, Cameroon, Kenya, Benin, Botswana and other West African countries), revealing levels of trade between African countries that are routed informally in some cases exceeding 80% (e.g. Benin-Nigeria).

If therefore, the 16.1% percentage of Intra-African trade is adjusted with estimates on the current levels of trade occurring informally, probably the results of the current level of integration between African economies would be surprising and maybe old stereotypes on Africa as the Continent that does not trade with itself will be abandoned.