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Contrary to common belief, trade in Africa could be higher if all statistics are captured, experts reveal.
Mr Carlos Lopes, the former executive secretary of the United Nations Economic Commission for Africa has said that because of the informal trade that is not captured in official statistics, trade within Africa is seen to be low yet in actual sense it is much higher than the current estimates.
Currently, estimates point to trade within Africa being at about 23 per cent by official statistics.
‘There is a lot of informal trade among African countries that is not captured by customs officials. If this is included in the trading statistics, then the trade is actually much higher. If you talk to customs officials, they will tell you how challenging the informal trade is to capture in official statistics,’ Mr Lopes said during the opening plenary session of the Africa Business and Investment Forum in Algeria.
Informal trade, according to the African Development Bank (ADB) is dominant on the continent because people who participate in it feel excluded from the formal structures of doing business. ‘Traders are generally not bankable, nor do they have assets that Banks would accept as collateral. They can also be formally registered firms evading regulations and taxes or aiming to avoid border crossing posts,’ a report on Informal Cross Border Trade (ICBT) by the ADB reads in part.
In Uganda for instance, the informal cross-border trade is common with markets such as the DR Congo and South Sudan, where most of Uganda’s goods and services are sold. About 80 per cent of Uganda’s trade with these countries is considered informal. The government may not be able to directly benefit from informal trade through customs revenue, but there are potential foreign exchange gains and employment opportunities.
When the war in South Sudan broke out in 2013, Uganda felt the effects on the currency and jobs because informal trade declined.
According to Mr Lopes, informal trade is not the only reason why intra-African trade is still being considered low. ‘The level of sophistication of financial and telecom services across borders in Africa is not captured well by regulators,’ he says.
During the opening session of the forum, Ms Amina Mohamed, the Foreign Affairs Cabinet Secretary in Kenya noted that the integration of Africa was the best solution to improving trading statistics.
‘The problem we have is that there are concerns around countries losing their sovereignty. If countries do not sacrifice this, then our trade will remain considerably low,’ she said.
African countries still have restrictions on the movement of labour and goods, that has been partly to blame for the relatively low trading figures. An African passport launched at the last African Union Summit in Kigali in October is yet to materialise as countries still have strict entry visa requirements for Africans.
In part, Algeria hosting the conference was to find a solution to boosting intra-African trade.
‘Africa cannot continue lagging behind in terms of exports. The region has been known for exporting raw materials and from what we have seen, that does not contribute to the development of the continent. We must unite for the interests of our continent,’ Mr Abdelmalik Sellal, the Algerian prime minister said at the forum.