Informal Cross Border Trade (ICBT) is a crucial driver of economic growth and poverty reduction in developing economies, including Uganda. It provides significant income and employment opportunities for the poor and vulnerable groups, especially low-income and unskilled youth, and women in border districts, who often operate outside the formal economy.
On the African continent, ICBT contributes significantly towards intra-regional trade by approximately 30-40 percent in the Southern African Development Community (SADC) and nearly 40 percent in the Common Market for East and Southern Africa (COMESA) region (FSDU, 2021). In Uganda, ICBT contributes around 12-16 percent of total exports and is predominantly carried out by women, acting as a vital source of income for many (BoU, 2023). According to Bank of Uganda, ICBT contributed an export value of approximately US$ 499.1 million in 2022.
Recognizing the importance of ICBT, the Simplified Trade Regime (STR) policy was launched by the East African Community (EAC) and the COMESA member states in 2010, to streamline customs procedures, reduce trade costs, and enhance the participation of small-scale traders. It aims to simplify documentation and procedures for small-scale cross-border traders dealing in specific eligible products (Nakayama, 2022). The STR policy is grounded on several pillars and instruments, such as the EAC Simplified Certificate of Origin (SCO), Simplified Customs Document, Common List of Products, and an agreed threshold value of US$ 2,000 (EAC, 2014).
Furthermore, the STR policy made several other provisions and developments, including the establishment of Trade Information Desks and One Stop Border Posts (OSBP) at each border crossing point, to provide information and facilitate trade activities. Notably, the Trade Information Desk Officers (TIDO) serve small cross-border traders seeking to access information on the STR, organize themselves into formalized groupings, and complete border procedures (Trademark EA, 2015).
The implementation of the STR has significantly impacted how ICBTs conduct business by enabling small scale traders to clear consignments swiftly, safely, with less effort and costs. Other advantages include the capacity building that comes from exchanging best practices with other EAC women traders, the possibility to purchase goods at lower prices from other partner states, the ease of investing in other partner states, and more job prospects, among others (Fundira, 2018). It has also contributed to regional economic integration by promoting cooperation among neighboring countries.
Despite its potential benefits, the STR policy has faced implementation challenges, impacting its effectiveness in Uganda. For instance, the share of ICBT in total export earnings in Uganda has significantly declined from 15 percent to 7 percent between 2013 and 2020, before averaging at 12 percent between 2021 and 2022 (BOU, 2023). Several literature sources attributed this decline to several non-tariff barriers (NTBs) including inadequate market information, cumbersome customs procedures, inefficient documentation requirements, and the poor implementation of the STR policy.
Additionally, many small-scale traders still prefer informal routes (panyas) due to poor STR implementation and corruption issues at border points (Akaezuwa et al., 2020). Non-adherence and inadequate awareness of the STR policy’s provisions have led to continued fees, exorbitant charges, and taxes on small scale traders (Titeca, 2020). Limited access to information has forced traders to rely on word-of-mouth, making them vulnerable to harassment and corruption (ibid). Additionally, the lack of gender considerations and the low level of awareness among both traders and implementation personnel have further hindered the policy’s effectiveness (ibid).
These pending challenges corroborate the findings from the regional consultative meetings undertaken by Uganda Cross Border Trader’s Cooperative Union (UCBTCU) with small scale traders in Goli, Miriama Hills, Saumu, Lwakhakha, Elegu, Goli, Katuna, Oraba, Madi-Opei, and Mutukula, and Mpondwe border posts among others. To address the challenges faced by the STR policy in Uganda, several policy implications are recommended:
- Enhanced Awareness and Information Dissemination: Efforts should be made to create awareness among small-scale cross border traders, border authorities, and the Uganda Revenue Authority (URA) customs officials. Providing comprehensive information about the policy’s benefits and procedures will encourage traders to use formal routes and reduce corruption at the various border points.
- Domestication of the STR Policy: The government should prioritize the domestication of the STR policy by providing training and capacity building sessions to key stakeholders involved in its implementation. This would ensure a more effective and efficient application of the policy’s provisions.
- Increased need for gender considerations: The STR policy should be more gender-responsive by addressing the unique challenges faced by women traders. Increased representation of women in policy debates and decision-making processes is essential to ensure that their perspectives are adequately considered.
In conclusion, the STR policy holds immense potential to enhance small-scale cross-border trade and contribute to economic growth and regional integration. However, the challenges faced in its implementation require urgent attention and action. By raising awareness, improving information dissemination, and addressing gender disparities, Uganda can unlock the full benefits of the STR policy and empower its small-scale traders for sustainable economic development.
FSDU, (2021). Market Study targeting women engaged in Informal cross-border trade in Uganda. Accessed from: https://fsduganda.or.ug/informal-cross-border-trading-in-uganda-study-report
BoU, (2023). Composition-of-Exports (Values and Volumes). Accessed from the link: https://www.bou.or.ug/bouwebsite/bouwebsitecontent/statistics/External_Sector_Statistics/Trade_Statistics/Composition-of-Exports_Values-and-Volumes.xlsx
EAC, (2014). EAC Simplified Certificate of Origin Awareness Guide. Accessed from the link: https://kra.go.ke/images/publications/EAC-SIMPLIFIED-CERTIFICATE-OF-ORIGIN-Guide.pdf
Nakayama, Y. (2022). Why Do Informal Cross Border Traders (ICBTs) Operate Informally? The Paradox of the Formalization of ICBTs in Africa. ASC-TUFS Working Papers, 2, 65-82.
TradeMark EA, 2015. Why informal cross-border trade remains important, Trade Press: TradeMark East Africa, Nairobi. https://www.trademarkea.com/news/why-informal-cross-border-trade- remains-important/
Fundira, T. (2018). Informal cross-border trading–review of the simplified trade regimes in east and southern Africa. Tralac trade brief, 8.
Akaezuwa, V., Chakraborty, A., Chang, B., Manian, S., Prabhakar, A., Sriram, S., & Zhu, C. (2020). Ethical cross-border trading between Kenya and Uganda by women-led micro and small enterprises. Columbia School of International Affairs.
Titeca, K. (2020). Informal cross-border DRC-Uganda border.