A man rides a tri-cycle with some of the imports that enter the country through various border points. Under informal cross-border trade, no standards and quality control measures are observed. PHOTO/MICHAEL KAKUMIRIZI
Uganda is witnessing a rise in informal trade, with exports and imports flowing through eight major border exit points, according to the 2023 Informal Cross-Border Trade report.
Informal cross-border trade may refer to trade transactions between residents and non-residents across the economic boundaries of two or more countries that are not officially registered/recorded. Typically, it is proximity trade involving the move of produce between markets close to the border.
Informal trade, practised by unemployed micro, small, and medium-sized enterprises, supports the livelihoods of hundreds of thousands of households across Africa. It serves markets and clients that are often neglected by formal channels and significantly contributes to regional food security.
Despite being a source of income for most citizens in African countries Uganda and others, Informal Cross-Border Trade (ICBT) is regarded as illegal commercialisation of cross-border activities.
Informal cross-border trade can have positive macroeconomic and social ramifications such as food security and income creation, particularly for rural populations who would otherwise suffer from social exclusion. If properly harnessed, ICBT can support Africa’s ongoing efforts at poverty alleviation.
Overall, the Informal Cross-Border Trade report, reveals that during 2023, informal exports were valued at $566.6 million (about Shs2.065 billion), representing an increase of 3.1 percent compared to the value of $549.8 million (about Shs2.004 billion) registered in 2022.
During 2023, total informal imports amounted to $124.0 million (about Shs452.071 billion), an increase of 56.3 percent compared to the value of $79.3 million (about Shs289.106 billion) registered in 2022.
Top informal export destinations
"DR Congo was the leading informal export destination in 2023, with export receipts estimated at $302.6 million (about Shs1.103 trillion), representing a 53.4 percent share of total informal export receipts. Kenya followed with $102.3 million (about Shs372.958 billion) representing 18.1 percent of the total informal exports," said Ubos.
In the report, Ubos stresses that exports to South Sudan came third amounting to $102.1 million (about Shs372.229 billion) which represents (18.0 percent). This was an 8.2 percent decline compared to $111.3 million (about Shs405.770 billion), recorded in 2022. Tanzania and Rwanda followed with 7.3 percent and 2.8 percent share of informal exports in 2023 respectively.
Informal imports
Kenya was Uganda’s main source of informal imports representing 63.5 percent of informal imports in 2023 with goods worth $78.7 million (about Shs286.919 billion). Democratic Republic of the Congo followed with goods worth $26.6 million (about Shs96.976 billion) representing 21.4 percent.
Tanzania with $11.1 million (about Shs40.467 billion) (8.9 percent) was the third source of informal imports for Uganda. The informal imports from South Sudan registered a value of $6.0 million (about Shs21.874 billion) in 2023. Informal imports from Rwanda registered an increase from $1.3 million (about Shs4.739 billion) in 2022 to $1.6 million (about Shs5.833 billion) in 2023.
Trade flows by border station (Informal exports)
The report shows that the leading exit border points for informal exports were; Mpondwe (DR Congo), Elegu (South Sudan), Busia (Kenya), Vvura (DR Congo), Mutukula (Tanzania), Odramachaku (DR Congo), Katuna (Rwanda) and (Paidha (DR Congo), with a combined share of 88.4 percent of the total informal export valued at $501.0 million.
Informal export values through Mpondwe border post alone, accounted for $131.2 million (23.1 percent) having increased from $106.1 million recorded in 2022. Elegu station followed, accounting for $99.9 million of informal exports representing a 9.5 percent decrease compared to $110.4 million registered in 2022.
"This decline occurred because the South Sudanese pound depreciated relative to the Ugandan shilling, which discouraged traders from doing business with South Sudan. Busia border followed with informal exports worth $82.2 million (14.5 percent share) compared to $106.7 million recorded in 2022," Ubos explained.
The report indicates that there was an increase in exports in 2023 through Katuna (519.5 percent), Cyanika (233.3 percent), Oraba (151.0 percent), Vvura (133.8 percent), Odramachaku (25.8 percent), Mpondwe (23.7 percent), Goli (16.7 percent), Bugango (11.9 percent), Paidha (9.7 percent), Mutukula (7.4 percent) and Mirama hills (6.8 percent).
On the other hand, exports declines were registered in Elegu (9.5 percent), Kikagati (13.0 percent), Suam River (18.5 percent), Malaba (19.7 percent), Ishasha River (21.9 percent), Busia (23.0 percent), Lwakhakha (50.8 percent) and Ntoroko (53.8 percent) in 2023 compared to 2022.
Informal imports
Busia was the leading entry point for informal imports with an import bill of $49.3 million (Shs180.6 billion) representing 39.7 percent in 2023. This was followed by Malaba with import items worth $13.2 million, a share of 10.6 percent of the informal import bill. Mpondwe and Suam River with values of $10.7 million (8.7 percent) and $10.2 million (8.3 percent) were the third and fourth entry points respectively in the values of informally imported items.
Trucks with goods in a queue as they wait to cross the Busia border to Uganda. Busia was the leading entry point for informal imports into Uganda with an import bill of Shs180 billion in 2023. PHOTO/MICHAEL KAKUMIRIZI
Oraba border point with 615.8 percent registered the most significant increase in the values of items imported. Other stations that registered increases for the value of informally imported items included: Mutukula, Katuna, Bugango, Elegu, Suam River, Busia, Kikagati, Odramachaku, Vvura, Mpondwe, Malaba, Mirama hills and Ishasha River. On the other hand, Ntoroko, Paidha, Lwakhakha, Goli and Chanika stations, registered decreases in the values of informally imported items in 2023 compared to 2022.
Trade flows by modes of transport
The values of the different modes of transport used in the transportation of informal exports and imports in the year 2023. Vehicles transported most informal exports, accounting for $387.8 million representing 68.4 percent of informal exports.
Motorcycles were second and they conveyed goods worth $65.9 million (11.6 percent). Tricycles followed with a value of $46.3 million, then bicycles with $30.6 million.
Head/hand-conveyed exports were worth $9.5 million while the Boat/canoe was used to transport export items worth $17.5 million during the year 2023 and these were only used at Ntoroko landing site.
Similarly, for the informal imports, vehicles were the main mode of transport in 2023 with items worth $34.4 million representing 27.7 percent of the informal imports bill. Motorcycles ranked second and were used in transporting items valued at $33.1 million (26.7 percent).
This was followed by bicycles which conveyed goods worth $22.6 million (18.2 percent), wheelchair were next with goods worth $13.4 million (10.8 percent), then head/hand $10.6 million (8.5 percent), tricycles $6.1 million (4.9 percent), and push cart $3.9 million (3.1 percent).
Director of macroeconomic Uganda Bureau of Statistics, Ms Aliziki K. Lubega wrote in the foreword of the report that the survey collected information on informal cross-border trade between Uganda and her neighbours that are not recorded by the Customs Department of Uganda Revenue Authority.
“The main objective of the ICBT survey is to obtain information on nature, values and quantities of goods traded between Uganda and her neighbours,” she wrote.
“In addition, it aims to measure the contribution of informal trade to total international merchandise trade, which has grown over time. Hence, the ICBT aims at accurately recording intra-regional trade to measure economic gains accruing from the integration process. The ICBT data is also crucial in improving the quality of other macroeconomic statistics used to inform policy and decision-making,” she stated.
The broad objective of the Survey is to estimate the volume of unrecorded/informal trade flows between Uganda and her neighbours and the specific objectives are to; determine the nature and composition of commodities transacted under informal trade).
Main informal exports
In 2023, the main exported commodities on an informal basis included Foot ware and parts (12.7 percent), maize (9.0 percent), clothes (new &used) representing 6.9 percent, beans (5.2 percent), maize flour (4.8 percent), fish (3.8 percent), fruits (2.8 percent) and alcohol/spirits (2.8 percent).
A man pushes a bicycle with some of the imports that enter the country through Uganda’s border points. PHOTO/MICHAEL KAKUMIRIZI
The combined export receipts for these eight commodities amounted to $271.9 million, accounting for 48.0 percent of the total informal exports.
The main informal agricultural exports were maize, beans, fish, fruits, bananas, eggs, onions, cattle, and tomatoes while the main informal industrial exports were foot ware and parts, clothes (new & used), maize flour, alcohol/spirits, mattresses, bags, soda, bed sheets, sacks, cement, hair synthetic among others.
Main informal imports
The main imported commodities under ICBT in 2023 were Rice, clothes (new & used), wheat flour, coffee, beans, groundnuts, soap, cooking oil, fish, bananas, cement and palm oil. Altogether, accounted for $75.3 million, representing a share of 60.7 percent of the total informal import bill.
The report states that the agricultural commodities transacted under informal trade such as maize, beans, rice, groundnuts, and tubers (cassava, irish potatoes, and yams) have direct implications on the country’s food security. The deliberate harnessing of such abundant food resources during harvest could ensure food security for the whole country.
Agricultural commodities traded under ICBT are largely raw materials with virtually no value added. Under informal cross-border trade, no standards and quality control measures are observed; hence, adversely impacting the price competitiveness of traded products.
Domestic industries face stiff competition from goods transacted under informal arrangements from neighbouring countries, especially manufactured goods from Kenya, whose industries are enjoying large economies of scale.
Recommendations
Government should build silos and train farmers in applying modern preservative methods on perishable commodities during the bumper harvest period to ensure the availability of such foodstuffs during scarcity times.
“This would lessen the burden of the government to meet food demands during disasters when the country experiences food scarcity," Ubos recommends.
Regional states should initiate joint trade policies that target informal traders to enhance their income and product competitiveness.
The director of Economic Forum Makerere University Business School, Dr Fred Muhumuza told dm Money that there is no effect here.
“Since we discourage taxing exports, no tax revenue is lost. Producers of those exports are earning,” he said.
Harmonisation of trade and fiscal policies in the region could contribute to price stability to mitigate the impact of informal trade transactions.
The government should introduce a legal framework that compels informal traders to declare their merchandise at the time of crossing whether on bicycle or foot. Simplified procedures and documents similar to COMESA Simplified Trade Regime should be implemented across the region after sensitising traders.
Various stakeholders including customs, immigration, police, and other border Traders engaged in selling agricultural commodities should form cooperatives to bargain for favourable prices. Regional traders buying commodities directly from the farms at farm gate prices should be discouraged with emphasis placed on exporting finished products.
“Given the informal cross border trade potential to increase border resident’s household income to reduce poverty, the government should strategically improve on infrastructure connectivity and continue to develop border markets at all customs stations. Moreover, maintaining good relations with neighbours through bilateral trade pacts with countries like South Sudan, Kenya and DRC (being main destinations of informal exports) is critical for trade sustainability,” the report recommends.
