The informal economy: the ups and downs for agriculture

The informal sector provides income and jobs for the most vulnerable populations in developing countries and, if gradually formalised, has potential to become a major lever for growth and development.

Women account for 80% of informal traders in East Africa © TradeMark East Africa
Women account for 80% of informal traders in East Africa © TradeMark East Africa

Thursday, 30 November 2017

With women making up the majority of informal traders in the East African Community (EAC), various initiatives are encouraging them to use safer formal trading routes and facilitating their participation in formal trading activities to help increase their incomes.

At the Kenya-Uganda border town of Busia, thousands of traders hustle against each other as they compete with trucks to get their goods cleared at the border post. The flourishing cross-border trade stems from the booming demand between the two Eastern African nations, providing livelihoods for millions and a rich source of revenue for the governments of Kenya and Uganda in taxes and custom duties. But, while Kenya has managed to gazette (certify) more than 35 official cross-border points, mostly with Uganda, only recently has positive progress been made to support informal traders, while also increasing protection for women who have traditionally borne the brunt of the risks of informal trading.

Making business easier

According to Trade Mark East Africa (TMEA) – a key institution for enhancing trade in the region – informal cross-border trade accounts for around 60% of all transactions in the EAC, with women accounting for 80% of all informal traders. “The issue of informal trade in East Africa cannot be separated from women. It is therefore very important to understand where women are coming from to trade, what information they have received in order to trade, and what they need in order to streamline their trade and ensure they can transact more easily and conveniently,” says Gloria Atuheirwe, TMEA women and trade programme officer.

But formalising the way women do business has not been easy. Traditionally, thousands of traders, afraid they would be forced to pay more at the borders, use alternative, ungazzeted and often dangerous routes, including crossing forests and rivers. Edna Mudibo, a Kenyan trader who has been selling cereals and peanut butter since 2012 has had her fair share of woes. “I lost count of how many times my goods were confiscated by police for using dubious routes. I would lose all my savings because I used to move with almost all of my cash to go trade. I had no bank or anywhere to store my money. Even after paying hefty bribes to avoid being arrested, we still feared going through the official border points. The custom officials were mean and the amount of money we used to pay was exorbitant,” she recalls.

Mudibo’s experiences are corroborated by a 2013 World Bank report, Women and Trade in Africa: Realizing the Potential, which stated that up to 80% of traders in the Great Lakes region (Burundi, Democratic Republic of Congo, Kenya, Rwanda, Tanzania and Uganda) paid bribes. An earlier 2007 survey by UN Women also indicated that bribes are not the only issue and that 26% of the women who were informal traders at that time were raped, predominantly by law enforcers, as they tried to move produce across trade routes. However, with the coming into force of the EAC Custom Union and the Common Market Protocol – which opened up borders to free movement of people, goods and services in 2010 – traders selling goods worth less than €1,700, which are primarily produced in EAC member states are now exempted from custom duty. “Considering we have informal traders in their thousands crossing the Busia border on a daily basis and trading in small produce, it makes sense to incentivise them to use the official border routes,” states Atuheirwe.

As a result of heightened campaigns on the importance and benefits of crossing through designated border routes, and forming associations that allow informal traders to easily access market information and open savings accounts, women traders are now able to access more funding and collateral to grow their businesses. It is also a lot easier for women to formalise their operations by obtaining certificates of origin to prove their goods have been produced in the EAC and are worth less than €1,700, and attain personal identification tax numbers to speed up clearance at the border. Consequently, since the Custom Union and Common Market Protocol was introduced, at least 8,000 informal cross-border traders in the four major Eastern African border points – Busia and Malaba (Kenya-Uganda border), and Namanga and Taveta (Kenya-Tanzania border) – have moved from using ungazetted routes to mainstream border posts, with the majority coming from Kenya, according to TMEA data.

Empowering women to trade

One particularly successful association is the Busia Women Cross-Border Traders Association that has more than 3,000 active informal women trader members, with most of them trading in cereals, fresh produce and fish. The women members are able to get commodity prices via their phones, access available markets in the two countries, and get connected to financial and information service providers. In addition, the association also runs a savings scheme to allow members to borrow, or use as collateral when seeking credit.

The Eastern African Sub-Regional Support Initiative for the Advancement of Women (EASSI), a body that works with women traders, has also been particularly instrumental in helping to improve custom official and trader relations. Through dialogue meetings, the two groups meet and discuss misunderstandings arising from their interactions. “EASSI has been quite helpful,” says Annet Auma, EASSI Busia border project assistant. “Women get the courage to lay bare issues to the custom officials such as time taken for clearing at the border, which results in them missing buses to the next market, or how some pockets of bribery and harassment still exist at the border. Custom officials, on the other hand, get to explain to traders which specific areas they should queue in to get faster services. As a result of increased understanding of custom procedures, women spend less time at the border, have increased their earnings and built cordial relations with the officials they once feared.” As a result, TMEA states that Busia has been voted as a model border post in improving relations between custom officials and traders.

The Busia women’s association, EASSI and Busia county government in Kenya have also been working on assisting traders to obtain the required identification, which costs only €1.23. This provides details of their name and what they sell and makes it easier for the women to get clearance at the border point. “These businesses are not illegal. As long as they are trading legally produced goods along ungazetted routes, we have a duty to ensure we move them into full registration so that they can be spared unnecessary risks and can also earn decently. We like to call this the first and most fundamental stage of formalisation,” says Richard Wanzala from the Busia county government.

Strengthening safeguards

While it has been a relatively smooth experience in getting the traders to embrace formality, there are still too many ‘rogue’ officials at the border asking for bribes, which is discouraging some traders from using the posts. It is hoped that greater accountability and transparency will soon be possible with the adoption of a formal Cross Border Trade Charter that will ensure that border officials carry identification, and that no male official can conduct a body search on a female trader.

TMEA are encouraged to see countries introducing policies and measures like the Common Market Protocol that recognises these traders. “Our studies have shown that, on average, one informal trader involved in cross-border trade supports about seven dependents,” Atuheirwe says. “Moving forward, we look to a time when informal traders will get full recognition for the pivotal role they are playing in driving inter-regional trade.”

Saving time and money at the border post

From 2005 to 2012, Agnes Opus was in the business of informally buying and selling maize and millet between Kenya and Uganda. It was a tumultuous journey for the 50-year-old, who came up against custom officials and the police due to tax evasion.

Opus was introduced to the business by another trader and taught the informal routes to pass through the Busia border, where, if stopped by police, she could be made to pay exorbitant bribes. The informal route from Uganda to Kenya can take up to 4 days compared to a day trip using the formal system. At times, she would cross the river with sacks of cereals using a makeshift raft, or hire the services of fishermen to help her. In her first encounter with police officers and custom officials, they took her bags of millet and all the money she had.

However, when an opportunity presented itself through the Busia Women Cross Border Traders Association in 2013, she decided to join and has never looked back. The association, comprising of an estimated 3,000 women traders in Kenya and Uganda has assisted Opus to register herself as a trader, acquire a formal trader’s ID and conduct her business legally. “I am now able to check market prices in real time and find out where demand is ripe,” she explains. “I have also managed to save with the cooperative, allowing me to access credit when I need it.” Having encouraged hundreds of informal women traders to join, Opus is now secretary general of the association in Uganda and regional treasurer of the East African Traders Association.

She travels to Kenya twice a week where demand is high and where she is able to make up to Ksh7,000 (€57) per visit. Such proceeds have enabled her to pay school and university fees for her four children. “By moving my goods through the formal routes, I earn more, save on time and have reduced numerous expenses like hiring people to help me cross to Kenya illegally,” she says.

Bob Koigi

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The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.