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August 2008

US$17,6 billion in informal trade is being ignored

For thousands of poverty-stricken people in southern Africa, informal cross-border trade (ICBT) is a means of survival, a source of income and employment. The trend towards informal cross-border trade has accelerated in recent years, with official surveys suggesting that it generates an average of R17,6 billion per annum.


Who trades?

Informal cross-border traders are a diverse group dominated by women (over 70%) and generally comprising the vulnerable, unemployed, orphans, refugees, the youth, school leavers and widows - among others.

Types of goods crossing borders informally

Informal cross-border exporters to South Africa tend to specialize in curios, doilies and similar goods, all originating from southern African countries north of South Africa. Informal traders who import from South Africa into countries such as Malawi, Mozambique, Zambia and Zimbabwe, bring in mostly food and groceries, liquor, motor vehicle spares, medical supplies, toys, clothing, electrical goods, household appliances and furniture. Highlights of food trade flows in selected Southern African Development Community countries captured by the United Nations World Food Programme in 2007 show that informal cross border food trade in maize, rice and beans is very significant (see box). The highest levels of informal maize exports were from Mozambique, accounting for 80% of the total trade. Informal trade in rice and beans is confined to a few border points: Zambian informal exports to DRC dominate, followed by Mozambican exports to Malawi.

Reasons why people engage in informal cross-border trading

  • Lack of employment opportunities in the formal sector.
  • Retrenchments, inflation and currency devaluations that create pressures on real wages.
  • Increase in rural-urban migration in search of often non-existent employment.
  • Cumbersome formal business registration procedures and high associated costs.
  • High taxes and customs duties in most countries compel some traders to remain informal.
  • Ease of entry into the informal sector.
  • Prevalence of burdensome and costly government regulations.
  • Certain ICBT activities are profitable and viable small businesses.

Average monthly values of goods traded

Value of informal cross-border trading

Although statistics suggest that informal cross-border trade within SADC contributes an average of over US$17.6 billion per year, most policy-makers at the national and regional levels continue to ignore this form of trade and ICBT flows do not appear in official trade statistics. This leads to a situation whereby official trade flows are understated. Despite the lack of data, some estimates have put ICBT at between 30-40% of intra-SADC trade, suggesting that by ignoring informal cross border trade, SADC Member States could be overlooking a significant proportion of their trade.

Stigmatized and ignored

Regardless of the value this sector brings, informal cross-border traders bear the stigma of prostitution, smuggling, drug-trafficking and lack of government interest. It is generally perceived as not only economically non-viable but also as socially undesirable. Whilst criminal elements do use the cover of being informal cross-border traders, thousands of bona-fide informal traders are law-abiding citizens who face additional challenges, such as:
  • Difficulties in obtaining passports and visas.
  • Excessive customs charges.
  • Unwarranted impounding of goods.
  • Numerous check-points.
  • Humiliating body searches.
  • Bribery & corruption at border posts.
  • Limited access to formal credit schemes.
  • Lack of reliable transport and other facilities.
In addition, they are confronted with a hostile policy environment at both a national and regional level, which undermines their ability to overcome poverty. This lack of recognition of ICBT is a major concern since there may well be lost opportunities to transform the regional and national economies, using innovative SME oriented policies and strategies. ICBT contributes significantly to the wellbeing of citizens and if deliberate steps are taken to create an enabling policy and regulatory environment in the SADC, the sector can have a positive impact towards the attainment of Millennium Development Goals (MDGs).
Southern Africa ChangeMakers is an e-newsletter for our donors, friends, partners and anyone concerned about overcoming poverty in southern Africa.

Please forward this newsletter to any of your colleagues or friends who want to see southern Africa transform into a vibrant, caring, and prosperous community

For the Record

Informal cross-border trade refers to unregulated and yet legal economic activity such as the selling of food, crafts and household goods and services across national borders

US$17.6 billion per year – average value of ICBT in the SADC.

30-40% - ICBT’s contribution to intra-SADC trade

70% of informal cross-border traders are women

Main foodstuffs traded in 2006/7
(in metric tonnes)
Maize:   97,000 MT
Rice:     6,500 MT
Beans:  10,000 MT



Benefits of Informal Cross-Border Trade

Ensures food security in the region by moving agricultural produce and other foodstuffs from areas of surplus to where there is a deficit
Complements established businesses by providing goods in short supply.
Opens new markets and/or pioneers new product lines.
Connects markets in various SADC countries.
Provision of basic necessities such as clothing, education food and health care to average of 8 dependents per trader.
Purchase of assets: fridges, radios, televisions, and satellite dishes.
Empowerment of women: Increases financial independence and access to resources.
Creates employment in both home countries and supplying countries.
In South Africa, a key driver of the tourism economy through provision of curios and crafts.





 
 
































Reality Check

SADC countries are attracting only 1% of global foreign direct investment.

Regional trade within the continent is also marginal: owing to the linkages established through colonial history, trade with Northern countries stands at 90%, whilst within the SADC, inter-regional trade is currently at 10%.


 
 

Policy Alert: The SADC Free Trade Area -
an Economic See-Saw

The launch of a SADC Free Trade Area in August during the SADC Summit in Johannesburg will usher in a new era of economic integration with an enlarged market of more than 200 million people. For SADC Member States, the Free Trade Area brings both opportunities and challenges.


Why regional integration?

The main purpose of regional integration is to increase Africa’s visibility in the global market. Many SADC economies are too small to support a large range of viable productive investments and as such, the Free Trade Area will provide the opportunity for an enlarged domestic market that can promote economic growth through more competitive pricing and improved efficiency. To ensure long-term economic sustainability, countries in the SADC must integrate into the global value chain; without it, the region will be isolated from global opportunities and developments. Member States also need to diversify their economies as a way of cushioning themselves from inevitable global shocks (eg: sudden changes in world commodity prices). Apart from diversification, SADC Member States also face the challenge of deepening intra-regional trade and ensuring that poverty eradication is achieved in the process. Against this background, SADC’s move towards a Free Trade Area becomes an attractive option, insofar as it will increase the region’s competitive advantage and trade performance, as well as enhance opportunities to attract foreign direct investment.

How it works

Governments in a Free Trade Area remove trade barriers to encourage inter-regional trade between neighbouring countries. This lowers prices, as goods being traded between countries are less expensive than they would be if there were tariffs.

The main components of the SADC Free Trade Area are:

  1. Up to 85% of products produced and traded in the SADC region will be tariff-free, resulting in cheaper prices for consumers
  2. Removal of ‘Rules of Origin’ which makes it easier for goods to move across borders
  3. Removal of ‘non-tariff barriers’ which also tend to increase costs

Once fully functional, there is no doubt that the Free Trade Area will lead to continual innovation, better products, increased savings and investment, better paying jobs as well as enable more goods to reach SADC consumers at lower prices.

Impact on the poor

Most southern African economies are dualistic and characterized by, on one hand, a foreign-dominated formal sector and, on the other, a marginalized, underdeveloped informal sector. In theory, increased trade should have a positive impact on poverty eradication, as more people will be drawn into the production process and consumers will have access to cheaper products, which should benefit the poor. In reality, however, the trickle-down process is much more obscure and its impact on poverty reduction is disputable. Trade can reduce poverty by:
  • Increasing income and providing people with the means to live a healthy and productive life.
  • Contribute to reducing the price of products in poor countries, making them more affordable to those in need.
  • Give poorer countries access to much wealthier markets in rich countries.
However it can also lead to job losses, massive poverty, indebtedness and underdevelopment in developing countries. Trade liberalization can increase domestic output, but it does not guarantee low prices in the long run to enable the poor to afford basic goods and services, nor does it necessarily mean that growth will alleviate poverty. Instead, it increases pressure on government’s social services and forces vulnerable communities to continue to be the social responsibility of the affluent and working class.

This underscores the need for SADC to have very clear development objectives and implementation strategies, to address the enormous problem of poverty in the region and ensure that the poor are not further marginalized by the Free Trade Area.

Yet these objectives are currently being undermined by the failure of SADC to recognize informal cross-border trade (ICBT) as a part of the bigger regional trade strategy, despite evidence demonstrating the growing importance of informal traders in the SADC region.

Informal cross-border trade is not only a source of livelihood, but provides employment, making up for the shortfall resulting from the reduction in formal employment. It plays a key role in poverty alleviation and therefore complements SADC’s objectives sought under regional integration.

Concerted efforts to understand ICBT and incorporate this sector into the regional trade policies are crucial, if the poor are to directly benefit from the Free Trade Area.

There are other complimentary policy issues that also need to be taken into account, such as:
  • Development of infrastructure to promote and support inter-regional trade
  • Improved social protection policies across the region, that provide a safety net for those who cannot directly benefit from trade (pensions, education health and welfare services etc)
  • Micro-financing opportunities to encourage small business growth
  • Incentives for informal traders to invest in the formal economy (eg: access to banking services which helps to develop the region’s financial sector)












































SADC’s strategic plan

Timeline of economic integration & cooperation:

2008:
Free Trade Area

2010:
Creation of a Customs Union

2015:
Creation of a Common Market

2016:
Creation of a Monetary Union

2018:
Single Currency



“Poverty can be ended by sharing rising wealth. There is a great sense of optimism in most countries that are currently achieving progress in ending poverty, no matter how modest the progress might be. The challenge is to make this progress to happen even faster.”

Zambian President & SADC Chairperson Levy Mwanawasa, speaking at the Poverty & Development Conference, Mauritius, April 2008




Links and Resources from
Southern Africa Trust
Grant Partners:


Southern African Research & Documentation Centre (SARDC) Report: Informal Cross Border Trade (www.sardc.net)
Southern Africa Microfinance & Enterprise Capacity Enhancement Facility (SAMCAF) Report: Microfinance & Poverty Reduction in the SADC
Economic Justice Network Report: SADC & Informal Cross Border Trade (www.ejn.co.za)
Pietermartizburg Agency for Christian Social Awareness (PACSA) Fact Sheet # 50:
Free Trade or Fair Trade? (www.pacsa.org.za )
Mthente Research & Consulting Services
(www.mthente.co.za)
 
 
 

Action Update: Where is Catarina now?

In our June issue, we told you the heart-rending story of Catarina Manungo, one of the victims of May’s attacks on migrants in South Africa.  We are extremely pleased to let you know that the FDC (Foundation for Community Development, Mozambique) helped Catarina to return to South Africa to get urgent medical treatment for her child – which was disrupted by the attacks that forced her to flee to Mozambique.

Catarina is presently staying with a good Samaritan from her church, while her child is in hospital in Johannesburg. As soon as she is able, Catarina will return to Mozambique with all her children and is looking forward to finding a place to live and starting an income-generating activity to sustain herself and her family.
  

Correction

In our June issue, we regret that we did not acknowledge that Khanya College Johannesburg Trust organised the anti-xenophobia demonstration that took place on May 24, 2008 in partnership with other organisations. This was not only a Khanya College initiative but was organised in partnership with several other popular social movements. We also incorrectly referred to Khanya College as a body of social movements whereas its an independent non-governmental organisation that works with social movements and other organisations.
 
 

Partner Links: Skillshare International

Humankind has produced handcrafts since pre-historic times and today, thousands of people throughout the SADC are involved in craft production. Trade in crafts has great potential as a strategy for poverty alleviation and job creation and could significantly contribute towards improved livelihoods and regional integration. However the craft industry has not yet realized its potential and the opportunities for regional and international trade in crafts are only starting to be explored.



The study on Regional Crafts and Access to Markets (2007) was commissioned by Skillshare International with financial support from the Southern African Trust. The study not only gives a detailed overview of the SADC craft industry’s potential for poverty alleviation and job creation, but it will also be used to lobby for increased regional trade and access to markets for the craft industry.

Skillshare International works to reduce poverty, injustice and inequality and to further economic and social development in partnership with people and communities throughout the world. Learn more about their work on www.skillshare.org
 

Get involved! If you could change one thing forever, what would it be?

This is the question that the Southern Africa Trust will be asking all South Africans to answer during the month of September.

It could be the shape of your nose, the type of car you drive, the make up of your favourite sports team ... or something deeper that could change the world as we know it... forever.

In asking you for your ideas on the one thing you want to change, we want to raise a minimum of R1 million for our grant partners and raise the debate on how we can work more effectively to end poverty, forever.


WE NEED YOU!

Your views are very, very important to us. Every single answer will be captured and will be used to get a better idea of what you (yes, YOU!) really want to change.

Several well-known people are supporting the Change4ever campaign, including Graça Machel, fashion designer David Tlale, MTV’s Sizwe Dhlomo, and the Mail & Guardian’s Ferial Haffajee.

The campaign will include SMS and online campaigns via the
change4ever website, David Tlale designer T-shirts for sale, high-level media coverage and debates on radio and TV

There will also be ‘graffiti walls’ in major Johannesburg shopping centres for you to write your ‘Wish 4 Change’ and corporate challenges for the business sector to give their responses.

Watch out for coverage of our work during the month of September and a Change4Ever special event - ‘Fashion with a social conscience’ on 2 October, with leading fashion designer David Tlale.

Get your friends and family involved – spread the message and help change the world....forever. Look out for the early September edition of Southern Africa Changemakers, which will be dedicated to the Change4Ever campaign.

Scroll down to ‘Meet the Team’ to see what Itumeleng Kgotlagomang would like to change forever.
 

News from the Trust

Free to be: A concert to celebrate our common regional identity
WITS University Great Hall, Johannesburg, South Africa
Date: 15 August 2008

THE GRAND DAMES of South African song get together for a good cause as SIMPHIWE DANA, SIBONGILE KHUMALO and LIRA, joined by DAVID IMANI from the DRC, add their voices to the "Free to Be" Concert line-up.



The Southern African Development Community (SADC) Secretariat, the Southern Africa Trust and MTN are hosting a Free To Be concert at WITS University Great Hall in Johannesburg on 15 August 2008 from 4-6p.m.

The purpose of this inter-cultural event is to create a platform for all southern Africans to reaffirm their commitment to understanding, tolerance, compassion and unity. The concert is open to members of the public at no charge. The youth orchestra of musicians from several southern African countries, and a selection of professional classical and jazz artists from southern Africa will be performing live.

 “We should all be free to be just who we are – wherever we go. And to be the best that we can be, so that we change forever the poverty and insecurity experienced by so many citizens of our region,” says Neville Gabriel, Executive Director of the Southern Africa Trust.  “This intercultural event will speak publicly beyond borders, politics and the limits of language.”

Gabriel added that, “One of the ways to prevent regional migration flaring up into a huge problem for our region, for example, is to address the root causes of why poor people are moving. The poor need social protection against destitution in the countries across our region. And they need support to change their lives forever by having opportunities to earn a living. The free to be concert will reaffirm the human dignity that we should all share – wherever we may be in southern Africa.”

MTN has volunteered to be part of the initiative in bringing this event to you.  MTN Group Executive and spokesperson Nozipho January-Bardill: “We are very pleased to be able to extend our support to the groundswell of unity that has arisen in the wake of the attacks.”  

The event will be produced by MIAGI (Music Is A Great Investment), a non-profit organisation that focuses on music education for children as a central tool of social upliftment, cultural awareness and positive social development. “We know, from experience, that music unites people, offering an invaluable contribution to community- and nation building,” says Robert Brooks, Director of MIAGI.  “We aim to include musicians from as many of the Southern African countries as possible,” he continues.

Contact
communications@southernafricatrust.org

 
 

Upcoming Events

Date Upcoming Events
3- 8 August 2008

The XVII International AIDS Conference
Theme: ‘Universal Action Now!’

Venue: Mexico City, Mexico
10 August 2008

Gender and Media South Africa General meeting
Election of new office bearers for the Executive Committee.

Venue: Johannesburg, South Africa
14 August 2008

Panel Discussion on The State of Food Security in Southern Africa: Towards a regional vision to end poverty?
Objective: to stimulate debate and promote greater understanding of the issues pertaining to the food security situation in the region

Venue: Protea Hotel Parktonian, Johannesburg,
South Africa
13 15 August 2008

4th SADC- Civil Society Forum
Annual Civil Society Forum: discussion will also include how to strengthen and sustain partnerships among CSOs in the region and between CSOs and governments,

Venue: Johannesburg, South Africa
15 August 2008

Southern African Development Community
/Southern Africa Trust/ MTN/ MIAGI Concert

Venue: WITS Great Hall, Johannesburg, South Africa
16-17 August 2008

SADC Summit 

Venue: Johannesburg, South Africa
17 August, 2008

SADC Day and the launch of the Free Trade Area

Venue: Johannesburg, South Africa
17-20 August  2008

Southern African Broadcasting Association (SABA) Annual general conference
Joins decision makers from the public and commercials sectors as well as senior representatives of the broadcasting industry and SABA partners from other regional and international organisations

Venue: Mauritius
31 August –
1 September 2008

Media Institute of Southern Africa AGM

Venue: Pretoria, South Africa
1 September –
2 October 2008
Southern Africa Trust Change4Ever Campaign
If you could change one thing forever, what would it be? Visit www.change4ever.org

Venue: South Africa
 
 

Who we are and what we do

Visit our award-winning and newly updated website www.southernafricatrust.org for the latest information on what we’ve been up to.

Do you have an insightful comment or provocative statement to share? Start your own discussion on our Blog!
 

Meet the team: Itumeleng Kgotlagomang

Itumeleng has experience working in the field of micro-biology, specializing in HIV and TB research. He previously worked with the Southern African Catholic Bishops’ Conference (SACBC) where he gained experience in working with civil society. His passion for communication led him to join the Southern Africa Trust, diversifying from his current qualifications.

Itu is the man responsible for the design of Southern Africa Changemakers and has been with the Southern Africa Trust for a year and half now. He is the father of a 22 month old son who keeps him at his toes at all times. Itu enjoys spending time with family and friends; and dreams of driving a Formula 1 car someday.

The one thing Itu would like to change forever is people’s perceptions on HIV/AIDS. Far too often we see people, especially the poor and vulnerable, die painful deaths caused by this deadly disease – leaving suffering orphans in the process. We tend to believe in useless myths about the virus and have this mentality that it will not happen to me or my family. I believe it’s time people took notice of the seriousness of the situation and what lies ahead.
 
 

Southern Africa Trust contact details

4 Midridge North, International Business Gateway, 6th Road (off New Road), Midrand, South Africa

T: +27 11 318 1012 
F: +27 11 318 0814 
E:
info@southernafricatrust.org  
W:
www.southernafricatrust.org




The Southern Africa Trust appreciates the support it has received from:




Trustees: Dr Vusi Gumede (SA), Mr Denis Kadima (DRC),  Rev Joseph Komakoma (Zambia), Dr Perks Ligoya (Malawi), Dr Reginald Matchaba-Hove (Zimbabwe), Ms Alice Mogwe (Botswana), Ms Paula Monjane (Mozambique), Ms Shirley Moulder (SA), Ms Lucy Muyoyeta (Zambia), Ms Riah Phiyega (SA), Dr Prakash Ratilal (Mozambique)


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