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Informal traders: a balancing act of survival

COVID-19 in Africa

Informal traders: a balancing act of survival

Women cross the border between Zambia and Zimbabwe carrying trays of produce on their heads

Africa’s informal cross-border traders have been hit hard by Covid-19. David Luke, Gerald Masila and Lily Sommer call for five urgent interventions to prevent irreversible damage to this vulnerable community 

In the fight against the coronavirus, almost all African countries have now suspended international flights, introduced 14-day quarantines, and closed land borders. Forty-four of Africa’s 54 countries have now announced land or port closures. In order to keep economies alive, cargo trade is typically still allowed by air, sea and vehicles, under very strict conditions. But trade across physical borders, much of which is small-scale and informal, requires the movement of people, and has come to an abrupt halt.

The chaotic Aflao-Kodjoviakope border between Ghana and Togo was closed almost two months ago, curtailing all movement of persons across borders. Large vehicles transporting bulky consignments can cross the border outside curfew hours (8pm-6am), if they adhere to strict hygiene measures.

Since Covid-19, small-scale traders have started to aggregate their goods, and pay a bundle of fees to truck drivers for transportation and clearance. For this reason, prices of key staples such as rice, tomatoes and peppers, have jumped about 50% in local border towns in Ghana. As demonstrated by the 2007-08 food crisis, price spikes can spark mass protests, presenting yet another public health problem.

On the other side of the continent, in East Africa, cross-border trade on foot has halted. Large consignments cross in vehicles, but drivers complain of long tailbacks due to mandatory coronavirus testing. At Malaba border, the queue of trucks entering Uganda from Kenya stretches to Mayanja Market in Bungoma, a distance of over 35km from the border post.

Many farmers cannot get their produce to border markets, which has cut off a vital source of informal cross-border trade. Much of this food typically ends up in cities, which now face worrying price hikes. As in West Africa, informal traders are innovating to aggregate their produce. Use of EAGC’s Grain Trade Business Hub (GHuB) application, which assists farmers to consolidate demand for inputs and sale of produce, increased significantly following Covid-19.

Cushioning the blow: easing restrictions and introducing concessions

The reality facing African governments is a difficult one: risk losing lives to Covid-19 or risk losing lives to hunger. Two-thirds of Africans live above the poverty line, but many hover just above the $1.25 a day threshold. The number of Africans suffering from hunger has declined to 20%, but Covid-19 risks reversing these gains. Emerging survey data indicates that 81% of Nairobi’s slum dwellers have suffered complete or partial loss of income, and 70% have skipped meals due to Covid-19.

The WHO has urged caution in easing Covid-19 restrictions too quickly. Yet Africa is set to enter its first recession in 25 years, social unrest is brewing, and food relief is running low. In view of this, African governments are grappling with how best to ease restrictions and get business going, without exposing their economies and people to mass devastation. UNECA estimates that one-month full lockdown across Africa would cost the continent about 2.5% of its annual GDP ($65bn).

Countries are now granting concessions for informal traders. Lagos state government permits trade every 48 hours, allowing two days for disinfecting the marketplace. Mauritius allocates market shopping days to citizens based on the first letter of surnames. Petty traders in Uganda can work if they don’t return home for 14 days. In South Africa, spaza shops can operate from 6am to 6pm if they obtain a permit, and a relief scheme was established to provide informal traders with seed capital to purchase stock. Next door in Zimbabwe, as supermarkets ran out of fresh produce, Harare partially reopened its largest market, Mbare.

Informal cross-border traders: vital to food security and supply chains

Informal traders in Africa’s urban cities and towns have saluted the easing of restrictions and relief schemes. The eagerness to persist with business amid the pandemic captures a desperate survival strategy.

The policy measures introduced, however, have overlooked a large section of informal traders. Informal cross-border traders are not eligible to concessions targeted at domestic informal trading. Unlike in Harare, in Mutare, a border town close to the border with Mozambique, many informal vendors have had their produce confiscated and set on fire by Zimbabwe Republic Police.

Yet, informal cross-border trade serves a significant income source, particularly for women. Several studies suggest that its value may even exceed the value of formal trade with neighbouring countries. This trade not only serves border communities, but provides a lifeline and food source for urban cities spanning entire corridors.

Informal cross-border traders are acutely vulnerable to Covid-19. Unlike formal trade, which continues to operate virtually, informal cross-border trade involves risky close person-to-person contact and cash-based transactions. Most border towns typically share one bore hole or community tap, and most do not have access to basic sanitary conditions. Informal traders live subsistence existences, and have suffered hefty losses from sudden border closures.

For instance, in Kenya, cessation of movements in and out of cities was abruptly announced with farmers en-route to markets. These farmers were blocked from passing police barriers and forced to abandon their harvest of a full season. Many informal traders are unbanked and rely on expensive informal loan sharks for bulk stock purchases, such as “mashonisas” in South Africa and “shylocks” in Kenya. Losses from unsold stock risk quickly escalating through hikes in interest and can turn into a spiral of debt.

A customised response for Africa’s informal cross-border traders

We are now two months into Africa’s Covid-19 combat, and now is the time to reflect. Africa has managed to somewhat contain the virus, save lives and avoid a massive blow to its health systems. But it has become clear that, for now, Covid-19 is here to stay. The question then is: how can governments strike the right balance between curbing the long-term spread of the virus and supporting the short-term realities of survival?

Five priority interventions are needed to “optimise” the Covid-19 impact on informal cross-border traders.

  1. First, partial reopening of informal cross-border trade must be executed in a manner that avoids reverting to the status quo of overcrowded borders. One way to reduce density could be by alternating the days traders can cross the border. Alternatively, Mondays and Fridays could be for trading vegetables and fruit, Tuesdays and Thursdays for fish, meat and dairy, and Wednesdays and Saturdays for sanitary and medical products.
  2. Second, cross-border trade must take place in a safe environment. This requires daily sanitisation of border crossings and facilities, handwashing stations, protective wear for border authorities, and medical and quarantine officers at borders. Much can be learned from TradeMark East Africa’s “Safe Trade Emergency Facility” which targets containing Covid-19, whilst simultaneously enabling trade. The Ugandan government disinfects all trucks entering the country and has designated places where transiting cargo drivers must stay. Simple visual step-by-step guides can help enhance understanding of Covid-19 border regulations and how to conduct safe trade.
  3. Third, digital solutions can contain the spread of Covid-19 along trade corridors. For instance, all truck drivers entering Uganda must present themselves for testing before clearance. An electronic cargo tracking system traces the movement of drivers, so that when results come in, those who test positive are immediately intercepted and quarantined. Many informal traders now have smart phones with built-in GPS, which can be similarly used to trace positive Covid-19 cases. Mobile payment systems can facilitate reductions in risky cash-based payments. In fact, the Kenyan government has issued guidelines to discourage the use of cash. Mobile companies are promoting this shift by reducing fees, and eliminating fees for small amounts below Ksh 1000 ($10).
  4. Fourth, authorities should facilitate aggregation of small-scale traders’ goods. Well-governed cross-border trade associations, or regional agencies involved in facilitating cross-border trade such as EAGC, FEWS-NET, WFP and CILSS, can assist with coordination, certification, clearance, payment and transport. Even better, governments could consider subsidising transport costs as a form of relief. Expanding warehouse facilities at borders would help informal traders scale their own cross-border trade. This could reduce the number of cross-border trips per trader, and hence congestion at borders, and make transport costs more affordable.
  5. Fifth, it is critical to extend relief to informal traders. These traders are typically excluded from traditional safety nets due to their unregistered status. In recent years, East Africa has proved that transferring cash to those most in need is possible with the use of mobile money and SIM card identification systems. We can learn a lot from these efforts. In the absence of technology, cross-border trade associations can assist in securely distributing cash or food transfers to their members.

The above responses must happen as soon as possible. There is no time to wait to see how Covid-19 unfolds. Informal cross-border traders are amongst the most vulnerable in Africa. Delaying action risks detrimental and irreversible damage to these communities, perhaps much larger than the risk of Covid-19 itself.

David Luke is Coordinator of the African Trade Policy Centre (ATPC) at the United Nations Economic Commission for Africa (ECA), Gerald Masila is Executive Director of the Eastern Africa Grain Council (EAGC), and Lily Sommer is a Trade Policy Expert of ATPC at ECA

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