Unexpected trade boon for Joburg
Informal cross border traders (ICBT) contribute up to R4.6-billion a year to the economy of Johannesburg alone. But while the women and men from Zimbabwe, Mozambique and elsewhere often manage to drag their families out of poverty, they have to deal with corruption, robberies and sexual assault on a daily basis.
These are some of the conclusions of yet-to-be published research by the Gauteng City-Region Observatory (GCRO), which has completed the largest survey ever undertaken of so-called ICBT traders who travel to Gauteng. Meanwhile, it doesn’t look like the red tape for informal or formal cross border traders is going to lessen anytime soon, as various overlapping initiatives to harmonise or remove tariffs and trade regulations are moving at snail’s pace.
During GCRO’s interviews with 1 270 traders in Gauteng, mostly conducted at bus stations, 44% of them indicated they would overnight with family or friends. This network is crucial for traders’ success, says GCRO’s senior researcher Sally Peberdy. “South Africans do not take part in the cross border trade. There is nothing to stop us buying stuff and selling it across the border, but we just don’t have the same network.”
South African Tourism figures over 2013 indicate that 74 790 (11.4% of the total) African land border entries were to shop for businesses. According to the GCRO data the average value of goods bought per trader per trip to Gauteng is R10 200, most of which is spent on bedding, household products, plastic goods, furniture, clothing, shoes and fabric — food just being a small part. On top of that traders spend on average R490 on accommodation and R1 060 on transport.
While ICBT is often seen as problematic for the formal economy, most traders shop at wholesalers (58%), Chinese malls (50%), factories (44%), retailers and supermarkets (34%) and at the Oriental Plaza (31%). “If we use South African Tourism figures, traders spend up to R4.6-billion a year in Johannesburg alone. With our more conservative figures that would be R2.6-billion a year,” says Peberdy. “This means our retail sector has a market far beyond the country’s boundaries. Traders also pay VAT here, but usually don’t claim it back, because don’t they know they can or because the procedure takes too long.”
Almost two-thirds of interviewees made profits of up to R5 000 per month, higher than the average monthly income of black Africans in Gauteng. While many traders have started their informal business “just to survive” or to send their kids to school, many now operate as true entrepreneurs with queues being frustration number one, says Peberdy. “These are busy people. They just want to get on with it.”
The queues also bother smaller traders who are walking, cycling or making short trips by public transport. “The long delays we endure at the border can be ridiculous at times, taking about three hours because of the strenuous exercise of unpacking the bale and repacking it,” Swazi trader Lucia Shungube recently told the Swazi Observer. She travels weekly to Mozambique to buy second-hand clothes. “The tirade of the soldiers” manning checkpoints form another obstacle to trade, the paper added.
The second biggest challenge at border posts is corruption, respondents to the GCRO survey indicated. While the traders are often branded smugglers or criminals, “corruption is not working in their favour, because it is erratic,” says Peberdy, while acknowledging that some traders do try to evade taxes, pay bribes or “underdeclare”.
Other challenges listed in the GCRO study are the short length of visitor’s permits and high duties. According to a World Bank study small informal traders pay on average 62% more than large traders to move a tonne of goods across the Zambia-Malawi border. The Common Market for Eastern and Southern Africa (Comesa) tries to tackle this with the simplified trade regime (STR), which means traders carrying goods included on a pre-negotiated list and worth up to $1 000 can clear those goods with little paperwork. Due to lack of information and illiteracy though, this regime is often not used.
According to Francis Ng’ambi of the Southern Africa Cross Border Traders Association (SABCTA) there is a lack of political will to implement the simplified trade regime. “Countries like Swaziland are struggling to implement the increased threshold. They are reluctant because they are concerned about protecting their markets. It’s only Zambia, Zimbabwe and Malawi that have increased the threshold,” he told the Swazi Observer.
Willemien Viljoen of the Trade Law Centre (Tralac) confirms red tape is not decreasing. “Zimbabwe is implementing a new inspection process to get rid of illicit informal trade and South Africa is introducing licences for importing over 20kg of goods. While that excludes the guy who walks over the border with two sacks of potatoes, larger informal traders will be affected.”
Viljoen says traders are hampered by non-tariff barriers like erratic customs procedures and poor road infrastructure. While the Southern African Customs Union (Sacu), Southern African Development Community (SADC), Comesa and the East African Community (EAC) all work on trade harmonisation, progress is slow. The Tripartite Free Trade Area (TFTA), which is supposed to incorporate all the initiatives “has created an additional overlap,” Viljoen notes. “Trade can benefit a lot from harmonisation of standards, but that has to wait because negotiations are stuck on tariffs and rules of origin.” Several countries, including South Africa, Botswana, Lesotho, Mozambique and Zambia, have not signed the latest TFTA agreement yet.
Next year negotiations start for the Africa-wide Continental Free Trade Area (CFTA), which adds another overlapping initiative. According to the African Union (AU) up to 70% of African families are in the informal sector. In a recent policy document the AU states that “the CFTA should be designed in such a way that it […] also caters for the needs of informal cross-border traders”, but Peberdy doesn’t expect many benefits from trade negotiations for informal traders. “In countries like the Democratic Republic of Congo and Malawi duties are some of the most important streams of tax revenue, so they don’t want to lose those.”
Traders are mostly between 25 and 49 and a lot of them single, GCRO found. Most are women, but men are also a significant group, especially in poorer countries like Malawi. According to UN Women, cross-border trade can empower African women, but a recent thesis by UCT master’s student Serita Garatidye found it less than emancipating. “[Women] view their participation in informal cross-border trade as a way of helping their husbands who have been emasculated by the economic crisis,” Garatidye concludes, adding that permission from husbands and co-operation from male border officials and public transport operators is usually required.
Women often have to deal with officials who solicit sexual favours. “That can be quite forceful,” says Peberdy. “One particular officer at the Komatipoort border post is known as The Rat. He always asks for sexual favours. When he doesn’t succeed he has been known to phone ahead to police roadblocks so the women get harassed there as well. When they are at the border post, people have to get back to their bus in time, which makes them easy victims of extortion.”
Harassment by officials on both sides of the border is rife, with physical harassment reported by 30% of the traders and verbal harassment reported by 60% to 70%. More than a third of the interviewed informal traders said they have been robbed in South Africa and more than a quarter suffered the same in their own country. “They either have a load of cash or a load of goods with them and they feel vulnerable,” says Peberdy.