Towards an estimate of informal cross-border trade in Africa

Abstract

Official trade statistics typically capture only formal trade. In order to accurately monitor intra-African trade, it is important to understand the scale of informal trade. Reliable data on informal cross-border trade (ICBT) is also crucial to building awareness among policymakers of the importance of this phenomenon and to make a case for policy action. This paper provides a comparative analysis of the ratio of informal to formal trade for African countries for which data is available. Based on this assessment, the paper makes the first ever attempt to estimate the total value of ICBT in Africa. We estimate that the value of ICBT is significant across all African subregions. Our estimate found ICBT to be equivalent to between 7 and 16 per cent of formal intra-African trade flows, and to between 30 and 72 per cent of formal trade between neighbouring countries. Those figures are significant and have important implications for the value, composition and sophistication of intra-African trade, particularly between neighbouring countries. Within the context of efforts to implement the Agreement Establishing the African Continental Free Trade Area, ICBT data collection must be institutionalized in order to facilitate accurate tracking of intra-African trade flows.