Informal Cross-Border Trade in Africa: The Imperatives for Formalisation

Informal cross-border trade (ICBT) in Africa is a crucial yet often overlooked element of the continent's economy. This chapter examines the definitions, drivers, challenges, and opportunities of ICBT, highlighting its significance in regional trade and economic development. ICBT contributes between $10.4 billion and $24.9 billion annually and supports about 60 percent of the informal labour force. While ICBT offers affordable goods and empowers women and youth, it also presents challenges, including government revenue losses, unfair competition for formal businesses, and security risks associated with smuggling. To address these issues, a balanced approach is needed that acknowledges ICBT's role while focusing on its regulations. Key recommendations include simplifying tax regulations, investing in infrastructure, providing business training and financing, and promoting regional trade policy harmonisation. Implementing these strategies can help transform ICBT into a more structured and beneficial part of Africa's economic development.