ATWA Stage 2 Report. Part 3: Informal Trade Component - Burkina Faso, Côte d Ivoire, Ghana and Togo borderlands

Transcription

1 ATWA Stage 2 Report Part 3: Informal Trade Component - Burkina Faso, Côte d Ivoire, Ghana and Togo borderlands Danida/ Dutch Ministry of Foreign Affairs September 2016 Prepared by:

2 ATWA Stage 2 report: Part 3 Informal Trade i Acknowledgements This report was prepared by staff from the Bureau Issala, LARES, and Inter-réseaux with the ATWA Team.

3 ATWA Stage 2 report: Part 3 Informal Trade ii Contents List of Tables/Figures... iii List of Acronyms... v Executive Summary... vii 1. INTRODUCTION Localisation of cross-border studies Research limitations INFORMAL SECTOR AND TRADE IN WEST AFRICA: A SHORT LITERATURE REVIEW A look back at theory A definition of the informal sector: as continuum Primary rôle of the informal sector in the West African economy The determining factors of informal trade Characterizing informal cross-border trade: operators Characterizing informal cross-border trade: practices Women in the informal sector Impact on society DESCRIPTION AND ANALYSIS OF THE REGULATORY ENVIRONMENT AFFECTING INFORMAL TRADE Policies and regulations with an impact on trade Community regulatory environment WEST AFRICA: BETWEEN INTEGRATION AND SEGMENTATION Obvious complementarities Global access and regional integration Approach and methodology used to assess actual trade CILSS trade estimate The study approach CHARACTERIZATION, MODUS OPERANDI AND IMPACT OF INFORMAL TRADE ALONG THE CENTRAL CORRIDOR The blurred boundary between formal and informal trade Informal trade along the central corridor THE BURKINA FASO IVORY COAST BORDER AREA Markets overview Cross-border markets Wholesale and redistribution markets Goods and commodities traded Supply Areas of agricultural products and seasonal variations in Burkina Faso Rôles of the different operators... 22

4 ATWA Stage 2 report: Part 3 Informal Trade iii Marketing networks Overview of formal administrative procedures Overview and determining factors of informal trade Factors that help informal trade to become firmly embedded Main acts of infringement and payment schemes for border crossing Rôle of women in informal trade THE BURKINA FASO-TOGO-GHANA BORDER AREA Markets overview Goods and commodities traded Rôles of trade operators Marketing networks and trade patterns The impact of currency exchange rates on trade Informal trade practices and determining factors The many ways of practising informality Factors that help informality to become firmly embedded Payment scheme for informal border-crossing THE BURKINA FASO-GHANA BORDER AREA Markets overview Pô market (Burkina Faso) Bolgatanga and Navrongo markets (Ghana) Paga, Ghanaian border town Overview of trade Marketing networks Overview of formal administrative procedures Overview of informal trade and its determining factors Factors that help informal trade to become firmly embedded Payment scheme for informal cross-border trade in goods Rôle of women in informal trade RECOMMENDATIONS ON A SUPPORT PROGRAMME FOR INFORMAL CROSS- BORDER TRADE Summary of key findings Key recommendations Key principles and rationale for a support programme Objectives Approach, positioning and synergies with existing programmes Components... 59

5 ATWA Stage 2 report: Part 3 Informal Trade iv List of Tables/Figures Map 1 Map 2 Map 3 Table 1 Table 2 Table 3 Map 4 Map 5 Table 4 Table 5 Table 6 Table 7 Box 1 Box 2 Box 3 Burkina Faso-Ivory Coast border and border markets Burkina Faso-Togo border and border markets Burkina Faso-Ghana border and border markets Formal taxes and duties applied by Ghana on a batch of 20 head of cattle from Burkina Faso Trade flows in cereals and cowpeas along the Ouagadougou-Accra corridor Livestock trade flows along the Ouagadougou-Accra corridor Main commercial areas in West Africa Complementarity of livestock and grain trade between the Sahel zone and coastal countries Main agricultural or food products from Burkina Faso to the Ivorian local market and for export outside Africa Main agricultural and food products from Ivory Coast to the Burkinabé market or in transit Supply areas and season variations in trade Main flows of agricultural and food products between Burkina Faso and Ivory Coast Breakdown of costs for crossing the Burkina Faso/Ivory Coast border Focus on the Bobo-Dioulasso railway station, a significant channel for informal trade Conversation with M. Dembélé Foussini, President of the Grain Producers and Traders Association for Ouangolodougou (Association Benkéléman) about cashew smuggling Box 4 Evidence given by grain trader Mrs. Mariam SANOGO, trader since 2008 and registered with the Company Register (one of three women members of the Houët Association of Grain Traders) Table 8 Table 9 Box 5 Table 10 Table 11 Table 12 Table 13 Table 14 Box 6 Box 7 Imports by Burkina Faso from Togo and Ghana Burkina Faso s exports to Togo and Ghana Evidence from operators on trade patterns Road and transport costs in the informal sector Main goods and commodities exported from Burkina Faso to Ghana Goods and commodities exported from Ghana to Burkina Faso Main harvesting areas Marketing channels between Burkina Faso and Ghana Example of a minibus with a cargo of 123 boxes of tomatoes approximately 25 kg each Trading food crops between Pô and Navrongo markets

6 ATWA Stage 2 report: Part 3 Informal Trade v List of Acronyms AFD AfDB ASYCUDA ATP ATWA BSTR CACID CBC CCI CET CI CILSS COFENABVI COTECNA ECOWAS ENDA ETLS FAO FCFA GDP GHC HS IW (LVI) ICT IFU ILO ISRT (TRIE) NISD (INSID) NPPO NSSF (CNSS) OIE PGI PMD RSAL (LARES) French Development Agency African Development Bank Automated System of Customs Data Aid and Trade Provision Accelerating Trade in West Africa Consignment note African Centre for Trade, Integration and Development Burkina Faso Transporters Council Chamber of Commerce and Industry Common external tariff Ivory Coast Permanent Inter-State Committee for Drought Control in the Sahel [West African confederation of national cattle and meat federations] A Swiss-based inspection and certification company Economic Community of West African States Environment and development for the third world ECOWAS Trade Liberalisation Scheme United Nations Food and Agriculture Organisation Franc of the West African financial community Gross domestic product Ghanaian cedi Harmonised system of Customs nomenclature International waybill Information and communications technology Unique tax number International Labour Organisation Interstate road transport National Institute for Statistics and Demography National Plant Protection Office National Social Security Fund World Organisation for Animal Health Protected geographical indication Transport under bond Regional and Social Analysis Laboratory (Benin)

7 ATWA Stage 2 report: Part 3 Informal Trade vi SCD STIB SW SYLVIE TPR (RCCM) UG (MND) UNIFEM USAID WACPN (ROAC) UEMOA Single Customs Declaration Côte d Ivoire-Burkina Transport Company Supplementary work Online system for import and export operations Trade and Property Register (Ivory Coast) Undelivered goods United Nations Development Fund for Women United States Agency for International Development West African Cereal Producers Network West African Economic and Monetary Union

8 ATWA Stage 2 report: Part 3 Informal Trade vii EXECUTIVE SUMMARY This study is part of the wider Accelerating Trade in West Africa (ATWA) programme. It has three objectives: 1. To have a better understanding of informal trade and its impact on West Africa in general, and in particular on border areas linking together Burkina Faso, Ivory Coast, Ghana and Togo; 2. To analyze the regulatory (national and regional) environment that affects informal trade; 3. To suggest possible actions (national and regional) likely to provide the basic architecture for a programme in support of an easier flow of cross-border trade. A whole level of the economy remains a black hole. In particular, cross-border trade is based largely on informal companies and practices, both on historical and practical grounds, and linked to the complexity of formal procedures. The informal sector remains little known and little defined, and its role within trade is largely underestimated. The notion of informal trade though rather vague - embraces a set of trade practices that fall entirely or partially outside the scope of official data. Few programmes in support of easier trade flows take full account of informal trade, including the determining factors, specific aspects and constraints of trade. It nevertheless plays an important role in helping to diversify economies and in food security. What stock-taking exercise on informal trade is possible today? What are its main characteristics? What is its role within the social and economic space? How do public policies and international assistance programmes take account of it? What loss of earnings do national and sub-regional economies sustain as a result of their weak understanding of informal trade? How can the capacity of the informal sector be strengthened, especially that of women, so that cross-border business activities contribute both to enhanced integration of local economies, and to poverty reduction and better food security? These are some of the questions that this study, which is based on desk research with additional surveys of three border areas (Burkina Faso-Togo, Burkina Faso-Ghana, and Burkina Faso-Ivory Coast), seeks to answer, as part of the efforts to design a programme document in the next Stage of the ATWA project. Regulatory framework for cross border trade Although some progress has been made in West Africa, including the finalisation of the ECOWAS Trade Liberalisation Scheme (ETLS) and the coming into force of the Customs Union with effect from 1 January 2015, regulations governing cross-border trade remain unclear. The ETLS provides that: (i) there must be free movement of staple agricultural products and craft products (free of certificates of origin and customs duties); (ii) where originating products traded in the region have been substantially transformed there both the company and the product must be approved; (iii) export restrictions must be eliminated and (iv) sanitary and phytosanitary certificates must be granted mutual recognition. The ETLS is only partially implemented by Member States. Therefore, regulations on intraregional trade entail much uncertainty for trade operators, whether in the formal or the informal sectors. This is related to:

9 ATWA Stage 2 report: Part 3 Informal Trade viii Only partial harmonization of existing laws between ECOWAS countries (15 in total) and UEMOA Member States, all eight of which are also ECOWAS members. This is the case, for example, as regards the domestic value added required for a product to be granted originating product status (35% for ECOWAS, 30% for UEMOA). Procedures at the regional level do not supersede the domestic formalities which each country requires; Additional domestic laws that are not harmonized between countries, and are sometimes not recognized as between exporting and importing countries in border areas (phytosanitary certificates for example), added to incomplete ETLS implementation; The continuing observance of outdated legal texts. In particular, this is the case as regards measures that ban imports and exports of food crops, with users unaware of the administrative act that puts an end to the ban; Inadequate communication regarding policy changes, on the part of both operators and law enforcement authorities; Lack of simplified and harmonized Customs clearance procedures, something which enforcement officials (Customs, police, gendarmerie, and packaging certification authorities 1 ) and Customs declarants (whether approved or illegal) make the most of; Refusal by some cross-border authorities to recognize trade documentation issued by other countries: this happens with phytosanitary certificates and certificates of origin certifying regional origin; Lack of cooperation between services in border areas, including sanitary, veterinary and phytosanitary services on the one hand, and Customs on the other; Collection of unlawful duties and taxes outside the import taxation code, which is implemented as part of the framework of the Trade Liberalisation Scheme and the Customs Union. Impact on operators As a result, operators find it very difficult to know exactly what formalities are required in order to export or import a product in full compliance with the law (access to information is problematic; rapid regulatory changes, etc.). However, formal and informal barriers to trade (so called harassment ) are only the tip of the iceberg: Under cover of a jungle of procedures, states adopt protectionist strategies, which they justify sometimes by the need to protect consumers (disease control, the fight against smuggling of goods and arms trafficking, food security/sovereignty, etc). These, however, also reflect development policies designed and devised within national boundaries, both for industrial goods and for agriculture; Barriers are fashioned as to the timing and level of their impact according to the type of product and the export/importer s relationship with the authorities, as well as to the social relevance of importers/exporters, including how extensive their relationships with the authorities are at all levels; They allow for an extremely well-structured, well-organized and very profitable corruption business. A political economy analysis is essential in order to improve understanding and formulate new and relevant policy proposals. State protectionism goes hand in hand with operator protectionism : new operators find it very difficult to get a foothold in the market, and the existing jungle of formalities as well as harassment on the road further reduce competition. The big operators play a kind of double game: they officially object to trade barriers, but at the same time actively collude with them. 1 Responsible for verifying sanitary and phytosanitary certificates as well as compliance with quality standards

10 ATWA Stage 2 report: Part 3 Informal Trade ix Informal trade is the result, on one hand, of operator and company practices that go unrecorded for various reasons (these have nothing to do with their cross-border business activity) and, on the other, of commercial practices in breach of existing regulations. Informal operation ensures that the jungle of procedures may be circumvented, border crossing simplified and waiting times highly detrimental to perishables and, generally, very costly - reduced. It is not a matter of two sides, with operators from the informal trade sector on one side and those from the formal trade sector on the other. Operators in both sectors operate through channels that overlap one another. A particular marketing network may involve actors operating in both formal and informal networks, whether as regards trade practices or the nature of companies engaged in production, storage, transport and distribution of the same product. At this level, fraud and active or passive smuggling of goods can feed into the same distribution networks. Typologies of actors and flows Different categories of regional trade flows/operators may be identified according to the following typology: Long-distance and large volume flows. These essentially involve formal and structured operators in possession of at least full or partial export/import documentation (including registration with the Companies Registers, membership of trade bodies). There are many reasons (saving time, maximizing profits, abuse of a dominant position, etc.) for which they may want to circumvent regulations and adopt informal practices. Micro cross-border trade flows and market organisation on both sides of the border. This most active and most diverse part of the informal sector revolves around extremely diversified transactions (staple agricultural products, but not only those). This includes circumvention of borders, breaking down consignments into small quantities for frontier crossing and then reloading them after border posts, and crossing border posts at night. In fact, sometimes it is not clear whether a transaction is informal or not, where countries are exempt from Customs duties and other taxes. One of the reasons for bypassing borders may be the desire to minimize the payment of illegal duties to border staff. The flows of manufactured goods depend on several dynamics such as: o Originating products being obliged to demonstrate proof of origin by means of a certificate issued by a National Approval Committee. The scale of trade flows of manufactured products with originating status traded in the region remains unknown. A number of countries such as Ivory Coast and Ghana have manufacturing industries, but not all their products benefit from regional level standardization. In this context, a number of products, including vegetable oils and fruit juices manufactured by small production units yet to be approved under the Liberalisation Scheme, circulate on an informal basis across the region. o Non-originating imported goods. These either cross the border without undergoing Customs clearance (to be done in the country of destination) or they are subject to clearance upon entry to the importing country and continue in transit as re-exports. The most important frauds which feed into informal trade flows occur in the case of these particular transactions. Even worse than re-exports, which may involve significant volumes, smuggling of counterfeit products tends to increase. This type of goods trafficking feeds

11 ATWA Stage 2 report: Part 3 Informal Trade x into distribution networks among coastal and transborder countries, taking full advantage of the import facilities provided by ports. Most small volume cross-border trade flows are made up of locally-produced goods and rely on small informal operators, particularly women, in certain border areas (e.g. between Burkina Faso, Togo and Ghana). They are unrecorded and avoid basic border formalities, either by bypassing border posts or through the collusive behaviour of border staff. Border crossing usually involves the payment of a flat fee. The following table summarises data collected as part of field surveys conducted in three border areas between Burkina Faso, Togo, Ghana and Ivory Coast.

12 ATWA Stage 2 report: Part 3 Informal Trade xi Burkina Faso Ivory Coast Burkina Faso - Ghana Burkina Faso Togo Main site characteristics Trade between Burkina and Ivory Coast is centred around two main transport links: The road link from Abidjan through Bouaké, Ferkessédougou and Ouangolodougou in Ivory Coast, and the towns of Niangoloko, Banfora, Bobo Dioulasso and Ouagadougou on the Burkina side up as far as Kantchari (border town between Burkina and Niger) The railway link between Abidjan (Ivory Coast) and Ouagadougou (Burkina Faso) The border region between Burkina Faso/Ghana lies between the Sahel zone and coastal land. Tema is one of the four ports used by Burkina Faso for commodity supply purposes. The Ouagadougou-Accra-Tema transport link is one of Africa s best known road corridors. Trade between these two nations has increased very significantly over the last few years, as a consequence of the Ivorian crisis. In 2013, Burkina Faso was Togo s main trade partner in West Africa with 16.7% of trade value in 2012 and 19% in At least for the past ten years, Togo has ranked as Burkina Faso s second import country in West Africa with XOF 70.7 billion (about 4%) in Goods and commodities traded Millet, corn, sesame, cashew nuts, shea nuts, tomatoes, cabbage, mangos, onions; Sheep, cattle, goats, poultry, beef horn; cotton balls, cottonseed cakes, fruit juices, unprocessed wheat (origin Canada, France), coconut, kola nuts, imported rice (origin Asia); Avocado, bananas, plantains and dessert, lemons, palm seeds; Fertilizers, veterinary medicines, pesticides, seeds; Biscuits, instant coffee, concentrated tomato paste, canned meat or fish (sardines, corned beef, sausage), seasoning cube, wheat flour, oil, condensed milk and milk powder, margarine, mayonnaise, pasta, salt, sugar, eggs, fish packed in ice, poultry, Attiéké, Gari, Cassava, Placali Goods exported from Burkina Faso to Ghana are mainly vegetables (tomatoes, onions and carrots), grain and oilseed products (maize, sorghum, groundnuts), and live animals (sheep, cattle...). Goods shipped out of Ghana to Burkina Faso are mainly soybeans, household appliances, fertilizers, plastic packaging, juices, etc. Yams (throughout the year with a drop during the hot season) and derived products (flour, chips), cassava and derived products (flour, chips, tapioca, gari); avocados (March to July), oranges (January to March), tomatoes (February), soya (October to June), locust bean seed (October to June), white corn (December to March), locally made soap "kabakrou", sweets, sugar, oil, pasta, concentrated tomato paste, soft drinks, biscuits, confectionary, condensed milk, paddy rice (rice leaves) and imported wheat flour, washing powder, caustic soda, Gari, cassava flour, soybean, corn, mangoes (Cinkassé), bissap, locust bean seeds, carrots, mangoes (Garango, Tenkodogo and Kaya) bananas, watermelons, tomatoes (Kaya, Bittou, Oumnonga), cabbage (laylay), onions 2http://

13 ATWA Stage 2 report: Part 3 Informal Trade xii Burkina Faso Ivory Coast Burkina Faso - Ghana Burkina Faso Togo (Niger origin), beans (Poutyenga, Bittou, Tenkodogo and Kaya ), groundnuts (Pouytenga), red Sorghum (Bittou, Tenkodogo and Kaya), bissap (hibiscus Kaya), tamarind. Product origin Production areas in Burkina Faso and Ivory Coast, international markets The purchase areas in the country vary according to price and supply volume; In good years, harvesting is done on site and, as far as possible, in non-remote areas; in bad years, it is done in traditionally high yield areas. Production areas in Burkina Faso and Togo, international markets Product destination Consumer areas in Burkina Faso and Ivory Coast, international markets Consumer areas in Burkina Faso and Ghana Consumer areas in Burkina Faso and Togo, international markets Challenges faced Lack of information on border procedures Onerous and time-consuming border formalities "Incidental expenses" incurred at border posts Introduction at border level of measures aimed at protecting the domestic market Defective road network and dilapidated delivery trucks Harassment linked to customs controls and Ghanaian- legal provisions deemed too complex and cumbersome by operators Burdensome and time-consuming border formalities "Incidental expenses" incurred at border posts Introduction of measures aimed at protecting the domestic market at border level Harassment both at border posts and along the whole corridor Complex border formalities "Incidental expenses" incurred at border entry points Low literacy levels and lack of information among traders and transporters further complicate administrative procedures for crossborder trade Due to lack of information, many traders are unaware of what needs to be done to have merchant status and operate legally. Trader Associations An Association of Grain Traders regulates trade for business operators in Bobo Dioulasso. The Association of Niangoloko Presence of a Manufacturers Association in Bittou

14 ATWA Stage 2 report: Part 3 Informal Trade xiii on the ground Burkina Faso Ivory Coast Burkina Faso - Ghana Burkina Faso Togo Grain Traders is also well connected to Ougolodougou market. Role of women Women s place in cross-border trade along this corridor seems quite limited. Women are more active in the trade of cash crops between Bobo Dioulasso / Banfora and border markets. Women interviewed at Ouangolodougou market said they barely travel at all and arrange for their goods to be transported by other women (usually relatives) via buses. Women are very active in trade along this corridor, both as traders and/or as labour. Food and agricultural products are sold by women. There is no trade organization specifically for women. The trade organization described above is implemented by women on the same basis. They usually have key women customers in Ghana markets, usually from large urban centers, who buy their supplies from them. At trader level in Burkina Faso women do not play a big role in the purchase of grains, focusing instead on wholesale markets. Tomato and mango traders are, however, mostly women. Women represent more than half of all traders in Pouytenga. However, our evidence shows that most women trade small amounts, in view of their small stocks. It seems that they resell part of their stocks purchased from producers to wholesale traders, who themselves have larger trade capacity.

15 ATWA Stage 2 report: Part 3 Informal Trade xiv Macro and micro impacts The impact of these practices is multi-faceted and wide ranging: Countries do not capture reliably the flows of goods between them. Therefore, they underestimate the importance of regional trade for the economy, job-creation, incomes, the economic integration of women, territorial planning, etc. Operators are confronted with burdensome procedures and remoteness from administrative centres, thus facing increased uncertainty in their day-to-day business. As a result of all this, together with traditional practices (informal companies and trade) and low literacy levels, operators opt for bribery. These multiple obstacles to the free movement of goods come with a cost, which is ultimately borne by end consumers and has an impact on how competitive regional manufacturing sectors and marketing networks are. In a context of profound changes in demand and weak regional market protection against imports from abroad, barriers encourage the influx of imported goods to the detriment of the regional economic growth based on production sectors. Likewise, these obstacles handicap the optimal exploitation of manufacturing complementarities between countries. In other words, border controls end up hindering production and increasing product costs without any trade-off in terms of more secure transactions and consumer and animal protection. Even worse, the regulations and practices that lead to evasion of border checks undermine the objective of making trade more secure, which is a core objective of Customs and police services. The consequences are a lack of human and animal health security and a lack of effective and efficient controls to deter possible trafficking of illegal goods (weapons, drugs, etc.). This is fundamental for the region because border controls appear ultimately as trade barriers, while states and trade operators see trade as an engine of growth and development. Barriers have none of the expected trade-offs in terms of making transactions more secure, in particular as regards health and combating trafficking. They do not allow for credible trade data and statistics either. What they do is make business more difficult for operators, increase costs for consumers and reduce West African competitiveness, without providing the services which are the ultimate purpose of border controls (and more broadly, corridor controls). Implications for ATWA Programming: outline for an Informal/ small scale trade component Although full trade liberalisation seems unlikely ever to become a reality, the failure of current approaches in terms of intracommunity trade controls must provide an incentive to consider new alternatives. Technological progress and streamlined procedures in the area of transit flow tracking from ports to clearance points in the destination country are helping to distinguish better the challenges arising in intracommunity trade from those more specifically related to goods in transit. As regards local products, whether they are basic or processed goods, other alternatives for more secure trade are worth exploring: spot checks by Customs, on-site product controls, simplification and complete standardisation of crossborder procedures, a single approach to animal health and veterinary procedures across the same region (the health status of the member countries being currently equivalent). This debate and the different alternatives under consideration are part of a wider technical and political undertaking, which should be led by the ECOWAS and UEMOA Commissions with the support of an enlarged pool of international partners, including specialized organisations such as the FAO and the World Organisation for Animal Health (OIE).

16 ATWA Stage 2 report: Part 3 Informal Trade xv The mapping of different initiatives demonstrates renewed interest on the part of regional institutions and stakeholders as well as the international community in promoting and liberalizing intra-regional trade. It is also evidence of numerous, and to a degree overlapping, initiatives, not all of which are led by regional institutions or stakeholders. Institutions pursuing regional integration are unable as of today to ensure efficient coordination of their market interventions. Although all initiatives share the same objective, their methodologies, priorities and approaches are diverse and are in need of harmonization. The broad orientation for an overarching programme in support of better trade flows result from the analysis of data collected and completed by additional desk-based research. They take into account existing initiatives and guidelines from the Department for Trade, Customs, Industry and Free Movement of Persons of the ECOWAS Commission. The overall objective is to promote regional trade as an engine for economic growth and poverty reduction through greater security of secure trade flows and operators, mainly from the informal sector. This overall objective breaks down into four specific sub-goals: 1. Better understand informal cross-border trade in local products, in particular processed and unprocessed agricultural commodities; 2. Contribute to improve, streamline and harmonize regulatory frameworks and businessand intracommunity trade-related formalities with a view to eliminating all tariff and non-tariff barriers; 3. Promote support services to informal operators in order to reduce their vulnerability and to enable them to play a growing and increasingly recognized role in regional integration, and maximize benefits in terms of job-creation and incomes 4. Contribute to the development of informal operators engaged in transnational value chains and make them more professional, in particular women, in order to increase value added, comply with standards and better respond to changing consumer demand, and contribute to networking of informal operators and strengthening their advocacy capacity. These specific goals are implemented through four components: a. Component 1: Develop a better understanding of informal cross-border trade in agricultural products; b. Component 2: Clarification, simplification, harmonization and transparency of regulatory frameworks; c. Component 3: Promote support services to informal trade operators; d. Component 4: Build up transnational value chains and make them more professional and support advocacy capacity building and networking of informal actors. The project might combine a crosscutting and complementary approach on three levels (national, cross-border and regional support), with an approach targeted on the public sector and the informal private sector.

17 ATWA Stage 2 report: Part 3 Informal Trade 1 1. INTRODUCTION The Economic Community of West African States (ECOWAS) is making progress towards regional integration and the creation of a common market. As from 1 st January 2015, the 15 ECOWAS members (including the 8 UEMOA Member States) have established a Customs Union, including a Common External Tariff (CET). Since 1993 ECOWAS has been implementing the Trade Liberalization Scheme (TLS), which was supposed to lead to the free movement of persons and goods within the community area after In a heavily segmented region - geographically, monetarily, economically, demographically, etc. - the aim of a single internal market is to open up national markets, better connect supply with demand and stimulate economic growth for the purpose of poverty reduction. However, many trade barriers remain, despite commitments made both at Heads of State and Government Summits, and by national institutions. Indeed there is a broad consensus that economic and commercial integration will be an engine for growth and prosperity for West Africa countries in the long term, but obstacles to integration make themselves felt on a daily basis. In addition, a whole level of the economy remains a black hole. In particular, cross-border trade is based largely on informal companies and practices, both on historical and practical grounds, and linked to the complexity of formal procedures. The informal sector remains little known and little defined, and its role within trade is largely underestimated. The notion of informal trade though rather vague - embraces a set of trade practices that fall entirely or partially outside the scope of official data. Few programmes in support of easier trade flows take full account of informal trade, including the determining factors, specific aspects and constraints of trade. It nevertheless plays an important role in helping to diversify economies and in food security. What stock-taking exercise on informal trade is possible today? What are its main characteristics? What is its role within the social and economic space? How do public policies and international assistance programmes take account of it? What loss of earnings do national and sub-regional economies sustain as a result of their weak understanding of informal trade? How can the capacity of the informal sector be strengthened, especially that of women, so that cross-border business activities contribute both to enhanced integration of local economies, and to poverty reduction and better food security? These are some of the questions that this study, which is based on desk research with additional surveys of three border areas (Burkina Faso-Togo, Burkina Faso-Ghana, and Burkina Faso-Ivory Coast), seeks to answer, as part of the ATWA initiative. 1.1 Localisation of cross-border studies The study focused on three border areas, each one being the focus of a more detailed section: Section 6 looks at the Burkina Faso - Ivory Coast border, where trade is centred around two markets: Niangoloko market in Burkina Faso (near Banfora and Bobo Dioulasso) and Ouangolodougou market in Ivory Coast, near Korhogo. What makes this border unique is the complex and long-standing ties between the two countries, and very large migrations of Sahel populations towards Ivory Coast.

18 ATWA Stage 2 report: Part 3 Informal Trade 2 Map 1: Burkina Faso Ivory Coast border and border markets The Burkina Faso-Togo border, where trade is centred around Bittou, Bawku and Cinkassé markets located on the border, as well as the big Burkina Faso market of Pouytenga. See Section 7 for further details about this border area.

19 ATWA Stage 2 report: Part 3 Informal Trade 3 Map 2: Burkina Faso Togo border and border markets The Burkina Faso Ghana border is described in Section 8. Trade is centred around the markets of Pô (Burkina Faso), Bolgatanga and Navrongo (Ghana). What makes this border unique is the language and currency differences between Ghana and Burkina Faso.

20 ATWA Stage 2 report: Part 3 Informal Trade 4 Map 3: Burkina Faso Ghana border and border markets 1.2 Research limitations To research informal trade on the one hand, and formal procedures that are implemented in disregard of community regulations on the other, together with trade practices in breach of regulations, is a particularly complex task. The limited time allowed for field surveys, the disinclination to transparency of both formal and informal trade operators, and the rigid compartmentalisation of information between the relevant administrative services have all greatly limited our evidence-gathering capacity, especially as regards quantity. However,

21 ATWA Stage 2 report: Part 3 Informal Trade 5 border surveys have helped to capture the extreme diversity of products traded and the mix of practices, often combining formal and informal aspects. As a result, data held by statistical services are poor and fail to capture the magnitude of cross-border trade. Because of the range of practices that may be deemed corrupt, both private operators and public officials are extremely reluctant to communicate. However, the goal of this study was not to provide a detailed diagnosis of how trade and trade operators operate in the border areas highlighted, but to lay the foundations for an analysis which would help to identify the relevant priorities for a support programme designed to facilitate trade flows and, in particular, to make informal trade more secure. 2. INFORMAL SECTOR AND TRADE IN WEST AFRICA: A SHORT LITERATURE REVIEW 2.1 A look back at theory A definition of the informal sector: as continuum Since its first definition by the International Labour Organization (ILO) in the 1970s, the concept of the informal sector has undergone seismic change. Whereas the ILO defines informal companies according to size and the lack of official registration, studies usually focus on specific sub-sectors, thus suggesting that informal trade is a matter only of small businesses run on a personal basis (ILO, 1993, 2002). The informal sector is multi-faceted. The Agence Francaise de Développement (AFD), on the contrary, argues that the informal agricultural sector is actually a structured network covering very large farms and including seemingly small isolated farms (AFD, 2012). Again according to AFD, the informal sector is a continuum across which a great number of formal companies can be found that often engage in some informal practices. AFD uses six criteria to define the whole sector, from the most informal companies (not fulfilling any criteria) at one end of the spectrum, to businesses engaged fully in the formal sector at the other end (these are rare, even one-offs, according to the AFD study): Size of the business Registration with the Register of Companies Trustworthiness of accounts Fixed workplace Access to credit Tax status of the company An encompassing definition. According to the AfDB (2007), "First, the informal sector covers all economic activities that take place on the margins of the criminal law and of social and tax legislations, or that national accounts fail to catch; Second, the informal sector is a set of activities that are outside the realm of economic and social policies, and, therefore, outside state regulation". In any case, both definitions make a similar point because they emphasize the idea of fraud or circumvention of state regulations. In general, it can be said that the informal sector refers to any economic activity that takes place outside state regulation. This definition is shared with ENDA (2010), which says that informal trade covers "trade flows that evade controls and for which there is, ultimately, no record."

22 ATWA Stage 2 report: Part 3 Informal Trade Primary rôle of the informal sector in the West African economy According to the AfDB, 2007: "The informal sector is estimated to occupy 61% of the active urban population in Africa, which is why it is an important dimension of the national economy, because it is a source of income, as well as of jobs and social stability ". According to AFD estimates - using National Accounts data the informal sector accounts for a large share of GDP and 90% or more of all jobs. In reality, formal employment in the private sector is a rare phenomenon and relevant to between 1 and 5% of the working population." Although the accuracy of data may be questionable, these figures reflect the scale of the problem. "Official statistics for West African countries indicate that up to 60% of their GDP is accounted for by informal activities. In Benin and Senegal, respectively more than 85% and 79% of heads of households carry out activities defined as informal, mostly on their own account or for the household. This proportion is as high as 91% in Burkina Faso. On the other hand, the informal sector contributes less than 3% of tax revenues in the three countries studied."(afd, 2012). Wholesale and retail trade is the most important sector of the informal economy, followed by transport and construction. Trade is two-dimensional, with a domestic as well as a crossborder dimension. The latter is the focus of this study. 2.3 The determining factors of informal trade Social and cultural background. According to ENDA, 2010, The existence on both sides of the dividing lines of populations with cultural and linguistic affinities is a strong stimulus to cross-border trade. It facilitates the pursuit of old relationships that bring populations together. " The same line of argument is pursued in the AFD study (2012), using the example of the Mouride and Yoruba peoples. The Mouride and Yoruba dominate trade respectively in Togo and Nigeria. They rely on specific social networks deriving from groups whose existence sometimes goes back several centuries. These groups have adapted the way they operate first to colonization and then to post-colonization. They deploy complex negotiating strategies, with strong community bonds and strong hierarchies. Furthermore, loyalty to traditional leaders who provide the framework for these networks is greater than loyalty to the authorities. A "deficient" institutional environment. According to AFD (2012), several factors contribute to the development of the informal sector, including: (i) "it is deficiencies in the business environment which largely determine the pervasiveness of the informal sector in West Africa; (ii) the prevalence of corruption." The AfDB (2007) makes a similar case: an overly onerous business environment forces companies and micro-enterprises to move into the informal economy. Further to this, ENDA (2010) mentions that Customs can particularly take advantage of information asymmetry to collect informal taxes, and at the same time encourage operators to adopt informal practices. Case studies (see section 6) confirm the importance of these two determining factors - on the one hand, the social and cultural background, the religious dimension and networks; on the other hand the regulatory environment - to explain the growth of the informal sector in cross-border trade. They also show that the use of informal practices goes beyond the network of informal operators alone, and that they account also for a sometimes substantial part of formal sector activities.

23 ATWA Stage 2 report: Part 3 Informal Trade 7 Many regional fragmentations (monetary, and commercial and tax policies). These fragmentations are manifested in the persistence of many other non-tariff barriers to formal trade that provide a fertile breeding-ground for unrecorded trade transactions (ENDA, 2010). Up to now, it is monetary and trade disparities between the UEMOA region on the one hand, and non-uemoa countries on the other, which have given rise to the most concentrated and most dynamic cross-border trade areas. A case in point is the Eastern area centred on Nigeria: apart from the fact that complex oil-based trade is boosted by Nigeria s domestic subsidy policies, neighbouring countries import from global markets and re-export all products that are banned or heavily taxed by Nigeria. The same phenomenon occurs in the Senegambia area and around Ghana, although to a much lesser extent due to the difference between import taxation levels being smaller. 2.4 Characterizing informal cross-border trade: operators The various business operators. Considering that informal trade and practices affect almost all players, a "spectrum of informality" may be established: Micro-entreprises: they operate wholly informally; Registered businesses and traders who however lack UEMOA or ECOWAS approval and make artificially low declarations; Businesses that are registered/approved: larger and more capital-intensive, they trade significant volumes but are sometimes also engaged in informality. According to interviews with various administrations conducted during the previous study: 85 % of cross-border flows are carried out by approved businesses; The remaining 15% by unregistered businesses and micro-enterprises. A whole range of operators and officials are involved in informal trade: State officials (Customs, Police, Gendarmerie); Transporters/loaders; Freight forwarders/licensed customs brokers ; Local authorities (transit/parking fees). 2.5 Characterizing informal cross-border trade: practices According to Delorme and Soule (2007), informal practices take many forms and potentially affect the whole spectrum of business operators. To study informal trade only through the lens of strictly informal trade operators would be wrong; an analysis of informal trade must cover instead: Active customs fraud, resulting from the activities of companies that are usually registered (or approved) but who, however, evade the law and use informal clearance practices, such as (i) under-valued declarations (ii) false declarations (clearing products declared in a fraudulent category), (iii) artificially reduced levies, i.e. applying a lower rate than officially established. Active fraud also includes smuggling, which involves bypassing customs clearance or registration posts (phytosanitary offices for example). Passive fraud, which covers the decentralized flows ( flux capillaires ) of goods and commodities linked to cross-border areas where border residents circulate. 2.6 Women in the informal sector It is widely acknowledged that women play a major rôle in informal trade. Although this has not been evaluated, evidence from several studies (UNIFEM, 2008; LARES, 2010) shows

24 ATWA Stage 2 report: Part 3 Informal Trade 8 that they are active in both retail and wholesale trade as well as in extra-community trade. They face a number of constraints: access to credit, including bank credit, and illiteracy (a trait which they share, however, with many informal trade operators). This study also highlights the particular vulnerability of women to harassment. However the fact that informal trade is, by definition, poorly understood by public authorities implies a serious lack of awareness in relation to the specific constraints faced by women. But it should also be noted that the advent of mobile phones has revolutionized the way in which informal trade operates. It has allowed women to distance themselves from dangerous situations because they can outsource more easily to freight forwarders, traders, transporters, and increasingly carry out some of their business remotely. 2.7 Impact on society Profitable or just to keep you going? This is a point addressed by several theories. On the one hand, "some authors consider the informal sector as a kind of safety valve for employment by providing a low level of income to economic agents faced with survival strategies, while others argue that the informal sector can be quite lucrative." So it is not just an issue of finding a survival/last resort solution, but also a lucrative activity and a business development strategy. Some authors think that informal trade has a negative impact on society, in particular because it implies a loss of control by the State in trade matters, a lack of transparency about the quality of the goods traded, and is a potential danger to public health or an obstacle to regional integration. Others believe that informal trade "undoubtedly contributes to solving a number of problems that existing economic regimes are unable to solve." (Soule, in CACID, 2010). Thus, informal trade would foster regional integration: (i) "It is a way to pursue trade relations and thus strengthen solidarity between populations who are divided by political boundaries"; (ii) "it allows economic operators to fit into a market dominated by monopolies"; (iii) "high illiteracy rates, training inadequate to the real needs of the labour market, and a predominantly lowskilled labour force all contribute to large segments of the population being marginalized. These find a safe haven in the informal sector, which, one way or another, eventually becomes a vital part of domestic economies. " According to ENDA (2010), it would also contribute to social cohesion and social peace as well as being a factor in local organization. This debate is now somewhat pointless! Despite every attempt by states to get informal actors more into the formal sector, they continue to be an important factor in activity and to represent a big share of transactions. It is therefore appropriate to consider whether there is a public interest case to be made for states and informal actors to move towards ways of formalising the activities of the sector, and therefore, to think in terms of incentives: extremely simplified declaration procedures, formal taxation offering more incentives than informal taxation, etc. Appropriate action should therefore be two-fold: to address the regulatory, procedural and fiscal environment on one hand, and on the other hand to develop advisory support, training and information services for informal operators.

25 ATWA Stage 2 report: Part 3 Informal Trade 9 3. DESCRIPTION AND ANALYSIS OF THE REGULATORY ENVIRONMENT AFFECTING INFORMAL TRADE This section deals with the regulatory environment for trade. This framework is mainly based on (i) ETLS provisions covering the ECOWAS region, (ii) UEMOA regulations applicable to its eight Member States, and finally (iii) national policies and regulations. 3.1 Policies and regulations with an impact on trade To carry out a comprehensive multi-country diagnosis of policies and measures affecting regional trade in goods is very difficult. Sections 6, 7 and 8 are devoted to a comprehensive take-stocking of customs border procedures for the four countries concerned, but it must be noted that these procedures remain unclear for most trade actors interviewed. Trade policies are clearly policies that have a direct impact on intra-regional trade, both as tariff policies applied by States to trading with the global market (whether pursuant to or in breach of community regulations) and as policies applied to intra-community trade across a wide range of goods (goods in transit, originating products, basic products, re-exports). However, many other policies have an impact on trade, including, but not limited to: Fiscal policies, if they discriminate between domestic products and imports from neighbouring countries (see taxation measures on livestock imports by Ghana); Industrial policies, if supplies are secured through an export ban of raw materials (eg. Ivory Coast with cashew nuts); Agricultural policies, in particular incentives (national subsidies) for using certain inputs, with the result that illegal exports flow into non-subsidized neighbouring countries (eg. fertilizer subsidies for cotton farms in Mali and Burkina Faso in the 1990s - early 2000s, still the case between Ghana and Burkina Faso); Infrastructure investment policies (roads and railways) and transport (road traffic regulations); Monetary policies, in particular along border areas between CFA Zone members and non-member countries. Table 1 : Formal taxes and duties applied by Ghana on a batch of 20 head of cattle from Burkina Faso 3 Import'taxes'' Amount'(Cedi)' Import'Duty' 0' Import'VAT' 0' Import'Special'Tax' 0' Import'Excise'Duty' 0' Processing'Fee'' 37' Export'Dev.'Levy'' 19' Network'Charge'' 13' NET'Charge'VAT'' 2' Ghana'Shippers'Council'SNF'Fee'' 5' NET'Charge'NHIL'' 0.33' IRS'Tax'Deposit'' 37' Moti'EQIDF'fee' 5' Special'Import'Levy'' 74' Total'customs'duties' ' Veterinary'Movement'Permit' 40' Inspection'Certificate' 10' Metropolitan'assembly' 10' Total'taxes' ' CIF'value'of'the'load'' 3,696' Proportion'of'taxes'on'the'value'of'the'load'(%)' 7%' ' 3 (Source: VSD, Ashaiman livestock market)

26 ATWA Stage 2 report: Part 3 Informal Trade 10 The seemingly straightforward question: "What are the formalities and laws that an exporter or importer must comply with?" is extremely difficult to answer as would appear from survey results and data comparison (See section 5) Community regulatory environment Intra-Community trade regulations ECOWAS regulation of intra-community trade is mainly implemented through the ETLS. The ECOWAS Revised Treaty provides for the gradual establishment of a Common Market among Member States through (i) liberalization of trade, (ii) adoption of a Common External Tariff, and (iii) the removal, between Member States, of obstacles to the free movement of persons, goods, services and capital and to the right of residence and establishment (see Chapter VIII of the revised Treaty: Cooperation in Trade, Customs, Taxation, Statistics, Money and Payment ). The ETLS was introduced in 1979 and at the time only covered agricultural products and artisanal handicraft products. It was extended to cover industrial goods in 1990, when the ECOWAS definition of "originating products" was also provided. Rules of Origin were defined in ETLS protocols and regulations, including Protocol A / P1 / 1/03 dated 31 st January 2003 and Regulations C / REG.3 / 4/02, C / REG.4 / 4/02, and C / REG.5 / 4/02 dated 23 rd April The Trade Liberalization Scheme was due to be in full operation by 2003 and should have helped to achieve four objectives: (i) to promote the development of entrepreneurship in the region, (ii) to increase intra-regional trade and boost economic activity, (iii) to improve the competitiveness of West Africa on global markets, and (iv) to increase the gross domestic product of Member States and thus improve the welfare of their citizens. According to the ECOWAS Commission: At the completion point of the Trade Liberalization Scheme (2003), ETLS has been slow in achieving the big outcomes expected. Even though the region has indeed experienced a windfall over the last ten years with sustained economic growth of around 5% per year, it is, however, a non-inclusive growth, as shown by high rates of unemployment, poverty, etc. The two immediate outcomes expected: (i) increased value and volume of intra-regional trade, and (ii) improved external competitiveness of the region on global markets, are far from being achieved. Despite many reform initiatives, the movement of goods still faces many hurdles. 4 Under the same regulations, only agricultural and livestock products as well as hand-made articles or articles manufactured without the use of tools, instruments, or implements directly operated by the manufacturer (ie. artisanal handicrafts) are exempted from the requirement to obtain a certificate proving Community origin. To obtain a Certificate of Origin, both the company 5 and the product 6 must be approved. To this effect, companies wishing to export what is considered an originating product must submit an application to their National Approval Committee, which will review the application against a set of agreed criteria ( wholly obtained products or products that have undergone sufficient working or processing 7 ), approve the products if relevant and send the list of relevant approved 4 Quote from the Action Plan for Free Movement of Goods. Regional Civil Society Forum on the Free Movement of Persons and Goods across the ECOWAS region. August Company registration number 6 Product approval number 7 Usually goods which are not wholly produced, for the production of which the use of such materials is required as have received a value added of at least 30% of the ex-factory price of the finished goods, or goods which have undergone a change of tariff heading at four-digit level of the Customs Nomenclature (HS).

27 ATWA Stage 2 report: Part 3 Informal Trade 11 products and applications to the ECOWAS Commission. The latter circulates the list of approved products and supporting documentation to Member States. ECOWAS and UEMOA have harmonized their approval procedures, except for company registration numbers and product approval numbers. However, there are two approval systems. A company and a product having received approval under ETLS/ECOWAS have freedom of movement in all 15 Member States across the ECOWAS region. By contrast, a product approved under the UEMOA Preferential Community Tax is not entitled to be exported to a non-uemoa country. Exports Under the Treaty, exports within the Community of basic products and handicrafts are free of duty and there is no requirement to obtain and produce a Certificate of Origin. However, exporters are required to comply with international regulations on trade: all goods must be accompanied by supporting evidence (invoice, cargo certificate, health certificate if relevant, etc.). Exports by originating product industries (processed products that may contain imported inputs) require prior approval of the company and of the product on the basis of an application that demonstrates originating status (see above). This approval is not linked to a particular export and, if issued under ETLS, allows the company to export any product across the ECOWAS region. Import and export restrictions are regulated by the revised ECOWAS Treaty (Article 41). They are limited to: arms, ammunition and other military equipment; gold, silver and precious and semi-precious stones; and items of artistic and cultural property. They can also be applied, as is often the case, for the protection of human or animal health. Imports The same also applies to imports. Again under the revised Treaty (Article 40), Member States may not apply a tariff which discriminates between domestic products and imports. However, these Community provisions do not rule out various taxes and levies at national level, provided they do not discriminate. An exception is made for competing products from a third country manufactured under conditions that distort competition (as may be the case with production subsidies). 4. WEST AFRICA: BETWEEN INTEGRATION AND SEGMENTATION 4.1 Obvious complementarities Regional trade is fundamentally based on the complementarity between supply and demand. This is well documented in the agricultural and livestock sectors. However, more generally it can be said that: Agricultural and climate diversity fosters natural specialisations and comparative advantages: agricultural and pastoral farming in the Sahel Zone, dry cereals (millet, sorghum); corn and rice, tropical products, cassava, etc. in coastal countries; However, this complementarity is weakened in border areas (Southern areas of Sahel countries and Northern areas of coastal countries) where competition occurs: livestock, corn, fruits and vegetables, etc. are raised and cultivated in each country, with each seeking to achieve self-sufficiency at the national level, as part of its agricultural policy;

28 ATWA Stage 2 report: Part 3 Informal Trade 12 Most countries use various systems (irrigation, lowlands, rainwater collection) to become rice producers, seeking to achieve self-sufficiency, or even to establish themselves as export countries, despite their current negative balance of trade; In the area of industrial goods, four countries have developed import substitution or food processing industries (Nigeria, Ghana, Ivory Coast and, to a lesser extent, Senegal). Their goal is, first and foremost, to satisfy domestic demand, and secondarily to export within the subregion, if not on external markets. In general it can be said that there is a significant potential for trade development on the basis of industrial complementarity, but economic development strategies designed within narrow national frameworks hinder the realisation of such potential. Besides, strong disparities between agricultural support policies (input subsidies) as well as inflation risks associated with a rise in grain exports to a neighbouring country hit by a severe food crisis may lead governments to impose formal or informal export bans. 4.2 Global access and regional integration The issue of regional trade needs to be put into perspective with how countries and the Community connect to global markets. History is a strong marker in this respect. Export specialisations, in particular in the case of agricultural products, explain the emphasis placed on global market access by several countries: Cocoa and coffee exports, as well as tropical fruits, from Ghana and Ivory Coast, and in terms of export volumes for Nigeria; Groundnut exports from Senegal; Cotton exports from Benin, Burkina Faso and Mali; Cashew nut exports from Guinee Bissau, Ivory Coast and Ghana. In general, the great majority of West African countries have a vision centred on global market access, while little emphasis is placed on regional markets. Nigeria has the largest domestic market. Spurred on by its robust population growth, the country relies, on the one hand, on the domestic market for market access opportunities for Nigerian producers, and, on the other hand, on the global market for its petroleum products, as Africa s top oil producer. This outward-looking tendency strongly determines how domestic economies connect to the market and regional economies achieve integration. On the import side, the global market has acted to steady and regulate domestic economies in the face of fluctuating food production in the region. Dispute settlements concerning rice tariffs - relatively harsh to regional rice producers - must be interpreted in this light. The same is true for wheat, milk, and in part for oils, meat, etc. In other words, the region, again with the exception of Nigeria, relies more on external trade for food security than on regional integration and interconnected markets. However, the ambition of regional agricultural policy is to ensure food sovereignty across the region. The difficult choice between strong global access on the one hand, and strong regional integration on the other is reflected at the national policy level. For example, while significant complementarity exists between the Sahel zone and coastal countries as regards animal products (cattle, sheep and goats), coastal countries rely primarily on imports from global markets to cover deficits in food production, and on domestic policies aimed at selfsufficiency. They are therefore very reluctant to facilitate livestock imports from the Sahel zone, and a concrete sign of this is some of the obstacles met along the corridors.

29 ATWA Stage 2 report: Part 3 Informal Trade 13 Consumption patterns in West Africa are undergoing profound change. Population growth, increased urbanization and the emergence of a middle class with significant purchasing power are three main factors contributing to change. Surveys show that West Africans remain committed to local commodities, as far their diet is concerned. But the capacity of local value chains to adapt to changing consumption patterns (processed, packaged and standardized products that comply with health requirements), as well as obstacles to investment, access to technology and the emergence of genuine regional markets, are all elements which facilitate the import penetration of products that meet consumer expectations better than local ones. Under these circumstances, the challenges faced by West African industries in fully exploiting regional market opportunities (processed originating products) constitute a big handicap that translates into a growing deficit in agricultural and food products. In this context, the competitiveness of the region and, therefore, reduced transaction costs are absolutely key for how regional producers and businesses assess regional market opportunities. 4.3 Approach and methodology used to assess actual trade Evaluating trade flows and, more generally, understanding how intra-regional trade works is complex. A feature of informal transactions is that they essentially avoid inclusion in official statistics provided by the services responsible for foreign trade, in particular customs posts. Understanding regional trade means measuring a whole set of transactions and practices, including: Informal trade transactions; Customs or active fraud: unrecorded flows, under-valued and under-quantified declarations of goods traded; Smuggling ie. bypassing customs posts in charge of clearance/registration; Passive fraud facilitated by porous borders and the local preference clause ; Decentralized transactions ( transactions capillaires in French), based on twin markets often located within 10 km on either side of the border; Long-distance or regional transactions carried out by lead market and trader networks. Six parameters must be considered as characterizing trade transactions: Goods and commodities traded; Volumes traded; Value of trade; Determining trade factors; Operators involved and the relationship they have with each other; Strategies implemented. Several mechanisms are in place at regional level to capture these transactions: Formal mechanisms: o o Other mechanisms: The Customs system: this is the most systematic. It requires comparison of export and import data (mirror statistics). Given the controls and levies implemented by Customs, it is this specific mechanism which operators seek to circumvent; Monitoring data from Plant Protection Services. Unreliable for volume estimates, they can help to estimate the direction of trade flows;

30 ATWA Stage 2 report: Part 3 Informal Trade 14 o o Collection of border data through regular surveys (repeated several times a year) of households, traders, transporters, smugglers, foreign currency dealers, etc. Method used in Niger and Benin; Estimation based on external data: quantification of volume and value through regular surveys of households and traders to characterize household spending and its nature (surveys of spending or household budgets), and identify the origin of products found on retailers shelves. This approach is very expensive CILSS trade estimate The observatory of trade flows and barriers along the corridors was initiated by USAID projects (ATP) and is currently managed by the Permanent Interstate Committee for Drought Control in the Sahel (CILSS). The Ouagadougou-Accra Corridor is among the trade corridors being monitored. The following data on trade in cereals and cowpeas indicate complementarity between production areas. Only corn is traded in both directions, with the balance clearly in Ghana s favour. Dry cereal (millet, sorghum) and cowpeas are only North-South flows from Burkina Faso to Ghana. Significant trade fluctuations may also be noted from one year to another. Table 2: Trade flows in cereals and cowpeas along the Ouagadougou-Accra corridor Corn Millet Sorghum Cowpea Accra-Ouagadougou Ouagadougou-Accra Volume (tonne) Value ($) Volume (tonne) Value ($)

31 ATWA Stage 2 report: Part 3 Informal Trade 15 Total cereals + cowpea Average Source : CILSS As regards livestock products, complementarity is even stronger. Table 3: Livestock trade flows along the Ouagadougou-Accra corridor Cattle head Ouaga-Accra Volume (Head) Value ($) Average Sheep-Goats Ouaga-Accra Volume (Head) Value ($) Average Total Livestock Ouaga-Accra Volume (Head) Value ($) Average Source : CILSS The study approach The surveys, which were conducted as part of this study, are based on cross-analysis of data from information surveys targeted on: Customs services (product type and volume/value declared)

32 ATWA Stage 2 report: Part 3 Informal Trade 16 Chambers of Commerce and Industry: list of key operators (manufacturers and dealers) for products identified at Customs level National Shippers Associations Freight forwarders In addition to these, field interviews were carried out on market days in border and wholesale markets with a wide range of stakeholders: retailers, transporters, freight forwarders, market organizers, etc. 5. CHARACTERIZATION, MODUS OPERANDI AND IMPACT OF INFORMAL TRADE ALONG THE CENTRAL CORRIDOR 5.1 The blurred boundary between formal and informal trade Informal cross-border trade combines two layers of informality: (i) the operators involved do not belong to formal economic or business entities, and have no status recognized by relevant administrations; and (ii) export and import operations are conducted outside relevant formal regulations, whether state or Community regulations. In fact, a form of continuum can be observed between formal and informal practices and it is rather pointless to try to identify trade operations according to one or the other description. A livestock exporter from an established company may need to export using an export licence, but without a veterinary certificate, or may want to avoid paying a particular tax in the importing country which he finds too high by bribing tax collection officials Informal trade along the central corridor Production and Trade Areas The Central Corridor is part of a wider economic and trade landscape across the whole of West Africa and parts of Central Africa, bordering West Africa. Map 4: Main commercial areas in West Africa

33 ATWA Stage 2 report: Part 3 Informal Trade 17 The Central Corridor centres around North-South trade between landlocked Sahel countries and coastal countries of the Gulf of Guinea: Mali, Burkina Faso and Niger (towards Sahel); Ivory Coast, Ghana, Togo and Benin. This area is not isolated from the rest of West Africa. It maintains cross-regional trade relations with Nigeria to the East, countries of the Atlantic front (Senegal in particular) to the West, and Mano River Union member countries to the Southwest. The map below shows the importance of agricultural complementarity for trade patterns in cross-border areas. Map 5: Complementarity of livestock and grain trade between the Sahel zone and coastal countries Source: IRAM-Issala-LARES selon Josserand, 2013; Blein, 2010 and OCDE, 2007 Trade flows, regions of origin and destination countries In essence, trade relations are based on three parameters: Flows linked to complementarity in agricultural production caused by rainfall gradient and agricultural biodiversity. This applies to many products and the dynamics of trade are sustained partly on the basis of migrations that led Sahelian populations to settle in coastal countries over time, and vice versa (but to a much lesser degree) coastal populations in the Sahel zone: o Livestock (cattle, sheep, goats) ranks first in terms of trade value. Trade is based on the competitiveness of pastoral and agricultural production from semi-arid Sahel zones, while coastal countries record huge meat production deficits. Trade is also generated by the purchasing power of urban consumers from coastal countries;