Unrecorded cross-border trade betwen Kenya and Uganda: Implications for food security

Abstract

Regional trade initiatives in Eastern and Southern Africa have in the past encountered various kinds of difficulties but the countries have not been deterred from exploring new ways of fostering economic development through trade expansion. Despite trade promotions and market reforms which have to a large extent minimized exchange controls and commodity movement restrictions, inappropriate policies and other trading malpractices still inhibit formal trade linkages in the sub-region and tend to distort relative prices in the factor/product markets and as a result encourage all forms of unrecorded (informal) cross-border trade. . At the same time, the easfern and southern Africa region has, over the past few decades, experienced prolonged civil conflicts, droughts, famine and food insecurity in the face of increasing population growth rates and deteriorating real per capita incomes. These factors, together with unfavorable trade policies and malpractices, have generally undermined regional governments' food security goals. The study by Chris Ackello-Ogutu and Protase Echessah uses innovative and practical border observation techniques in quantifying cross-border trade and examines in great detail not just how this trade is being carried out but also who is involved and its impact on food security. By so doing, the study makes a significant contribution to earlier efforts to authenticate the quantity of goods traded informally using the Kenya-Uganda border case study. The authors' way of data treatment as well as their handling of underlying issues and problems constraining formal cross-border trading is thorough and exhaustive. The constraints to formal cross¬border trading revealed by the study demonstrate the gravity of the bottlenecks and the urgency with which Governments, at national and/or regional levels, must address this problem. As the study points out, unrecorded cross-border trade is significant and vital to the region's economic development. It also points out that when the forces of supply and demand are left to operate without interference, the greater gains accruing in terms of regional food security and efficiency in resource allocation are enormous. Thus, unofficial trade is a pointer to the comparative advantage existing in respective countries and to the vital food security role the private sector can play in moving commodities from one part of the region to another, often against serious barriers imposed by governments. The achievement of food security is one of the region's key development challenges articulated by USAID and also represents a major component of various ongoing strategic initiatives. By emphasizing free trade and underscoring the importance of rational trade polices and removal of all trading malpractices, this study offers a new policy option that may guide efforts of US AID and other regional institutions and initiatives in addressing the challenges of assuring national and regional food security. This report is a major eye opener on the subject of unrecorded cross-border trade in the region and should form the basis of future policy formulation and strategies on the subject. It is one in a series of studies on Africa's regional trade and comparative advantage, a joint activity of USAID Africa Bureau's Food Security and Productivity Unit in the Office of Sustainable Development, Productive Sector Growth and Environment Division (AFRISDIPSGE), and the Regional Economic Development Services Office for Eastern and Southern Africa (REDSOIESA).