An assessment of the agricultural cross border trade between Sierra Leone and her neighbours (Guinea and Liberia)

Informal Cross Border Trade (ICBT) has become a topical issue in Africa, and in particular the Mano River Union (MRU) due to its broader impact on the economies of these countries. Whilst ICBT may provide short-term solutions to poor households, in the long run it can seriously challenge the economic development of African countries. ICBT creates unfair competition vis-à-vis formal traders, reduces the incentives to invest in the formal economy, and lowers business opportunities in regional and global markets, which diminishes the prospects for private sector and overall economic development in Sub-Saharan Africa, especially between the MRU. This form of trade lowers the efficiency of measures put in place to ensure health, safety, and environmental protection. Agricultural commodities which are often traded informally, for example, escape sanitary and phytosanitary controls meant to ensure adequate food safety at home and avoid proliferation of diseases across borders. Also, informal trade erodes government revenues and finally, such practices lead to unreliable external trade statistics which might hinder the formulation of appropriate trade and macroeconomic policies.

Although informal trade takes different forms and is known under different names[1] it is best characterised by its non-inclusion in the national accounts of a country or region in terms of its domestic and international trade (Aryeetey, 2009). At one end of the spectrum lie negotiated relationships between informal traders and state agents designed to facilitate predictable cross-border commerce within a poorly institutionalised setting. At the other extreme lie cases in which relations between traders and state agents are characterised by conflict, arbitrariness, illegality, and high levels of informal extraction. However, whilst the existence of these informal realities are increasingly recognised, few efforts have been made to systematically study how they function or to understand differences across population group and locations.

In view of the above, and consistent with its mandate of trade promotion and facilitation, the Sierra Leone Investment Export Promotion Agency (SLIEPA) has engaged with the IGC to undertake a study on cross border trade with a particular focus on agricultural products which are typically traded, processed, and consumed in the MRU or in its immediate neighbours.

This is envisioned as pilot study, though one capable of producing interesting results in its own right, which may then lead to a subsequent research extension that will aim to provide detailed analysis of informal and formal trade practices in Sierra Leone. The ultimate aims of the broader project are to make the following contributions:

  • Firstly, to generate baseline information on informal trading environment which include a detailed empirical picture of the reality of cross-border trade by informal businesses, including variation in these patterns across locations, seasons and different groups.
  • Secondly, gain a detailed understanding of the nature of informal bargaining processes between state actors and informal business in the border communities.
  • Thirdly, understand the dynamics of informal trade and its implications on border communities to inform policy and decision making.
  • Finally, put forward the type of policy measures that should be taken by governments of the MRU member countries, both individually and at community level to strengthen formal trade and improve the business climate in the sub-region.

[1] For example, unrecorded trade, illegal trade, unofficial trade, underground trade, part of parallel market activity, the activities of black market, trade subject of over-and under-invoicing, smuggling or hoarding).