Business

WB survey reveals transaction costs high for informal traders

KELLY NJOMBO, Lusaka
A SURVEY by World Bank has revealed that small-scale traders in Africa are being subjected to higher cost of transactions at border posts than the formal ones, making business uncompetitive.
The World Bank is in the process of formulating a charter for cross border traders to improve informal trade in some agricultural produce such as maize, rice and beans.
The bank undertook a survey on the border between Malawi and Zambia to establish how Africa can attract informal trade.
This is contained in a statement availed to the Daily Mail in Lusaka recently.
“Currently, the costs of cross border transactions remain expensive for small-scale traders in Africa. In a review of Zambia and Malawi border posts, costs were on average 62 percent more expensive for small-scale traders than for formal sector traders.
“This, however, is less than the additional costs faced by small-scale traders if they trade formally, and these are estimated to be 125 percent higher than for large-scale traders,” the statement reads.
The report emphasises the importance of informal cross border trade flows which also substantially contributes to the development of the economy.
On the setting up of the charter, the World Bank notes that it will enshrine rights and obligations of both traders and officials after the charter is established.
The charter will also seek to build on the current departmental guidelines by introducing a credible complaint mechanism using toll-free phone lines and an effective performance measurement system.
Some of the factors highlighted as contributing to increasing the cost of trade transactions include high custom duties and taxes, time consuming and inefficient border procedures.
Others are trader registration and tax identification requirements.
Others include the centralisations of administration of import and export licences and the arbitrary application of rules.
A survey conducted on the border between Malawi and Zambia revealed that it costs about 62 percent more for small-scale traders than for formal traders.
According to a statement availed to the Daily Mail in Lusaka recently, the World Bank will come up a charter for cross border traders to improve informal trade in maize, rice and beans.
The charter would enshrine rights and obligations of both traders and officials.
It says the charter will also seek to build on the current departmental guidelines by introducing a credible complaint mechanism using toll-free phone lines and an effective performance measurement system.

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