In the Shadow of a Conflict: Crisis in Zimbabwe and its effects in Mozambique, South Africa and Zambia

12. The impact of the Zimbabwean Crisis on Informal Cross-Border trade with Zambia

309 Introduction and Background The economic crisis in Zimbabwe in the past decade has led to extraordinary growth in informal cross-border trade (CBT). Within the informal economy lies informal cross-border trade, which is unrecognized and often deemed illegal . For the purposes of this chapter, ‘informal cross-border trade’ is defined as trade where the movement of goods and services across borders is, by and large, not officially recorded. It is characterized by under-invoicing and underdeclaration of invoices. At times, it may even be outright illicit and of a contraband nature. It characteristically involves ‘the frequent movement of people across borders with small consignments’ (Ndlela, 2006: 8). This study does not, however, deal with informal cross-border trade of an officially illegal nature such as the sale of stolen goods and proscribed drugs. Informal traders are often viewed as ‘smugglers’, while women traders are frequently portrayed as ‘prostitutes’ (Muzvidziwa, 2005: 51; 1998). This perception can be attributed to the fact that most trade is undocumented and unregistered, and thus unaccounted for in national trade statistics. This perception is prevalent, moreover, because the informal economy is understudied. The level of trade in the Southern African Development Community (SADC) is understated due to the non-inclusion of informal CBT into official trade statistics . SADC states obtain revenue from duties and taxes charged to small informal traders who operate across borders, although this sector is not officially recognized. Available statistics suggest that informal trade within SADC contributes an average of over US$17.6 billion per year (Peberdy, 2000; Musonda, 2004). Poverty is pervasive in the region and has been aggravated by the negative effects of structural adjustment programmes prescribed by the Interna12 The impact of the Zimbabwean crisis on informal cross-border trade with Zambia Thomson Kalinda, Diana Banda, Priscilla Hamukwala, Fabian Maimbo and Espen Sjaastad1 In the Shadow of a Conflict 310 tional Monetary Fund and the World Bank as a means of achieving economic recovery (SADC, 2000). In the case of Zimbabwe, the chaotic land reform programme, poor governance and a polarized political climate took its toll on the country’s economy as foreign currency reserves dried up, exports declined and foreign direct investment dwindled to zero. As a result as local authorities allowed various economic activities to flourish, ranging from flea-markets, tuck shops and street vending to mushroom-growing, resulting in a significant shift from formal to informal sector activities (Ndlela, 2006; Solidarity Peace Trust, 2006). Informal economic activity spiraled as a result of the high unemployment, inflation, shortages of foreign currency, goods and commodities, high levels of poverty and food insecurity that followed fast-track land reform (Chari, 2004; Solidarity Peace Trust, 2006). The growth of the informal sector was further fueled by a thriving black market, buoyed by the differential in foreign currency rates, and the collapse of health care and education services. The HIV/ AIDS pandemic exacerbated the situation (Chari, 2004). The informal sector provides people with a source of income and employment. For many economic destitutes, informal CBT has become a means of survival, a source of income and employment. It is also a dynamic sector in which small traders or small exporters and importers make a profit (Muzvidziwa, 2005). Historically, informal CBT in Zimbabwe dates back to pre-colonial times. People carried out barter trade without the need for formal registration. At independence, many African states adopted the artificially created borders, which led to the emergence of tariff and non-tariff barriers. This, in turn, disrupted informal economic activity (Nyantaga et al., 2000). Goods were sold internally within Zimbabwe and across the border to neighbouring countries. Informal CBT was often associated with low-income earners. Cross-border traders are confronted with a hostile policy environment at both national and regional levels. However, SADC governments can gain from informal CBT by creating an enabling environment in which informal traders can operate and in turn generate revenue (Mpande, 2004). Furthermore, informal CBT facilitates regional integration through the sharing of ideas and experiences at grass-roots level. The formal sector cannot be studied in isolation from the informal sector. Informal CBT not only benefits the traders themselves, and government, but it also provides employment opportunities in industries such as transport, manufacturing, production and revenue institutions at border posts. In this way, the informal sector is closely linked to the 311 The impact of the Zimbabwean crisis on informal cross-border trade with...