Ahmadou Aly Mbaye

Informality, Trade Policies and Smuggling in West Africa

Abstract In West Africa, recorded intra-regional trade is small but informal cross-border trade (ICBT) is pervasive, despite regional integration schemes intended to promote official trade. We argue that ICBT must be understood in light of two features of West African national boundaries: divergent economic policies between neighboring countries and the ease with which informal operators can ship goods across borders. We focus on two ICBT clusters: Senegal–The Gambia and Nigeria–Benin–Togo. Nigeria and Senegal have protected their domestic industries with high import barriers, whereas Benin, Togo and The Gambia have maintained lower import taxation. These differential trade policies, together with high mobility of goods and people across borders, lead to widespread smuggling, with goods imported legally in low-tax countries and re-exported unofficially to countries with higher import duties.

Can Africa Compete with China in Manufacturing? The Role of Relative Unit Labor Costs*

In this paper we examine Sub-Saharan Africa’s (SSA) bilateral trade and cost competitiveness with China. We review patterns of bilateral trade between SSA and China, showing an extraordinary imbalance in the structure of trade, in that China overwhelmingly exports manufactured products to SSA and almost exclusively imports primary products in return. Our principal means of assessing the competitiveness of SSA’s manufacturing sector, vis-a-vis China, are measures of relative unit labor costs (RULC). We find that African RULC levels have generally been very high relative to China, but declined over the 2000s as China’s wages have risen faster than Chinese productivity, while the reverse is true for the SSA countries in our sample. Nevertheless, RULC vis-a-vis China remained elevated for many SSA countries as of 2010. Generally high RULC along with weaknesses in the business climate suggest that most SSA countries are unlikely to be competitive in labor-intensive manufacturing any time soon.

Policies, prices, and poverty : the sugar, vegetable oil, and flour industries in Senegal

Like many countries in Sub-Saharan Africa, Senegal has struggled to develop its industrial sector in the face of import competition. For basic food products, there is an implicit trade-off between the objectives of maintaining employment and lowering the cost of living, both of which figure prominently in current government policy. Conflicting pressures have led to a rather inconsistent policy mix of high levels of protection with price ceilings. The products of the three industries examined here—sugar, vegetable oil, and flour—account for roughly 14 percent of the consumption basket of the poor, so distortions in their prices can have a significant effect on poverty reduction. This paper compares domestic prices in Senegal with world prices since 2000, and then explains the difference by examining the protection enjoyed by these industries, along with their market structure. The analysis finds that high protection and market power have resulted in domestic prices which were often two or three times the equivalent world price. Tightening of price ceilings and some liberalization have taken place recently, but consumers have continued to pay above world prices for sugar and edible oil in 2014. The paper estimates that if this differential were eliminated, the purchasing power of households around the poverty line would increase by 3 percent, 227,000 people would move above the poverty line, and the national poverty rate would drop by 1.9 percentage points. The cost to consumers far exceeds the total wage bill paid by these industries. Further liberalization of these industries is recommended, along with phasing out price controls and shifting government policy from protecting traditional enterprises to the promotion of new export-oriented ones.

The Competitiveness Challenge of the Formal Sector in Francophone Africa: Understanding the Role of the Informal Sector and the Business Environment

In francophone Africa, a clear stagnation of the size of the modern sector is observed over time, contrasting with a huge expansion of the informal sector. While some authors point to competition from the informal sector as the main explanation for this contrast, a growing body of literature emphasizes the role of the business environment. This study uses a unique set of data to show that a poor business environment is affecting both formal and informal enterprises, although not to the same extent. While it is true that in areas where formal and informal firms are in competition, the latter have been able to substantially outpace the former, products offered by both categories of firms are often strongly differentiated. Our results do not show any negative correlation between exposure to informal competition and formal firms’ productivity level, which, by contrast, is found to be strongly correlated with the business environment.

The Interplay Between Formal and Informal Firms and Its Implications on Jobs in Francophone Africa: Case Studies of Senegal and Benin

In this chapter, the relationship between the formal and informal sectors in francophone Africa is investigated, considering both trade with and outsourcing to the informal sector, and competition from it. Using survey data collected in francophone West Africa, important cases of backward and forward linkages between both sectors are documented. The chapter also highlights areas where fierce competition from the informal sector is observed. Finally, a descriptive statistic relational analysis and econometric regression are used to shed light on the profile of formal firms that are more likely to interact with informal ones, either by way of trade or outsourcing or through competition.