The feuds between Rwanda and its neighbours have led to a sharp decline in informal cross-border trade, with the latest central bank figures showing an 8.1 per cent drop in exports, while imports fell by 40 per cent in the first half of this year compared with 2018.
Informal exports account for 10 per cent of the total share of the country’s exports while informal imports account for 0.5 per cent.
For years, informal cross-border trade has been a source of livelihoods for poor border communities. But the escalation of political tensions between Kampala and Kigali, for instance, which led to Rwanda closing its borders with Uganda, prohibiting its citizens from crossing, greatly affected trade along the border, with many who depended on it going without an income.
An earlier impasse between Rwanda and Burundi also affected informal and formal cross-border trade between the two countries, especially after Bujumbura blocked its traders from selling groceries to Rwanda.
Rwanda’s total informal exports in 2018 stood at $125.3 million. Exports to other East African Community member countries, which accounts for 22.3 per cent of its total exports, however rose by 141.0 per cent in value, fetching $128.9 million in the first half of 2019.
Imports from the region however dropped by 7.8 per cent, attributed to the increased participation of local businesses that had to step up to the plate and fill in the gap for consumer goods from Uganda and Burundi.
“People are slowly getting used to goods manufactured here. We can’t get Mukwano soap any more, so they complain about the quality but when there are no options they end up buying what is available,” said a wholesaler in Kigali.
But the crisis has narrowed Rwanda’s trade deficit with the EAC to $99.8 million in the first half of 2019, from $194.5 million recorded last year.
The figures also indicate that the country’s efforts to diversify exports is beginning to bear fruit after it recorded a 7.5 per cent growth in exports in the first half of 2019, largely driven by a surge in non-traditional exports at a time when traditional exports like coffee, tea and minerals declined due to weakening global demand.
Non-traditional exports like milled products and other manufactured goods registered a 25.2 per cent growth earning the country up to $196.4 million of the $577.8 recorded in the first half of the year.