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Cross border trade keeps South Africa's wholesale sector vibrant

posted 7 Dec 2012, 06:06 by Sam Mbale   [ updated 7 Dec 2012, 06:07 ]

Over the last year, 50,000 jobs have been lost in South Africa's retail sector. However, retail and wholesale is up by 40 percent and doing better now than before the global financial meltdown. Financial experts say sellers are doing so well because of the contribution of cross border traders who come to South Africa for the sole purpose of buying goods in bulk to take back home for sale.

JOHANNESBURGSOUTH AFRICA  (REUTERS) -  Despite slowing economic growth and crippling labour turmoil in South Africa, retail and wholesale numbers remain positive, largely in part due to cross border trade, analysts say.

Hundreds of traders cross into South Africa everyday from the country's partners within the Southern African Development Community (SADC) to make wholesale and retail purchases for sale back home.

Africa's biggest economy has the variety of goods and political stability to give buyers cheaper options.

According to Statistics South Africa (Stats SA), retail trade rose by 6.4 percent in August, months before christmas spending had even kicked off.

Established and verified trading with neighbours, ZambiaZimbabweBotswana and others within SADC is already a significant part of local GDP, analysts say.

But a lot of this trade is informal. Big-profits-seeking entrepreneurs buy merchandise inSouth Africa and mark it up for sale in weaker economies.

According to UN statistics informal cross-border trade accounts for one-third of all trade between members of SADC, but it is hardly recognized by regional integration organizations.

"We have in Africa, the phenomenon of multinational informal businesses and that's interesting because it is foreign exchange, it is also contributing to the demand in the country its also helping to contribute to the development and provision of services of products in other countries where it wouldn't exist," said Chris Hart, an investments analyst in Johannesburg.

While official data on cross border trade is hard to come by in Africa, the World Bank said unrecorded trade flows represent a "significant" share of cross-border trade in the region.

In some African countries, informal regional trade flows represent up to 90 percent of official flows, with the vast majority of cross border trade involving staple food, livestock and poor-quality consumer goods.

Official channels involve red tape and trade barriers that are costing Africa billions of dollars and depriving the region of new sources of economic growth, according to aWorld Bank report released early this year.

Trade barriers and red tape also feed corruption, with traders becoming victims of bribery by police, military and customs officials.

Economics professor Chris Malikane says graft is costing the country millions.

"There's a lot of corruption that is happening at the borders to the extent that theDepartment of Trade and Industry has decided to focus... zoom in on illegal imports but also exports as well and the government is losing a lot of revenue because people who have to pay the customs duties and because of these illegal activities, government loses out. Also, we know there are instances where, wholesalers, people who are selling goods and services might be legally registered as entities but they insist on getting cash because they want to avoid the paper trail for SARS (South Africa Revenue Service), for example so that also contributes to the loss of revenue, when it comes to trade," he said.

About 50 - 60 buses, trucks and taxis leave for numerous borders everyday, laden with South African goods.

Wholesalers admit up to 70 percent of their sales are conducted with informal traders of mixed origin, but maintain it is their core business, and checking travelling documents is not part of their duty.

"I prefer to buy food here in South Africa because in Zimbabwe there is not much to buy and here in South Africa it is much cheaper and it has more food than Zimbabwe," said an un-named Zimbabwean trader.

"When you are buying in Zimbabwe its like you are buying from someone who bought things from South Africa so it will be like another 30 percent, so the things they are very expensive there," said another trader.

A leaders' summit of the African Union early this year called for a continental free trade area by 2017, a move that means more countries will have to align their policies and institutions to create an Africa-wide market.