Algeria–Mali trade: the normality of informality

Abstract

This paper estimates the volume of informal trade between Algeria and Mali and analyzes its determinants and mechanisms, using a multi-pronged methodology. In addition to mirror statistics analysis, we provide evidence of the importance of informal trade, drawing on satellite images and surveys with informal traders in Mali and Algeria. We estimate that the weekly turnover of informal trade fell from approximately US$2 million in 2011 to US$0.74 million in 2014, but that trade continues to play a crucial role in the economies of northern Mali and southern Algeria. We also show that official trade statistics are meaningless in this context because they capture less than 3% of total trade. Meanwhile, profit margins of 20–30% on informal trade help to explain the relative prosperity of northern Mali. Informal trade probably plays a strong role in poverty reduction, especially in the Kidal region.

Keywords:

• informal trade
• Algeria
• Mali
• customs
• smuggling
• Kidal

JEL classification codes:

• F14
• H26
• J46

Acknowledgements

The authors would like to thank Mehdi Benyagoub for his help on this research; Olivier François and Laurent Layrol for their work on satellite images; Nancy Benjamin, Thomas Cantens, Arti Grover, Mombert Hoppe, Raed Safadi, Raju Singh, and Olivier Walther, and the participants in the presentations at the Centre de Recherche en Economie Appliquée pour le Développement (CREAD) in Algiers on 25 January 2015, during CSAE (Centre for the Study of African Economies) 2015 at Oxford University, and during the Economic Research Forum (ERF) in Tunis in March 2015 for their comments; and Sabra Ledent for editing. The views expressed here are those of the authors and do not necessarily reflect the views of the World Bank or DFID and their Executive Directors, and the countries the authors represent. All errors are the authors’ responsibility.

Disclaimer

The findings, interpretations and conclusions expressed in this article are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations or those of the executive directors of the World Bank or the governments they represent.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Informal cross-border trade is defined as the flow of goods not reported or inadequately reported to customs authorities. Thus it encompasses two practices: (1) the trade in goods through border posts for which false statements are made about the types or quantities of goods, and (2) the smuggling of goods (i.e. when goods are passed unknown to customs authorities through or outside of border posts). The estimates presented here do not include products whose import is illegal in Mali (such as weapons and drugs) because collecting information and data on these products is even more difficult. Since 2013, Algerian authorities have considered any trade with Mali as smuggling because the border is officially closed.

2. All dollar amounts are US dollars unless otherwise indicated. Conversions in this report are made on the basis of US$1 = CFAF (Communauté Financière Africaine Franc) 480 in 2014.

3. If we include informal cross-border trade to Niger and Nigeria, the informal cross-border trade volume amounted to over $150 million. This research was based on interviews carried out during the spring of 2014 in the subregion, and the satellite images were taken in March 2014.

4. For a discussion of potential explanations, see Raballand, Cantens, and Arenas (2013).

5. For a detailed list of official traded goods, see Appendix 1.

6. These flows correspond to the humanitarian aid Algeria sent to Mali in 2011 in the water and health sectors, especially targeting regions in northern Mali.

7. It has not been possible to estimate the poverty impact of such price differentials because household surveys do not have enough disaggregated data on household consumption.

8. For more details on the methodology, see Appendix 3.

9. Because of the arid terrain, traces remain present on satellite images for weeks or even months, depending on the depth of the trace.

10. A rather similar approach was used by Golub (2012) in West Africa.

11. Approximately a dozen of traders and customs officers still involved or controlling this trade were interviewed.

12. This year was selected because, according to all traders, it was the ‘apex’ of informal trade between Algeria and Mali. Trade flows began to decrease as of 2012 because of the military coup in Bamako and the subsequent fighting in the north of the country.

13. Between 15% and 20% of goods smuggled from Algeria end up in the south of Gao and in Douentza, Mopti, and the southern part of Mali.

14. Data have been computed using figures for the population of northern Mali because the vast majority of them are consumed in that area.

15. Data for Nigeria (in particular the Lagos region) were taken from Raballand and Mjekiqi (2010); for Tunisia, from Ayadi et al. (2014). Figures are for all major imported products.

16. In this article, US$1 = DA 75 in 2011 and DA 87 in 2014.

17. Section 128 of the Finance Act of 1994 and the Decree Inter. of 14 December 1994, setting out the arrangements for exercising the barter trade with Niger and Mali (OJ No. 7 of 15 February 1995, p. 30) and repealing the decree of 5 April 1991, fixing the conditions and terms of import and export of goods under the barter trade border with Mali (OJ No. 29 of 12 June 1991, p. 914).

18. The Algerian products authorized for barter are common dates; Frezza dates, to the exclusion of other varieties of Deglet Nour dates; domestic salt; household objects made of plastic, aluminum, cast iron, iron, and steel; blankets; and local crafts, excluding wool rugs. The authorized products from Mali and Niger are livestock, henna, green tea, spices, turban fabric, Tarri fabric, mil, rancid butter for local consumption, dried vegetables, rice, and mango. Since the closure of the borders, only dried dates are allowed for export.

19. For a 10-ton truck coming from Bordj Badji Mokhtar, paid duties in 2014 were about CFAF 75,000 ($156) in Kidal, CFAF 120,000 ($250) in Gao, CFAF 140,000 ($290) in Timbuktu, and CFAF 400,000 ($830) in Bamako, as in northern Niger. These figures are averages. Many traders are paying duties sometimes more modest because of the corruption within customs, or even sometimes are fully exempt from customs duties by circumventing customs offices.

20. According to the West African Economic and Monetary Union (UEMOA), customs duties at the Malian border (in percentage of the value of goods) are 20% for dates, couscous, pasta, and cigarettes and 10% for gasoline (for ordinary car) and car tires.

21. Walther (2009) showed that traders were heavily represented in the National Assembly of Niger.

Additional information

Funding

This work was supported by funds provided by the U.K. Department for International Development (DFID ) under the Support to West Africa Regional Integration Program (SWARIP) window of the Multi-Donor Trust Fund for Trade and Development Phase II (MDTF-TD2) supported by Finland, Norway, Sweden, and the United Kingdom (World Bank Group).