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Key success factors in cross border trade

Posted By Prof Shephard Dhliwayo , 29 May 2017
Updated: 29 May 2017

The export and import of goods and services by small, micro and medium enterprises (SMMEs) usually referred to as cross border trade (CBT), is an important form of trade in many developing economies of the world. Unfortunately it is largely ignored by governments, economists and researchers. This is surprising given the importance of the trade in many economies, for example, the value of CBT in the SADC region averages US$ 17.6 billion annually[1], and contributes 30 to 40%[2] of intra-SADC Trade.

Recent research shows some interesting facts. It was based on data collected from 146 cross border traders from 8 SADC countries. The aim was to identify key success factors and constraints faced by traders.

The study yielded the following results:

• It is just a portion of the more successful small and medium enterprises (SMMEs) that go into the import and export business while the less successful ones, operate in the local market or close shop. The risk of failure of an export business is highest in the first 5 years and that only 25% of the business last for over 10 years.

• Support interventions by governments tend to be under-utilized. Only less than 13 % South African SMMEs were aware of the different export incentive schemes available to help them. The reasons advanced for this include, the programmes being irrelevant or the SMEs not being aware of the existence of such programmes. There is also evidence of very low accessibility to loans by SMEs.

• The top three ranked key skills needed to succeed in CBT were identified as: (1) the sourcing of markets and supplies. (This is the ability to identify potential suppliers and customers, and be able to establish and sustain business networks). (2) financial management skills (This is the ability to source funding for the business as well as to optimally apply funds in the running of the business. This includes skills in working capital management). (3) the knowledge and management of border issues (This includes knowledge of import and export duties and tariffs as well as knowledge of the rules, regulations or incentives that apply to cross border trade).

The top three forms of assistance required to succeed in CBT were identified as: (1) The sourcing of markets and supplies, (2) funding and (3) general business management skills. [3] •

The three most inhibitive constraints faced were identified as the (1) sourcing of markets and supplies, (2) funding and (3) border restrictions. The traders lack formal protection due to the nature of their operations which borders on informality. The lack of recognition of cross border trading as a form of business results in the criminalisation of trade which leads to harassment and abuse by authorities. This should be addressed by the respective authorities and one stop border permits and licences issued. Access to government assistance programmes as well as sector formalisation should be improved.

 Sources Cited:

[1] Southern Africa Trust. 2008. Informal Cross-Border Trade in SADC. Consultation and Planning Workshop.www.southernafricatrust.org/.../ICBT%20Workshop%20Report.pdf

[2] Unwomen.org. 2010. Unleashing the Potential of Women Informal Cross Border Traders to Transform Intra-African Trade - http://www.unwomen.org/en/digitallibrary/publications/2010/3/unleashing-the-potential-of-women-informal-cross-border-traders-totransform-intra-african-trade#sthash.DB5o6Q53.dpuf

[3] Chiwara, L., & Ndiaye, T. 2010. The contribution of women informal cross border traders to transform SADC economies. UNDP. www.sz.undp.org/.../UNDP_SZ_Organisational_Arrangement_for_Women

The full research article; Export experience and key success factors in cross-border trade: Evidence from Southern Africa, is published in Acta Commercii 17(1), a383. http://dx.doi.org/10.4102/ac.v17i1.3863. www.actacommercii.co.za (This is an open access journal)

 

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