The commencement of trading on the African Continental Free Trade Agreement (AfCFTA) in January 2021, Africa is sending a powerful message to the world: Africa is open for business. This time around, Africa is significantly improving intra-continental trade and resoundingly indicating that its future development is hinged on trade, not aid.
The combined African market (GDP) of the 55 member states who have signed up, is valued at USD3.4 trillion with a population of 1.3 billion people, majority of whom are women and youths. The Agreement, therefore, represents a bold proposition to shatter all trade barriers to, facilitate free movement of goods and create a unified market. In March, the AfCFTA and UNDP Regional Bureau for Africa (RBA) signed up to a strategic partnership to promote trade as a stimulus for Africa’s socio-economic recovery from the COVID-19 crisis, and as a driver of sustainable development.
However, the picture is not all elegant. Africa is home to eight of the world’s fifteen fastest growing economies and will, by 2050, have one in every four global consumers, yet there are concerns over how lack of inclusive growth could stunt the realization of this development projection. Agropastoralism and Informal Cross-Border Trade (ICBT), which are expected to be major contributors to the expected growth, through the provision of jobs, food security and, prosperity, are under threat due to spiraling insecurity, conflict and violent extremism. The borderlands are often the frontiers and critical transit points in this combat, a situation that makes them particularly vulnerable. In addition, COVID-19’s socio-economic impact, has had a disproportionate impact on borderlands’ communities, leading to the closure of businesses and the devastation of social protection systems. In the absence of robust state support, the livelihood of the poorest and most vulnerable households in the borderlands, most of whom are dependent on ICBT for survival, is now at risk. This gloomy perspective has been the main narrative about the borderlands.
Despite the challenges, Africa’s borderlands are notable for their incredible resilience and adaptability, which have made them critical to food security in Africa, mainly through ICBT. If the 270-million strong
inhabitants of the borderlands are supported, they can be prepositioned to take more than a slice of the pie of the projected US$3 trillion investments in climate resilience and low-carbon infrastructure in Africa by 2030, with the development of environmentally sustainable agropastoralism and trading practices.
Achieving sustainable development of the borderland communities, however, requires support for innovation in ICBT. Informal cross border trade can transform the lives of the most vulnerable persons. This entails not only the injection of catalytic funding to support short-term recovery of ICB traders, but more critically, to identify, curate, experiment, upscale and prototype locally developed solutions to improving access to finance for traders. This is what UNDP Africa Borderlands Centre based in Nairobi, Kenya intends to achieve with the 2021 Innovation Challenge themed “Improving Livelihoods through Informal Cross Border Trade (ICBT)”.
The intervention will support up to six border communities in Africa, to co-create and develop innovative solutions to funding challenges experienced in the conduct of ICBT. Promising solutions will be identified through collective intelligence, learning sessions and local sensing then cultivated for implementation. Successful pilots will be incubated, prototyped and replicated across other border communities in Africa, in a manner that ensures that the over 270 million borderlands inhabitants, who are currently at risk of being left behind in the race towards the SDGs, are supported on their own terms, and based on their own generated solutions.
The innovation challenge seeks to interrogate the following: how have communities with limited government presence, with limited private sector funding, and indeed, without most of the building blocks of development, been able to stabilize, cope with vulnerabilities yet develop pockets of effectiveness on ICBT? Which specific social innovations in borderlands’ communities have helped improve funding for ICBT? Which are the most promising innovations to improving access to funding by the most vulnerable ICB traders, particularly women and youths? How can we experiment with these most promising social innovations, with the aim of developing them into “investment-ready” solutions, and also “new models” of development practice?
There are five classes of innovation portfolio in contemplation Each bid from UNDP Accelerator Labs is expected to propose an innovation activity, in only one portfolio, which has the best prospect of providing innovative solutions to challenges being experienced by cross-border traders. The selected activity should be implementable within a period of 10-months, ideally in a borderland community (the laboratory), straddling at least two countries.
What are the types of innovation contemplated in each of the five portfolios? They are market intelligence, crowd/pooled funding, deployment of technology, investment-readiness programmes, and green and energy-efficient ICBT initiatives.
The role of market intelligence in improving access to finance for ICBT traders is the first area of innovation for the 2021 Call for Proposal. This portfolio envisages the use of local sensing to develop forward-thinking insights, which can then enable ICB traders to make more profitable and progressive business decisions. It targets data mining, archiving, analysis, and deployment, on information related to market competition, customer demographics, market potentials, risks and prospects in real-time.
The second portfolio is crowd/pooled funding. It is focused on identifying new sources of capital within and outside the communities, understanding the risks associated with fund management, and developing this into a local credit system for ICB traders. There are existing community pooled funding mechanisms that require curation, incubation and exploration. This could happen through the cultivation of communities, building momentum and consensus, and mobilizing funds to add value to development. Digitization, for instance, can also play a role in helping to find alternative funding sources for borderlands traders, including outside the borderlands geographical space. It can contribute to mobilizing funds and facilitating their transparent management, as well as to de-risking borderlands businesses, thus addressing skepticisms by potential investors in the formal sector.
Technology represents another critical entry point, that a proposal may wish to focus on. With the increasing pressure put on Africa’s borderlands communities by migration, climate change, conflict, violent extremism, etc. and considering that about 70% of informal traders are women, they are exposed to vulnerabilities such as robbery, exploitation by law enforcement agents, and other forms of threats. The deployment of technology can contribute to convergence of e-payment platforms, tracking and management of logistics, development of early warning system for traders, and other measures capable of enhancing social protection. The attendant risk reduction can then boost investors’ confidence in supporting ICBT, in a measurable manner.
Investment-readiness programmes for young entrepreneurs is critical to the borderlands. The youth often have to contend with the challenges of geographical isolation, structural unemployment, lack of essential infrastructure and services, thus limiting their opportunities for capital accumulation. This portfolio of innovation shall therefore map a number of investible businesses, map opportunities for attracting funds, prepare the businesses to be eligible for private capital injection, support young business-owners to understand the dynamics of external finance sources, package and ‘sell’ their businesses to potential investors.
Green and energy efficiency-related financing of ICBT, is the last portfolio eligible for support in the 2021 Innovation Challenge. This entails the activation of social investment sources and philanthropic financial flows, to Micro Small and Medium Enterprises (MSME) engaged in cross border trade. The emphasis here is on fund-generatable activities, which are focused on reducing pollution and greenhouse emission, whilst minimizing waste and improving efficiency in the use of resources within the location where ICBT takes place.
Changing the Narrative
With the launch of UNDP’s 2021 innovation challenge, Africa’s borderland communities not only have the historic opportunity to write their own development narrative, but they also have the opportunity to contribute to shaping how development ought to happen in the periphery. Every step of this ICBT adventure will be curated and become critical learning points for us as development practitioners. This engagement will also hopefully kickstart initiatives, capable of making ICBT work for the poorest and most vulnerable. Through a learning network on borderlands, lessons from the process will be continuously subjected to robust analysis, brainstorming and prototyping in other borderlands.
The possibilities of this innovation journey are exciting. It could indeed prove that the borderlands are not a problem to be solved. Counter-intuitively, it may end up demonstrating that the borderlands are an asset to be harnessed in fast-tracking the achievement of the 2030 Agenda in Africa and in making the dividends of AfCFTA accessible to the most marginal communities.