i © 2021 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street NW Washington, DC 20433 USA All rights reserved Photos: Shutterstock and Unsplash. HORN OF AFRICA REGIONAL ECONOMIC MEMORANDUM BACKGROUND PAPER 3 A Review of Cross-Border Trade in the Horn of Africa1 - Paul Brenton and Habtamu Edjigu ¹ For the purposes of this paper the Horn of Africa is deemed to comprise Djibouti, Eritrea, Ethiopia, Kenya and Somalia, sometimes referred to as the “little” Horn of Africa. This allows focus on those countries where actual and cross-border trade is strongest and is consistent with the emerging political economy of regional integration in the area following the recent agreement by these five countries to take forward discussions on fostering economic integration and regional cooperation, with the support of the European Union, African Development Bank, and the World Bank. iv CONTENTS 1 Introduction ............................................................................................................................................. 1 2 The Structure of Trade in the Horn of Africa ......................................... 3 2.1 Officially recorded trade ................................................................... 3 3 Unrecorded Cross Border Trade .............................................................................. 11 3.1 Overview of the Region .................................................................... 11 3.2 Ethiopia-Kenya Cross-Borders Trade ............................ 13 A. Livestock .................................................................................................... 14 B. Agricultural commodities .................................................. 15 C. Main trading eoutes .................................................................. 17 3.3 Ethiopia-Somalia Cross-Borders Trade ........................ 18 3.4 Ethiopia - Djibouti Cross-Borders Trade ..................... 22 3.5 Ethiopia - Eritrea Cross-Borders Trade ......................... 23 3.6 Somalia - Kenya Cross-Borders Trade ........................... 24 3.7 Somalia-Djibouti Cross Border Trade ............................. 25 4 Value chain in livestock and food crops ...................................................... 26 Livestock value-chain ................................................................................................. 26 Agricultural commodities value-chain ............................................... 30 5 Impact of Cross-Border Trade ..................................................................................... 31 6 Major challenges in cross-border trade in HoA ............................... 33 References ................................................................................................................................................. 36 v vi SECTION 1 | INTRODUCTION SECTION 1 Introduction Informal cross-border trade is an important commodities handled; and investigate major feature of trade in the Horn of Africa. In many challenges, particularly in cross-border areas. instances the value of informal cross-border Such understanding will provide context for trade exceeds the value of official trade. For the extent of regional integration, analysis, and example, official annual exports of cattle from response planning. Ethiopia, home to the largest cattle inventory in Africa, are less than 2,000 heads, when more than This paper provides a review of existing literature 25 times this amount are typically exported across on cross-border trade among the Horn of African borders (Little, 2005). For some commodities, countries Djibouti, Eritrea, Ethiopia, Kenya and like maize, dry bean, and sorghum, unrecorded Somalia.² It offers analysis on key traded products exports of Ethiopia to neighboring countries particularly food crops and livestock, a review on exceed officially recorded trade by a factor of 30 main trade routes and border marketing centers; or more (Little, 2015). the operation of cross-border value chains in the borderlands, including the economic impact on There is a need to understand more about the border communities and a summary of common common challenges and opportunities for challenges facing cross-border trade within the cross-border trade in the HoA. Because a large region. The review is augmented with analysis of part of cross-border trade and movement of available data on trade between these countries people is unrecorded, knowledge about market from UN COMETRADE, FEWS NET and FAO.3 networks and integration in the Horn of Africa To put cross-border trade in context, the paper countries is limited. There is a need to identify starts by reviewing the available information from key catchment areas, trade routes, markets and officially recorded trade data. 2 There appears to be no information on cross-border trade in services and so we concentrate on trade in goods. Limited information from other borders in Africa suggests that such trade could be important and should be an issue for data collection and analysis. 3 The FEWS Net provide a survey of cross-border trade data collected by Food Security and Nutrition Working Group (FSNWG), through its Market Analysis Sub-group in East African countries. The survey covers 88 food commodities and livestock. However, it does not completely capture all cross-border trade in the region because collection is limited to selected borders. In addition, the data are not collected 24 hours per day, 7 days per week or for all traded commodities. 1 2 SECTION 2 | THE STRUCTURE OF TRADE IN THE HORN OF AFRICA SECTION 2 The Structure of Trade in the Horn of Africa 2.1 Officially Recorded Trade Officially recorded information suggests that were in Djibouti (-50 percentage points of GDP). trade is underperforming as a driver of growth, However, Djibouti still remained the country with job creation and poverty reduction in the Horn the highest trade-to-GDP ratio, at 298% in 2019, of Africa. The degree of integration with the global due to the magnitude of port related services economy, as measured by the ratio of exports (Figure 1A). Low-value products are dominate the and imports to GDP decreased between 2013 structure of trade in the region. Except for Kenya, and 2019 in four out of the five HoA countries exports from HoA countries have a relatively high for which data are available.4 The largest declines proportion of raw materials (Figure 1B). Figure 1: Trade-to-GDP and trade Structure in HoA, 2018 A. Trade (% of GDP) B. Export Structure HoA, 2018 0% 3% 3% 400 367 100% 12% 6% 348 1% 350 319 9% 27% 22% 298 80% 34% Trade (% of GDP) 300 11% 14% 61% 250 210 60% 200 165 150 130124 40% 68% 72% 59% 11% 63% 100 4129 53 50 50 20% 50 33 24% 0 0% Djibouti Ethiopia Kenya Somalia Vietnam Cambodia Djibouti Ethiopia Singapore Eritrea Kenya Somalia 2013 2019 Raw materials Intermediate goods Consumer goods Capital goods Source: staff calculation using data from United Nations Comtrade Database. The Middle-east and North Africa region is an other countries in the HoA (Figure 2). China is a important destination for goods exports for all major export destination for Eritrea’s exports. The five countries. For Djibouti and Somalia over half EU, although declining, is a key market for Ethiopia of their recorded exports to this region comprise and Kenya, accounting for over a quarter of exports. animals, which as discussed below are likely to be For Ethiopia and Kenya, the US has become a more the result of value chains that cross borders with important destination in recent years reflecting the 4 Eritrea has not provided trade data to the UN statistical agencies since 2003. 3 CROSS-BORDER TRADE IN THE HORN OF AFRICA rising importance of apparel exports. Exports to that officially recorded data for trade between HoA other African countries are small or negligible. countries is not consistently available. Ethiopia is the only country for which data are reported on With regard to imports of goods, China is a major a regular annual basis. Figure 3 shows the trend and increasingly important supplier. Between in Ethiopia’s reported imports and exports with 2010 and 2018, China’s share of the total imports other HoA countries. Exports on the whole are of all 5 HoA countries increased from just under tending to increase but are somewhat erratic 20 percent to over 30 percent and is the dominant at the country level, with exports to Somalia supplier of imports to the region. The EU is still increasing substantially in 2018 while those to a major supplier but has declined in importance, Kenya declined. Following this surge in exports to accounting now for around 15 percent of the Somalia, Ethiopia’s exports to the Horn countries imports of the Horn compared to 20 percent in exceeded USD 100 million in 2018. Ethiopia’s 2010. However, this is not consistent across the imports from HOA countries are dominated by countries and is driven mainly by Kenya. Eritrea, Kenya, amounting to around USD 40 million Ethiopia and Somalia have seen an increasing each year. Kenya has reported trade data only in share of the EU in their imports. The Mena region 2010, 2013 and 2017 to 2018. Figure 4 shows the is also an important source of imports, especially information for 2010 and 2018. Recorded imports for Eritrea and Somalia. from HoA countries are negligible. Exports are dominated by Somalia, amounting to over USD Recorded intra-regional trade remains marginal 120 million in 2018. Kenya’s exports to Ethiopia and erratic. Figure 2 suggests that for most amounted to about one quarter of total exports countries (the exception is Somalia’s imports) the to HoA countries. Hence, Somalia is now the Horn of Africa countries are not significant trade largest market for recorded intra-HoA exports, partners for each other. To some extent this reflects accounting for two-thirds of the total in 2018. Figure 2: Horn of Africa Countries Recorded Global Trade: 2010 and 2018 A. Djibouti Exports B. Djibouti Imports 80 50 60 40 Per cent Per cent 30 40 20 20 10 0 0 China EAC EAP EU27 Horn MENA South SSA USA China EAC EAP EU27 Horn MENA South SSA USA Asia Asia Exports Exports 2010 2018 C. Eritrea Exports D. Eritrea Imports 80 50 60 40 Per cent Per cent 30 40 20 20 10 0 0 China EAC EAP EU27 Horn MENA South SSA USA China EAC EAP EU27 Horn MENA South SSA USA Asia Asia 2010 2018 2010 2018 4 SECTION 2 | THE STRUCTURE OF TRADE IN THE HORN OF AFRICA E. Ethiopia Exports F. Ethiopia Imports 50 30 40 20 Per cent Per cent 30 20 10 10 0 0 China EAC EAP EU27 Horn MENA South SSA USA China EAC EAP EU27 Horn MENA South SSA USA Asia Asia 2010 2018 2010 2018 G. Kenya Exports H. Kenya Imports 40 35 30 30 25 Per cent Per cent 20 20 15 10 10 5 0 0 China EAC EAP EU27 Horn MENA South SSA USA China EAC EAP EU27 Horn MENA South SSA USA Asia Asia 2010 2018 2010 2018 I. Somalia Exports J. Somalia Imports 100 30 80 25 20 Per cent Per cent 60 15 40 10 20 5 0 0 China EAC EAP EU27 Horn MENA South SSA USA China EAC EAP EU27 Horn MENA South SSA USA Asia Asia 2010 2018 2010 2018 Notes: Data are mirror statistics (partner country reporting) from UN Comtrade via WITS EAC = East Africa Community minus Kenya EAP = East Asia and Pacific minus China Horn = Djibouti, Eritrea, Ethiopia, Kenya, Somalia Mena = Middle East and North Africa minus Djibouti SSA = Sub-Saharan Africa minus Horn of Africa countries and EAC 5 CROSS-BORDER TRADE IN THE HORN OF AFRICA Figure 3: Ethiopia’s Trade with HOA Countries: 2010 to 2018 A. Exports to HoA Countries 80 60 USD Mill 40 20 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Djibouti Eritrea Kenya Somalia B. Imports to HoA Countries 50 40 USD Mill 30 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Djibouti Eritrea Kenya Somalia Source: staff calculation using data from United Nations Comtrade Database. Figure 4: Kenya’s Exports and Imports with HoA Countries: 2010 and 2018 200 150 USD Mill 100 50 0 Djibouti Eritrea Ethiopia Somalia Djibouti Eritrea Ethiopia Somalia Exports Imports 2010 2018 Source: staff calculation using data from United Nations Comtrade Database. 6 SECTION 2 | THE STRUCTURE OF TRADE IN THE HORN OF AFRICA In general, HoA countries export agricultural mainly industrial products. Eritrea’s exports are products to the global economy and primarily currently dominated by mineral products. For import manufactures.5 Table 1 shows the sector Djibouti and Somalia exports of animals are composition of officially recorded exports and important, many of which are destinated to the imports with the global economy in 2018. Exports middle-east. Vegetable products comprise a high are concentrated on agricultural products for share of exports from Ethiopia and Kenya reflecting Ethiopia, Kenya and Somalia while imports are the importance of coffee, tea and sesame. Table 1: Sector Composition of Global Export and Imports of HoA Countries in 2018 Exports Imports Djibouti Eritrea Ethiopia Kenya Somalia Djibouti Eritrea Ethiopia Kenya Somalia Agriculture 41.92 0.51 72.92 62.03 59.96 20.33 36.35 6.96 14.89 46.89 Industrial 33.88 99.46 23.96 36.38 40.00 78.93 62.75 80.40 83.29 52.65 Animals 27.84 0.04 4.20 2.02 53.09 0.66 1.39 0.23 0.86 3.98 Vegetables 13.50 0.39 67.88 54.71 13.87 12.78 24.96 5.14 9.57 18.70 Food Products 0.54 0.26 0.78 6.04 0.19 6.90 9.99 1.54 5.04 24.55 Minerals 0.08 71.59 0.72 4.35 0.06 0.27 1.77 0.04 1.02 0.96 Textiles and 0.55 0.51 8.11 8.18 0.06 10.41 1.53 8.75 8.65 9.00 Clothing Footwear 0.13 0.00 2.11 0.53 0.01 2.18 0.02 0.53 1.64 3.34 Machinery and 57.37 27.22 16.21 24.17 32.72 66.80 60.34 83.77 73.22 39.48 other manufactures Source: Insert source here. Table 2: Sector Composition of Exports and Imports of Ethiopia and Kenya to HoA Countries in 2018 Exports Imports Djibouti Eritrea Ethiopia Kenya Somalia Djibouti Eritrea Ethiopia Kenya Somalia Agriculture 30.72 15.63 53.33 11.96 1.22 47.62 74.57 17.56 79.79 72.44 Industrial 69.28 84.37 46.09 86.64 98.71 27.63 25.43 82.44 20.20 27.54 Source: Insert source here. 5 Note again that this is based only on import and export data for Ethiopia and Kenya. 7 CROSS-BORDER TRADE IN THE HORN OF AFRICA For recorded intra-HoA trade, manufactured Prior to 2017, however, Ethiopia’s official exports exports are typically more important that of maize to Kenya were negligible and the main agricultural exports. The share of manufactures exports were beans, footwear, cement, fruits in both Ethiopia’s and Kenya’s exports to HoA and vegetables (Appendix 2). The surge in maize countries is almost double that in trade with the exports in 2017 was due to a huge maize shortage rest of the world. Almost all of Kenya’s exports to in Kenya following the drought crisis in that year the region are industrial products. At the same time, (USAID, 2018). However, it may also be that in with the exception of Ethiopia, most countries are ‘normal’ times maize exports are not captured in also primarily importing agricultural products from official statistics. The officially recorded value of other HoA countries. Given the limited data, this Ethiopia’s live animal and meat exports to Kenya shows that Ethiopia is the major market in the is almost zero. Ethiopia has an enormous supply region for HoA countries exports of manufactures of livestock and is major cross border livestock and the main exporter of agricultural products exporter to countries like Kenya. However, this to the region. Somalia, the main import market is not being captured in official statistics. We for intra-HoA trade, primarily purchases vegetable will discuss below the available evidence on the products and processed food from the region. magnitude and structure of trade flows across the Kenya-Ethiopia border that does not rely The product composition of Ethiopia’s recorded on official data. The leading exports of Kenya exports to Kenya is highly variable over time. In to Ethiopia are manufactured goods. Kenya’s 2018 the leading exports of Ethiopia to Kenya exports consisted of medicines (7.5 million or consisted of beans (26.75%), cotton fabrics 11.3% exports to Ethiopia), pens (7.4 million or 11 (11.2%), vegetables (11%), and Rye (5.2%). In %), petroleum (7.24 million or 10.9%), fungicides 2017, Ethiopia’s second largest export was maize (3.4 million or 5%) and surfactant (3.42 million or accounting for 28% of total exports to Kenya. 5%) (Figure 5). Figure 5: Kenya Export to Ethiopia, 2018 8,2% 7,2% Petroleum Medicines 7,1% Pens 8,3% 6,4% Fungicides Plastic packing 58,6% 4,3% Others Insecticides Source: staff calculation using data from United Nations Comtrade Database. Vegetables dominate Ethiopia’s recorded exports Somalia show that the main traded product is soap, to Somalia and Djibouti. The four leading exports which accounts for 82 percent of the total in 2018. of Ethiopia to Somalia in 2018 were vegetables Fish and chemical products are also recorded in (79%), cements (5.4 %), potatoes (4.5%) and bovine Ethiopia’s imports. It is noteworthy, that trade in (3%). The small recorded imports of Ethiopia from livestock between these two countries appears to 8 SECTION 2 | THE STRUCTURE OF TRADE IN THE HORN OF AFRICA be negligible in the official statistics. Vegetables Kenya’s main export to Somalia in 2018 was and fruits are also the main recorded export tobacco. Tobacco and tobacco products from Ethiopia to Djibouti, accounting for 20% of accounted for 28% of the total bilateral the total in 2018. Other products that appear in flow from Kenya to Somalia followed by recorded exports are salt and cement (20%), road vegetables (10%), edible preparations (8%) vehicle (8%) and sesame seed (3%). The very small and pharmaceutical products (7%). as shown recorded imports of Ethiopia from Djibouti include in Table 13. Kenya’s recorded imports from moto vehicles (40%) and sauce and preparations Somalia in that year were negligible.6 (31 and carboard packing containers (7%). 5 Note again that this is based only on import and export data for Ethiopia and Kenya. There was a recorded import flow of USD 8.5 million related to tanks and other armoured vehicles which is likely to be a 6 non-market transaction. 9 10 SECTION 4 | UNRECORDED CROSS BORDER TRADE SECTION 3 Unrecorded Cross Border Trade 3.1 Overview of the Region Unrecorded cross-border trade (UCBT) is an intra-regional trade in the Horn (Little, 2007 and important phenomenon in the Horn of Africa.7 2009). During 1993-2000, for example, the total Studies suggest it supports about 17 million people value of Ethiopia’s unofficial cross-border trade along the different value chains, including crop in livestock in the region is estimated to have farmers, brokers, crop traders, livestock-keepers, averaged $105 million, 100 times greater than fodder suppliers, ranch owners, itinerant traders, the average annual official livestock export trade large livestock traders and transporters ( Tesfaye (Halderman, 2005). Similarly, a more recent study and Amaha, 2018). It is estimated that this cross- by Habtamu et al., 2016 shows that the annual border trade accounts for more than 95 per value of Ethiopia’s cross-border trade in livestock cent of total (officially recorded and unrecorded) with Somalia, Kenya and Puntland during 1998- 2014 was estimated approximately to be at $25, $9 and $10.5 million respectively, considerably Map 1: Commodities and livestock trade higher than the officially recorded livestock routes in the HOA trade. Map 1 provides a snapshot of the main border crossings and documented trade routes, particularly for livestock. Horn of African countries have a large potential to increase trade in livestock, both within the region and with third countries. Figure 6 illustrates the magnitude of livestock production in Djibouti, Eritrea, Ethiopia, Kenya and Somalia. The region’s highest concentrations of cattle, sheep, goats and camels are found in Ethiopia. In fact, Ethiopia has the largest cattle inventory in Africa and the 5th largest globally, behind Brazil, India, China and the United States. Kenya and Somalia have also considerable herds of cattle with 20 million Trade flow Capital and 4.7 million respectively. Somalia is home to Market ADM2 boundary the world’s largest camel population of around 7 Source: staff calculation using data from United Nations Comtrade million. Hence, there is a huge trade potential in Database. livestock between HoA countries. 7 In the existing literature, many sources refer to the phenomenon described in this paper as ‘’informal cross-border trade (ICBT)’’. However, this often carries a negative and unwarranted connotation as ‘’informal’’ can be easily confused with ‘’illegal’’. It also inaccurately reflects the reality of trade flows on the ground, as traders may indistinctly use both formal and informal crossing channels depending on a variety of factors, such as the nature of the goods, the value of their consignment, the length of the queue at the border, or the mood of the individual official on duty. The preferred terminology for this paper is “unrecorded trade” as this commerce is either missed or under-represented in official (customs) collected data at the border. 11 CROSS-BORDER TRADE IN THE HORN OF AFRICA Figure 6: Livestock population of HoA versus peer countries, number of heads, 2018 80 70 Millions (head) 60 50 40 30 20 10 0 Djibouti Eritrea Ethiopia Kenya Somalia Bangladesh Cambodia Pakistan Vietnam Camels Cattle Goats Sheep Source: FAOStat, 2020 There is substantial potential for intra-regional faces an increasing structural deficit in maize trade to bring agricultural commodities to as domestic production is unable to satisfy rapidly urbanizing towns and cities. The local demand. This is typically met by imports Horn of Africa exhibits a complex structure of from regional neighbours such as Tanzania and agriculture, within and across countries. Figure Uganda but also by Ethiopia. Dry bean is the 4 shows the production of key food grains most important legume and second to maize as including maize, wheat, sorghum, beans and a food crop in Kenya. In 2018, the country’s total rice across the Horn counties in 2018. The dry bean production was beans (0.86 million region’s highest concentrations of maize, wheat metric tonnes) the largest in the Horn of Africa. and sorghum are found in Ethiopia. Around 8 million tonnes of maize were produced in Official export and import statistics do not Ethiopia, which ranks third largest in Africa next capture the magnitude and importance of trade to South Africa and Nigeria and the 14th largest in livestock and food crops between the Horn globally. Ethiopia was also the second largest countries. Figure 7 indicates the total value of sorghum producer in Africa and the third in import and export in live animals and cereals the world next to the United States and Nigeria within the region in 2017. Ethiopia’s official live with a production of 4.8 million tonnes. Looking animal export in the Horn was only to Djibouti at wheat, Ethiopia was the second largest ($2.3 million) and Somalia ($1.4 million). Though producer in Africa and the 18th in the world, there is a huge cross-border trade in live animal producing 4.8 million metric tonnes in 2018. between Ethiopia and Kenya, there is no official In Kenya, maize is the principal stable food bilateral trade between the two countries in 2018 and the country produced around 3.6 million (latest available data). Looking at cereals, the metric tonnes in 2018, makes the 6th largest only official trade was Ethiopia’s maize exports maize producer in Africa. Nevertheless, Kenya to Kenya amounting $13 million. 12 SECTION 4 | UNRECORDED CROSS BORDER TRADE Figure 7: Food crop Production in HoA, 2018 9 8 7 Millions (head) 6 5 4 3 2 1 - Djibouti Eritrea Ethiopia Kenya Somalia Beans, dry Maize Rice, paddy Sorghum Wheat Source: FAOStat, 2020 The paper now proceeds to provide an overview food crop value chains in the borderlands of of unofficial bilateral trade between the Horn the region and seeks to draw attention to the of African countries. We discuss the available economic implications of cross-border trade in information on catchment areas, main trade the region and then finally the current state of routes and border markets of the region. knowledge on the major challenges that traders The paper then focuses on the livestock and in the region face. 3.2 Ethiopia-Kenya Cross-Borders Trade Informal cross-border trade between Ethiopia countries.8 Table 3 shows the key products that are and Kenya is substantial and vital for both traded in the borderlands of Ethiopia and Kenya. countries. A 2011 survey by the Kenyan National Ethiopia’s main exports include livestock, livestock Bureau of Statistics (KNBS) shows that informal products and cereals. On the other hand, Kenya’s cross border trade with Ethiopia represents more exports to Ethiopia are manufactured products than 25 percent of total trade between the two including processed food. 8 The KNBS survey covered 15 of the 24 official border stations in the country 13 CROSS-BORDER TRADE IN THE HORN OF AFRICA Table 3: Goods Traded in the Ethiopia-Kenya cattle from Ethiopia to Kenya through informal Borderlands cross-border channels since 1970s. The trade through the Moyale trade route is substantial. Ethiopia to Kenya Kenya to Ethiopia For example, in 2001 more than 58,000 head of Livestock Construction materials cattle were traded to Nairobi with a market value Cattle Veterinary drugs of about $11 million. More than 70% of livestock Goats trade in Moyale markets originate in Ethiopia. A Camel similar study analyzing livestock marketing in the Sheep Ethiopia/Kenya border area by Pavenello (2010) shows that a substantial number of castrated Livestock products Foods bulls from Ethiopia reach Kenya via the Moyale Milk Rice markets. On average, more than 300 castrated Hides and skins Biscuits bulls were transiting from Moyale Ethiopia to Flour Moyale Kenya daily during 2004 to 2009 Edible oil (Table 4). Tesfaye and Amaha (2018) estimated Sugar that 70 % of castrated bulls from Borana Zone, one of the largest cattle producing zones of Agriculture commodities Ethiopia, are trekked to Moyale to be sold in Maize Kenya markets. Beans Sorghum For other animals, such as camels and sheep Chat and goats, there are extensive regional value chains linking producers to overseas markets. Source: FEWS NET, 2018 Little et al. (2015), for example, finds that a large A. Livestock number of goats and sheep that are processed at Ethiopia’s abattoirs and then exported to the Most cross-border trade in livestock in Middle East are sourced from northern Kenya the borderlands of Ethiopia and Kenya is via unrecorded trade channels. Sheep and goats unrecorded. The pastoral communities in are moved from northern Kenya into Ethiopia southern Ethiopia are closely linked with through Moyale and then to Elwaye and Mega in northern Kenya’s markets. The incomes from southern Ethiopia. Some of theses animals are livestock sales are usually used to buy finished trucked to Addis Ababa for final consumption goods and food commodities. Cattle, camels, while others are transported to Djibouti for small ruminants and recently donkeys are the export though series of further transactions main live animals traded in Ethiopia-Kenya (Tesfaye and Amaha, 2018). There is often entails borders. two-way trade in animals across HoA borders. Camels cross from Ethiopia to Kenya while at Ethiopia is a key source of cattle for Kenya. the same time Kenya is a key source of camels Ethiopia has a strong advantage in the rearing to Southern Ethiopia through Moyale (Tesfaye of livestock and this is reflected in cattle prices and Amaha, 2018). The main source markets in that are up to 40% lower than cattle price in Kenya includes Mandera, Wajir, Garisa, Bangale, Kenya, particularly in Nairobi (Little, 2002). Isiolo, Marsabit and Moyale. The animals are Hence, there is substantial scope for cross- trucked to destinations in Ethiopia such as border trade. Mohammed (2010) documents Nazaret, for further fattening and then later that there has been a huge annual flow of trucked to Djibouti to be exported. 14 SECTION 4 | UNRECORDED CROSS BORDER TRADE Increasing international demand has led to B. Agricultural commodities a rise in cross-border trade of donkeys from Ethiopia to Kenya. Ethiopia’s 7.4 million donkeys Ethiopia is a major source of food in the have increasingly been the focus of attention to borderlands of Kenya, especially during periods fulfil a growing demand for donkey products, of adverse weather. The main agricultural especially in China . However, Ethiopia has products traded in the borderlands of the two banned trade in donkey skin and meat since countries include maize, sorghum and dry beans. 2017. While Ethiopia and most other African Ethiopia can be a particularly important source of countries have banned donkey slaughter, Kenya, maize for Kenya during adverse weather periods. in contrast has licensed donkey slaughterhouses This leads to somewhat erratic trade patterns. For and the export is growing each year. During example, in 2017, maize exports from Ethiopia to 2016-2018, Kenya exported a total of 16,544 Kenya reached about 95,000MT, considerably tonnes of donkey meat valued at KES. 1.72 higher than in years before resulting from the billion (KNBS, 2019). Studies shows that the drought conditions in Kenya in that year. Ethiopia donkey population of Kenya has declined since is also a key source of dry beans. During the following donkey exports in 2016. As a result, period from 2016 to 2020, nearly 122,031MT donkey traders are importing from neighboring of beans were exported from Ethiopia to Kenya countries to meet the increasing demand. (Figure 8). Figure 8: Cross-border maize and bean export from Ethiopia to Kenya: 2016-20 70 60 50 40 MT 30 20 10 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 2020 Maize Beans Source: staff calculation from FEWS NET, 2020 As climate change brings the risk of more twice as much maize as Kenya reflecting a larger frequent extreme weather events, the area under cultivation but also significantly importance of cross-border trade in maize and higher yields. But, measured in consumption other agricultural products is likely to rise. The of grams per person per day, the available scope for cross-border trade between Ethiopia evidence suggests Kenya (171) has much higher and Kenya reflects the differences in production consumption per person than Ethiopia (94) (FAO, and consumption of the two countries with 2009). Map 2 shows the geographic structure of Kenya being maize deficient in most years. maize production in the Horn of Africa and the Figure 9 shows that Ethiopia produces almost areas with the highest yields. 15 CROSS-BORDER TRADE IN THE HORN OF AFRICA Figure 9: Maize production and yields 9 40,000 8 Production (million tonnes) 35,000 7 30,000 6 25,000 Yield (hg/ha) 5 4 20,000 3 15,000 2 10,000 1 5,000 0 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Ethiopia Kenya Ethiopia Kenya Source: FAO, 2019 Map 2: The geography of maize production and yields in the Horn of Africa A. Yield B. Value of production Maize yield (kg/ha) Maize production (mt) 4,180 - 8,664 5,921 - 11,267 2,719 - 4,179 3,712 - 5,920 1,666 - 2,718 2,078 - 3,711 714 - 1,685 796 - 2,077 1 - 713 44 - 795 Source: Global Agro Ecological Zones (GAEZ), 2010 16 SECTION 4 | UNRECORDED CROSS BORDER TRADE C. Main Trading routes Kenya: This route, on the other hand, links Oromia’s region of Ethiopia to Moyale Kenya. There are two key cross-border trading routes The great majority of cattle sold in Moyale Kenya between Ethiopia and Kenya (Tesfaye and originate from markets mainly in Borana zone Amaha, 2018). in Ethiopia. Among others, Dubluk, Harobake, Arero, Dhas, , Taltale, and Hiddilola are the A. Filtu-Dolo-Suftu- Mandera, Kenya : This trade main cattle marketing centers in Borana zone. route links the southern part of Ethiopia’s Somali Dubluk, located 635km south of Addis Ababa region to Kenyan livestock markets such as along the main route to Moyale is the largest Mandera, Wajir and Garissa. market in Oromia region, with approximately 1,000 animals offered for sale per market day B.Negelle-Dubluk-Moyale, Ethiopia-Moyale, (Pavallona, 2010). Table 5: Catchment areas and markets Catchment areas Markets Terminals Net flow Cattle Oromia: Oromia • Nairobi Ethiopia-Kenya • Arero • Sololo • Isiolo • Dhas • Moyale • Mombasa • Harobake • Somalia • Taltale • Moyale • Dubluk and • Hiddilola Somalia: Kenya • Web • Moyale • Dolo • Mandera • Garissa Camel Kenya: Kenya-Ethiopia • Mandera • Moyale Oromia • Wajir • Adama • Garisa, • Bangale • Isiolo • Marsabit Goat and sheep • North Kenya Borana Addis Ababa Nairobi Kenya-Ethiopia • Southern Ethiopia • Elwaye • Mega Source: Pavallona, (2010) and Tesfaye and Amaha (2018) Moyale and Mendera are the two main livestock southern Somalia to Kenya’s largest livestock trading hubs across the border between Kenya markets, including Garissa, Nairobi and Mombasa. and Ethiopia.9 They connect prime livestock- The Moyale trading hub is located in the producing areas of southeastern Ethiopia and administrative center for two woredas in Ethiopia; 9 Moyale is located about 595 km from Nairobi and 675 km from Addis Ababa. It is split between the two countries: the larger portion being in Ethiopia (in the Oromia Region) and the smaller in Kenya (i.e. the capital of the Moyale district). 17 CROSS-BORDER TRADE IN THE HORN OF AFRICA Moyale of Somali region and Moyale of Oromia for cattle. Other cross border markets near Moyale and Moyale District of Kenya. Moyala Somalia is are Sessi, Arbale, Somare and Lammi (Tesfaye and a main market for camel while Moyale Oromia is Amaha, 2018). 3.3 Ethiopia-Somalia Cross-Borders Trade The main products traded along the Ethiopia- border trade between central Somalia and eastern Somalia border are livestock such as cattle, Ethiopia, Ethiopia’s main export is coffee, goats, sheep, goats and camels and commodities such sheep, camel and Khat while imports from central as maize, sorghum, rice, pasta and sugar. Several Somalia include pasta, wheat flour and food crops studies have documented that the movement of ( Little, 2002 and FEWS NET 2020). livestock trade in the Somalia corridor is the largest in the world, although the information is dated, The volume of cross-border livestock trade the estimated annual trade was $200 million in between Ethiopia and Somalia is substantial, with 2008 (Majid, 2010). Looking at the direction of most of the animals being further exported to flows, livestock and food crops flow from eastern the Gulf countries. Figure 10 presents the volume Ethiopia to Somaliland. Whereas rice, pasta, of unofficial cross-border exports of livestock wheat flour, sugar and other imported consumer from Ethiopia to Somalia during 2016-20.10 goods flow from Somaliland to eastern Ethiopia Livestock trade in the border increases seasonally (Little, 2002 and FEWS NET, 2020). The main in the third-quarter mainly due to extended high livestock catchment areas in Ethiopia are from demand both regional and in Middle Eastern Somalia regional pastoralists such as Gode, Liban Gulf States during the Haj festivities in August. and Afder. Several reports indicate that besides Cattle trade has increased substantially in recent domestic consumption, cattle crossing eastern years, from 66,000 in 2017 to 131,129 heads in Ethiopia to Somalia are then exported to middle 2020, an increase of almost 100%. Ethiopia is eastern markets. Little (2002) and Tesfaye and the main source of goats exported to the middle Amaha (2010) find that approximately 50 percent eastern countries via Somalia much of which is of livestock exports from the Port of Berbera unrecorded in official statistics. Exports over the originated in Ethiopia. In 2011, more than 3 million last five years (2016-2020) have averaged above live animals were exported from Somaliland to 200,000 head. Somalia is home to the world’s Middle Easter countries, a large percentage was largest camel population. Nevertheless, there are originated from Ethiopia (Little 2015). For cross- still substantial imports of camels from Ethiopia. 10 These data are based on FEWSNET data from five border crossings, Togwajale (Wajale), Bohotle, Goldogob, Beled weyn and Bula Hawo. 18 SECTION 4 | UNRECORDED CROSS BORDER TRADE Figure 10: Cross-border livestock exports from Ethiopia to Somali, 2016-20 120,000 100,000 80,000 Heads 60,000 40,000 20,000 - Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 2020 Cattle Camel Goats Source: FEWS NET, 2020. Maize Somalia in this year. The April-to-June three year average (1,700) MT) was 25 percent higher Between 2016 and 2020, a total of more than than the first quarter and 40 percent higher 23, 000 MT of maize was informally imported than the third quarter average (Figure 11). In from Ethiopia to Somalia (Figure 11). The addition to maize, Somalia import sorghum highest import was recorder in 2018 partly due from Ethiopia. Its import was totaled 9131 MT to the fall in domestic production of maize in during 2016 and 2020. Figure 11: Cross-border maize and sorghum exports from Ethiopia to Somali,2016-20 2,000 1,800 1,600 1,400 1,200 1,000 MT 800 600 400 200 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 2020 Maize Sorghum Source: staff calculation from FEWS NET, 2020 19 CROSS-BORDER TRADE IN THE HORN OF AFRICA Map 3: The location of sorghum production in the Horn of Africa Sorghum production Sorghum production (mt) 9,234 - 22,638 4,174 - 9,233 1,954 - 4,173 711 - 1,953 89 - 710 Source: Global Agro Ecological Zones (GAEZ), 2010 Ethiopia imports a large amount of rice from rice has been imported from Somalia in each of Somalia. The available evidence suggests that the last three years. However, with the increase this is re-exported rice previously imported from in domestic production of rice in Ethiopia, the outside of the region (FEWS Net, 2017). Figure 12 import has declined by 35 percent between 2017 shows that between 30 and 40 thousand tons of and 2019 (Figure 12). Figure 12: Cross-border rice export from Somalia to Ethiopia, 2016-20 14,000 12,000 10,000 8,000 MT 6,000 4,000 2,000 - Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 2020 Source: FEWS NET, 2020 20 SECTION 4 | UNRECORDED CROSS BORDER TRADE Main Trade Routes from markets in Somalia region such as Fiq, Kebri Dehar and Degeh Bur are assembled Unlike Ethiopia-Kenya trade, the Ethiopia- and trekked or trucked to Hart Sheikh and Somalia cross border trade routes are clan then to Hargeisa, Somaliland. This trading based. A large proportion of livestock especially route is also used in reverse direction to bring goats and sheep, come from areas populated by livestock from Somaliland and sell them in members of the Ogaden clan. The Ogaden clan Harta Shiekh market, Somali Region. inhabits much of the interior of Ethiopia Somalia region, while clans such as the Isse, Gadabursi, 3. Dire Dawa/Harar–Jijiga–Hargeisa–Berbera: Isaaq, Dhulbahante and Marehan straddle the This route connect traders from Harar and borders of Ethiopia and Somalia. The majority of Dire Dawa to Jigjiga which is the largest trade in the borders involves the movement of center of the Somalia region in Ethiopia. It is animals across clan and national boundaries. an important livestock market centers serving as an assembly point for livestock coming from There are three main cross-border livestock and Fiq town and surrounding areas of Jigjiga for crops corridors between Ethiopia and Somalia export prior to 2010.11 Another catchment area (Umer, 2007; Majid, 2010): near to Jijiga is Lefe Isa, an important livestock trading centre, especially for fattened cattle A. Berbera corridor: The cross-border trade from areas like Adama (Nazret). between the two countries goes through the Berbera corridor, coming from different trade 4. Gode-Gashamo-Burco-Berbera: This route routes. Currently, the main trade routes feeding serves mostly livestock coming from Gode, the Berbera corridor are: Afdher and Degeh Bur zones of Somali Region. The livestock that goes through this route 1. Tog wajale-Hargesia-Berbera: this is a route passes through Burco town, in eastern Somali that assembles livestock coming as far as before it reaches the port city of Berbera. Adama (Nazaret) and the northern parts of Somali region. Tog wajale is a town located B. Bosasso corridor : This route connects livestock in northwest Somalia on the border with traders from Ogadeni, Marehan, Dhulbahante Ethiopia, 230 KM from Berbera port. It is a and other clans of the eastern Somali Region vibrant market that handle both formal and of Ethiopi with Bessaso, Somalia. The main informal trade between the two countries. marketing borderlands are: It has been one of the largest livestock as • Warder routes - Bosasso well as commodities markets center at the • Kebri Dahar–Bosasso border. As such a modern livestock market center was built in 2006, a fenced enclosure C. Mogadisho corridor: The route is centered for holding animals and a rump for loading on Belet Weyne, an important agropastoral area livestock onto trucks. of Shebelli Valley, central Somalia. It connects Somalia region of Ethiopia and Mogadisho. It has 2. Hart Sheikh–Hargeisa: In this route livestock a relatively low cattle price. 11 Recently, federal authorities in Ethiopia sought to exert greater control over transactions at the Jijiga market and hence the cross-border trade has significantly reduced. The trade has shifted to Kabri-bayah and Harta Shiekh (EID, 2014). 21 CROSS-BORDER TRADE IN THE HORN OF AFRICA Table 9: The flow of livestock and crops between Ethiopia and Somalia Markets in Ethiopia Markets in Somalia Ports Tog wajale Hiran Berbera Jijiga Galgadud Bosaso Lafa Isa Mudug Mogadisho Gode Borama Kismayo Liben Belete Weyne Afder Wajale Harar Buholde Hargeisa Goldogob Burco Bula Hawo Kebri Dahar Teferi Ber Fiq, Qoraxay and Degeh Bur Source: Majid, 2020; Little, 2002 3.4 Ethiopia - Djibouti Cross-Borders Trade Ethiopia is the main source of livestock for sheep are Afar and Somali regions. The direction Djibouti’s re-exports of animals and livestock of flow of animals is entirely from Ethiopia to products (hide and skins) to the Middle east Djibouti. In addition to trade in livestock there countries. While officially recorded trade has are small flows of vegetables and fruits, spices, been declining, the actual amounts of exports, grained bean and pepper, animal products such dominated by livestock, has been increasing as milk, butter and honey (Taka and Azeza, 2002; (Tesfaye and Amaha, 2018). The main catchment 20Majid, 2010; Habtamu et al, 2016, Tesfaye and areas in Ethiopia that supply cattle, goats and Amaha, 2018). Table 10: Ethiopia-Djibouti cross-border trade Ethiopia to Djibouti Djibouti to Ethiopia Catchment area (livestock) Trade routes Khat Cigarette Dessie, Mille, Semera, Gewane Galafi, Yoboki and Dikhil Cattle and Camel Cooking oil Diredawa , Dewele Galile, Ali Sabih, Balbala, Hide and Skins Pasta, Macaroni, Wheat flour Dibouti Vegetables and Fruits Rice Source: Teka and Azez, 2002, FEWS NET, 2017 Khat (chat): Ethiopia’s nearly half a million by Belawi (2014), the daily demand of Chat for hectares of land are believed to be allocated to Djibouti is more than 20 tonnes. However, the Khat production (Feyisa & Aune, 2003). Currently demand fulfilled through informal exporters Khat production is estimated to be three times from Ethiopia (Habtamu et al, 2016). The main more than it was grown in early 2000s. Many collection centers are Awday and Haraghe farmers switched to cultivate khat from coffee highlands (Bedessa,, Chelenko, Felana, Karamille, and other crops, due to its higher and more Kobo Kulubi) (Taka and Azeze, 2002). Sorghum stable returns. Khat is now among the top export is the main stable food exported from Ethiopia products of Ethiopia. The main trading partners to Djibouti amounting to 4000 tons in the first are Djibouti and Somalia. According to the study quarter of 2020. 22 SECTION 4 | UNRECORDED CROSS BORDER TRADE Main Trade Routes is connected to Djibouti’s main territory market of Balbala in the capital city of Djibouti by road There are two main trade routes from Ethiopia to and rail with Yoboki and Dikhil markets lining Djibouti ((Habtamu et al, 2016).) this transport corridor. I) Galafi---Yoboki---Dikhil---Balbala: This II) Galali----Ali Sabih----Balbala: In addition to route connects the northwestern Ethiopia Galafi, the cross-border trade between Ethiopia to Djibout. Galafi is an important livestock and Djibouti takes place through Galile. This market market centers serving as an assembly point for linked with Balbala (main market) through Ali Sabieh livestock coming from Northwestern Ethiopia by railway. Dire Dawa and Dewele are among the markets such as Adama, Dessie, and Semera. It main assemble point in this trade route. 3.5 Ethiopia - Eritrea Cross-Borders Trade Teff and sorghum were the main staple food main products Eritrea imported from Ethiopia traded between Ethiopia and Eritrea before the (Ethiopia Ministry of Revenue, 2020). Ethiopia was war and border closure. Following the end of the importing sheep, garments and electronics from war, there has been some small-scale cross-border Eritrea. However, this was short lived as Eritrea trade, especially the more important informal closed border crossings in 2019. cross-border exports of teff from villages around Tsorona, Ethiopia to Eritrea (Loura, 2003). The Main Trade Route trade takes place through third countries. Majid (2010) documents that teff was being brought The main trading routes between Ethiopia and from Ethiopia through Djibouti and Dubai to Eritrea are: Massawa. Following the Ethiopia-Eritrean peace • Djibouti – Massawa deal in 2018, both countries reopened border • Dubai- Massawa crossings and cross-border trade flourished with • Bure – Assab no issue of currency exchange. Teff, edible oil, • Zalambesa-Serha fuel, red pepper, cement, and charcoal were the • Humera -Omhajer 23 CROSS-BORDER TRADE IN THE HORN OF AFRICA 3.6 Somalia - Kenya Cross-Borders Trade There is a significant cross-border trade in livestock routes connect Northeastern Kenya and Southwestern (cattle, camel, goats and sheep) and agricultural Somalia. It is a key route for exporting to Kenyan commodities between Somalia and Kenya (Table markets such as Nairobi. Liboi, a town in Southeastern 14). Though the volume of cattle traded varies Kenya at the border with Somalia is another major depending on the availability of pasture and water, town where cross border trade is important. It Awuor (2007) estimated that around 65,000 cattle per connects Afmadow, a prime area for cattle pastoralism year enters Kenya markets from Somalia. Rice, pasta, in Somalia with Garissa, Kenya’s second largest market sorghum and food aid maize are the main primary that hosts animals from Somalia. Little (2012) finds that agriculture commodities traded between Kenya and Afmadow accounted for about 25% of cattle supplied Somalia (Table 14). Northeastern province of Kenya is to traders in Kenya during the period between 1996 pastoralist and hence their agriculture production is and 1998. Figure 14 presents the volume of livestock very small. Sorghum, imported rice and pasta moves (cattle, camels, goats and sheep traded unofficially from Somalia to northeastern Kenya. across two selected borders, Bula Hawo and Doble, in Somalia and Kenya. Currently cross border trade The main trading border routes between Kenya and appears to be suppressed compared to 2016/17. Rice Somalia are Bula Hawo-Mandera and Afmadow- is a key product flowing from Somalia to Kenya but Liboi-Garissa. The Bula Hawo and Mandera trade is likely mainly re-exports. Table 14: Somalia-Kenya cross-border trade Somalia to Kenya Kenya to Somalia Trading routes Cattle Mirrah12 Bula Hawo-Mendra camel Maize Afmado-Liboi-Garissa Goats and sheep Tea Doble- Garissa Rice Sugar Pasta Sorghum Food aid maize Source: Little, 2015 Figure 14: Cross-border rice export from Somalia to Ethiopia, 2016-20 30 70 25 60 50 Heads (‘000) Heads (‘000) 20 40 15 30 10 20 5 10 0 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 2020 Cattle Sheep Camels Goats Source: FEWS NET, 2020 12 Mirrah is a mildly narcotic leave (Little, 2015). 24 SECTION 4 | UNRECORDED CROSS BORDER TRADE 3.7 Somalia-Djibouti Cross Border Trade Sorghum is the main food crop traded between 2020. There are also other food commodities the two countries. There is no official trade such as lentils, beans, pasta and maize and fruits between Djibouti and Somalia. However, there and vegetables such as mango, watermelon and is a large amount of informal cross-border trade onions exported from Somalia to Djibouti but the between the two countries. For example, about 10 amount is insignificant. Looking at livestock cross- percent of food crops consumed in Djibouti come border trade, significant number of cattle, camel from Somalia.13 Sorghum is the main food crop and goats were crossing from Somalia to Djibouti traded in the border areas of the two countries for eventual export to Saudi Arabia. However, Figure 15 shows that the amount of Sorghum livestock cross-border trade from Somalia to traded between the two countries increased Djibouti has significantly reduced following Saudi substantially in the period between 2016 and Arabia’s lifting of the Somali livestock ban in 2016. Figure 15: Cross-border Sorghum export from Somalia to Djibouti, 2016-20 2,500 2,000 1,500 MT 1,000 500 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 2020 Source: FEWS NET, 2020 Main Trade Route main commodities traded through this routes include food commodities cereals and legumes Loyada – Balbala: Loyada is the main entry (sorghum, lentils, beans, maize) and fruits and point for staple goods into Djibouti from Somalia. vegetables (watermelon, onions). Loyada market It is located on the border between Djibouti plays an important role in enhancing food and Somalia, 13 km from Djibouti city. The security in Djibouti. 13 About 90 % of the food commodities traded come from Ethiopia (FEWS NET, 2010). 25 SECTION 4 Value chain in livestock and food crops Livestock value-chain that starts with the collection of animals from farm gates moving on to local primary markets The Horn of Africa livestock value chain has (collection markets), and then to secondary developed over the years into a complex markets (regrouping markets) where livestock structure involving a wide range of stakeholders are regrouped and sorted into different classes including producers (herders), brokers, feed and based on appearance, size, color and conditions water suppliers, traders, transporters/trekkers, and then on to terminal markets and final buyers. processors, exporters and consumers. Figure If a primary market is near a border, cross- 16 depicts the general value chain for livestock border traders purchase animals from farmers 26 SECTION 5 | VALUE CHAIN IN LIVESTOCK AND FOOD CROPS for onward sale in a terminal market, which may Pastoralists and agro-pastoralists are the main be in an overseas country. Secondary markets supplier of livestock in the Horn of Africa. are relatively larger than primary markets, usually Smallholder farmers in arid and semiarid areas they are the main trading center in a district. The of the Horn are dependent on trade in livestock main actors in these markets include pastoralists, and livestock products. They are main supplier of local butchers, middlemen and export traders. animals at primary or collection markets. Farmers Pastoralists may directly sell their animals at (herders) also sell directly to secondary market secondary markets or purchase breeding stock. traders at secondary or regrouping markets. Brokers purchase animals for reselling to the Pastoralists are often located in remote areas, at butchers. Exporters purchase animals and further times in inaccessible terrain, far from town centers. fatten to export to overseas markets. However, When primary or secondary markets are far away while this summarises the broad structure of the from the farm gates, farmers hire trekkers to move value chain processes and interactions between their animals over several kilometers to reach to actors in the value chain are casual and change these markets. Long distance trekking is common to suit the nature of the border. particularly in Kenya-Somalia borders (Little, 2015). Figure 16: Livestock value chain in the Horn of Africa Herders/Producers Brokers/Buyers Agent Local primary market trader/broker Exporting country Secondary market trader/broker Importing country Middlemen Terminal market trader Re-exporter /Agents Middlemen Final buyer (Butcher) Retail consumers Source: FEWS NET Box 1: Cattle value chain from the Borana Zone (Ethiopia) to Nairobi (Kenya) Figure B1 presents the value chain for cattle from these markets trek to sell on to medium along the Moyale corridor. The largest share traders at Harobake livestock market. From of cattle sold in Moyale, Kenya are supplied there, they are trekked Dubluk for sale to large from lowland pastoralists in Borana zone, and cross-border exporters. Large traders then Ethiopia. As shown in the figure, there are move the cattle again to Moyale Oromia for at least three primary local markets including cross-border trade to Moyale Kenya. From Teltele and Elweya markets on the west of Moyale Kenya, cattle are then trucked to Harobake and Didi Hara east of Harobake. Nairobi, 730km away, where they are finally Pastoralist or small traders who collect cattle slaughtered (Pavanello, 2010). 27 CROSS-BORDER TRADE IN THE HORN OF AFRICA Figure B1: Cattle value chain along the Moyale corridor Borena Zone Transaction Import at Ethiopia- Storage between buyers Transport Market Kenya border in Movale & sellers Markets along the value chain Teltela Elweya Harobake Didi Harah Dubluk Ethiopia Moyale Oromia Kenya Moyale Kenya Nairobi Source: Insert here Box 2: Livestock value chain in Togwajale Figure B2 present a summary of the value livestock are purchased by export traders or chain for livestock trade along the Togowajale. their agents (wakiil), while local quality animals As shown in the figure, livestock is trekked are purchased by local traders (faashle). The mainly from Somali region of Ethiopia to trade in livestock between pastoralist and Togwajale. In Togwajale market center, exporters is facilitated by Brokers (Dillaal), livestock are sorted in to two groups: export who are respected by the community (FEWS quality and local quality. The export quality NETS, 2013). Figure B2: Livestock value chain along the Togowajale corridor attle value chain along the Moyale corridor Livestock CBT in Somalia region Ethiopia Trekked Somalia Brokers (Dillaal) in Togwajale Export quality Local quality Exporters (Wakiil) Local traders (faashle) in Togwajale in Togwajale Middle East countries Source: FEWS NETS, 2013 28 SECTION 5 | VALUE CHAIN IN LIVESTOCK AND FOOD CROPS The key features of the livestock value chain the Somalia the Muslim Hajj period (between July and region include (i) clan-based and trust-based trading September) causes sharp increase in price of cattle (ii) the role of price setters (iii) quality grades and and small ruminants (Musa et al, 2020). In terminal standards (iv) fattening to improve return:14 markets, however, butchers and middleman are the main price setters (Awour, 2007). In general, Clan-based trading: Cross-border trade in the along the value chain, the price gets lower all the Horn of Africa is sustained by high levels of social way down to the pastoralist. capital among key market actors. Mohamed (2008) document that livestock sales are Quality grading and standards: In spite of constraints transacted mainly based on ethnic and familial related to scientific capacity, livestock collectors in ties. This could be due to the uncertain business the Horn of Africa grade and standardize animals environment, absence of strong institutional or based on breed. Breed standard covers observable judicial intermediation and formal systems of qualities of animal such as color and appearance, credit enforcement, weak infrastructure, limited size and region of origin. In the case of goats and market support services and prevalent insecurity sheep grading, hair or wool characteristics are in pastoral areas. In the absence of ethnic ties, a used in addition to color, appearance and region trust-based network of pastoralists, intermediates, of origins (Samuel et al, 2000). traders and final buyers is important (Awour, 2007). Though clan-based and trust-based marketing Fattening: Along the value chain, small and facilitate trade, they can also distort the livestock large livestock traders in the Horn of Africa buy market in the region (Little, 2007). It may result animals from primary and secondary markets for clan-controlled monopoly market. For example, fattening. For example, in Adama city (92 KM in Ethiopia’s Oromia region, there are two ethnic away from Addis Ababa), there has been a large communities namely Garri and Borana that are private feedlot that buys and fattens cattle for sale involved in Ethiopia-Kenya cross-border trade. for domestic as well as cross-border traders. They In Ethiopia-Kenya trading routes, traders of Garri use agricultural processing by-products from the ethnicity do not participate in Borana dominated flour factory, oil mills, feed shops and crop mills markets such as those at Harobake and Dubluk for fattening the cattle ((Akiliu 2002). Similarly, in (Pavanello, 2010). Somalia, middlemen purchase and fatten animals for up to two years before selling them. Recently, Price setting: There are many factors that however, fattening practice has been declining determine livestock prices in the Horn of Africa due to constraints related to land access and the such as drought, holidays, seasons (Awour, 2007, high cost of fattening products. Moreover, from Little 2015). On average, livestock prices decrease the demand side, butchers’ demand for fattened during droughts as their weight declines. On the cattle is low and offer reduced prices compared other hands, prices tend to rise during holidays to pasture-fed cattle on the notion that the meat when meat is in high demand. For example, in from these animals has a lower shelf life. 14 (Little and Mohamoud, 2005, Awour, 2007; Mahmoud, 2008). 29 CROSS-BORDER TRADE IN THE HORN OF AFRICA Agricultural commodities seasons. They may also collect commodities value-chain from farms. In most cases, they use hired vehicles, non-motorized transport (donkey and The key cross-border agricultural commodities bicycles) or small trucks to collect commodities traded between Horn of Africa countries are from local markets or farms to their stores (Awuor, maize and maize flour, wheat and wheat flour, 2007). Accumulated agricultural commodities rice, sorghum and sorghum flour (East Africa from surplus areas are then transported to Cross-Border Trade Bulletin, 2019). In general, major export markets near or along borders. the process and main actors in the agricultural These markets usually have storage facilities. commodities value chain in the Horn of Africa Export assemblers in export markets dry, sort, are shown in Figure 17. The great majority of weigh, and package commodities for export. agricultural commodities are produced by Importers come to these markets to inspect, smallholder farmers who sell mainly to local choose and purchase commodities. Importing primary assemblers. Local assemblers are small traders have at least three options in selling their traders who bulk crops, vegetables and fruits commodities: i) small retailers some of whom from market surplus areas for onward sale to have small millers of maize, millet and sorghum, larger domestic and export markets. They may ii) large processors that usually receive high also be agents of secondary markets assemblers. quality products, iii) large traders for onward Local assemblers usually purchase commodities sale to processors, humanitarian organizations on local market days, especially during harvest or reserves (Awuor, 2007). Figure 17: Value chain in Crops Farmers Local primary assembler in market surplus areas Main transportation: trucks/lorry Main transportation: Trucks/Trailers Secondary assembler in major export market in the borderlands Exporting country Importing country Local small retails, small processors Processors agents, large processors Large traders Consumers Source: FEWS NET, 2013 30 SECTION 5 Impact of Cross-Border Trade Cross-border trade is an important part of the opportunity for poor households particularly for economies of HoA countries. In the Horn of Africa, women (see for example, Aklilu, 2002, Little, 2005, it is estimated that cross-border trade supports Mohammud, Mejid, 2010, Pavenello, 2010 Bouet about 17 million people including pastoralists, et al, 2018). agro-pastoralists, small and medium local traders, cross-border traders, brokers, butchers, Cross-border trade in the Horn of Africa is trekkers and others (OECD, 2017; Tesfaye and crucial for food security, improving food Amaha, 2018). Among others, cross-border availability, food use and stability in the region. trade in the region contributes to greater food Little (2010) documents that trade in the border security, enhanced income earning opportunities areas facilitates cross-financing in trading and reduced poverty, generating employment agriculture products. In many parts of the region 31 CROSS-BORDER TRADE IN THE HORN OF AFRICA the income from livestock and livestock products to enables herders to provide for their children’s trade is used to subsidize grain and other food education, housing and other basic needs. Along consumptions. This is particularly the case for the value chain, cross border trade also increases herders living in food deficit zones. For example, income of traders, trekkers, fodder produces and along the Ethiopia-Somalia trade routes, income traders, brokers and other marketing service from livestock trade to finance grain imports has providers in direct or indirectly (Amhaa and improved food security in the area (Umer, 2007). Tesfyae, 2014). Cross-border trade constitutes a This has been also documented along other vital source of livelihood for the poor, in particular routes including southern Ethiopia-northern for low-income and low-skilled traders in border Kenya (Teka et al 1999; Mahmoud 2003), districts (UNCTAD, 2019). southern Somalia-northern Kenya (Little 2000; 2006), and eastern Ethiopia-Djibouti (Teka and Cross-border trade widens employment Azeze, 2002). opportunities for both men and women in the border areas where there is no alternative There are three main channels through which employment (Amaha and Tesfaye, 2014). In the cross-border trade affect the food security in Horn of Africa, although the cross-border trade the border areas (Take (2001)): First, cross-border has been dominated by men, it has contributed trade increases and broadens available market to job creation for women who may not have supply and demand for livestock and food crops in the time or support necessary to enter into the region. Hence, pastoralists in the borderlands formal employment channels (Boute et al, 2018). benefit from the increase in demand for their Comparing employment opportunity in the animals and commodities. For example, Togwajale borderlands, the participation of women is much market is key to food security of households in more prevalent in Ethiopia-Somalia borderlands, catchment areas of Eastern Somalia region who where Somali women are very active in small sell livestock and livestock feeds to Somaliland in stock marketing, than the Ethiopia-Kenya border order to buy food and non-food items. In addition, areas which is male dominated (Berihanu, 2016). imported food and none-food commodities from Cross-border benefits women by providing Berbera port are trucked to Togwajale cross into business opportunities for those who engage in Eastern Ethiopia (FEWS NET 2013). Second, people the cross-border trade. Tiki (2012) shows that trade in the border consume food items produced in in goat and sheep, fruits and vegetables in Moyale other neighboring countries or imported from is dominated by female traders who buy and sell elsewhere that could not be supplied cheaply in the same market. Women are also found from domestic markets. For example, eastern working in hotels and restaurants that are linked to Ethiopia imports rice, wheat flour, pasta, sugar and cross-border trade. Further, although women are vegetable oil form Djibouti and Somalia borders. rarely involved with the cattle trans-border trade, These products, however, are either unavailable or they often participate in the value chain such as relatively more expensive in the domestic markets. through fattening animals or engaging in grain Thirdly, by generating employment opportunities, production. Finally, women participate in small- cross border trade provides incomes to purchase scale trade-related activities in the border areas. food (Little, 2015). Improvement of food security is For example, along the Ethiopia- Djibouti trade particularly important in food-importing countries routes there are large numbers of women traders suffering from drought which is common in the in Dire Dawa, Shinnile and Melka Jebdu, who sell Horn Africa countries. food items to traders crossing to Djibouti. (Amha and Tesfaye, 2014). For many women in these Cross border trade in the Horn has contributed towns, cross-border trade activities are the only to improvements in smallholder income and source of income to contribute to their families’ poverty reduction. This trade has been found subsistence and wellbeing. 32 SECTION 7 | MAJOR CHALLENGES IN CROSS-BORDER TRADE IN HOA SECTION 6 Major challenges in cross- border trade in HoA The potential for cross-border trade in the Horn challenges facing the different actors involved in of Africa countries is undermined by a range the cross-border trade value chain. These barriers of constraints. Table 14 summarizes the main are then discussed in more detail below. Table 14: Constraints face by pastoralist/agro-pastoralist and cross-border trader in the Horn of Africa Production Marketing Pastoralists and • Lack of/limited access to credit • Poor transport infrastructure Agro-pastoralist • Climate change/Drought • Ineffective marketing information • Low adoption of improved systems technologies • Low and variable price • Limited access to feeds in dry • Insecurity season • Border closure and domestic • Animal disease movement retraction • Water inadequacy • Lack of appropriate slaughtering, • Declining land base cold chain storage • Absence of value-adding practices • Livestock bans Traders • Lack of/limited access to credit • Poor transport infrastructure • Lack of appropriate slaughtering, cold chain storage • High tax and transaction costs in market systems • Border closure and domestic movement retraction • No foreign exchange service • Livestock bans Source: Little, 2015 The Horn of Africa’s poor road, market and 2007). The market infrastructure on the Kenya communication infrastructures are key obstacles side is relatively poor. Comparing infrastructure to cross-border trade in the region (Akililu et al., of two markets, Borena (Ethiopia) and Mendra 2013). For example, the feeder roads in the northern (Kenya), Pavanello (2010) shows that Mandera had Kenya that connect Isiolo-Moyale highways are no basic livestock market infrastructure such as mostly not paved and often get flooded during the fences delimiting the market yards, no holding rainy seasons, making the markets inaccessible grounds and partitions to separate small from big (USAID, 2018). As such the transport cost in ruminants. The region also suffer from shortage of northern Kenya accounts for 25 to 40 percent water, fodder and veterinary services particularly of the total cost of livestock delivered at terminal along transit routes for trekked animals (Joosten, markets from northern pastoral areas (Awuor, Muzira and Mintesnot, 2017). 33 CROSS-BORDER TRADE IN THE HORN OF AFRICA Transporting animals is negatively impacted by countries in the region. both poor road quality as well as lack of designated vehicles for animal transportation. For example, Insecurity is one of the major risks facing cross- in northeastern Ethiopia animals are taken from border traders in the Horn of Africa. The main collection sites to feed lots and then transported source of business insecurity in the region includes to Djibouti. In most cases, animals are trekked ethnic conflict, war, highway robbery, confiscation for several kilometers and then loaded on trucks. and business rivalry. There are regular border and Because trucks are overloaded and not specifically ethnic conflicts within the market catchment area designed for carrying live animals, transportation in Southern and southeastern Ethiopia, northern causes stress and damage (bruises) to the animals. Kenya and northern and south eastern Somalia. As a result, cross-border traders face a rejection These conflicts often lead to the closure of the rate of 2 – 5% of such animals upon inspection at border and disruption to cross-border trade. In the port of export. Poor road infrastructure and recent years, cross-border trade between Somalia inadequate transport services undermine the and Kenya has ceased several times due to conflict exploitation of economies of scale in livestock and Kenya’s concerns about insecurity in Somalia. trade (USAID, 2013). In 2019, following a maritime dispute over a 62,000-square-mile triangle of the Indian Ocean, Despite an improvement in communications the Government of Kenya closed the border with infrastructure, challenges remain especially Somalia with cross-border trade banned in the regarding the expansion of cell phone networks process. Similarly, trade between Ethiopia and in border regions. The internet penetration rate Somalia has been disrupted numerous times due in Somalia and Ethiopia is very low at 2 % and to clan conflict. in 2002, the clash between two 18% respectively in 2017 (latest available data).15 sub-clans, Ogaden (Somalia region in Ethiopia) Expanding access to cell phones would contribute and Isaaq initiated the burning of up to 88 trucks to making cross-border trade more efficient, for owned by Isaaq businessmen (Eid, 2014).16 In example, by increasing access to information 2010, conflict spread in Aware area, affecting the on market prices and market demands. Another Daror/Rabaso and Gashamo trade routes. key infrastructure-related constraint to cross- border trade in the Horn of Africa is the lack of Even in relatively peaceful periods, there is storage and warehouse facilities. Most of the the threat of confiscation of their products by border markets in the region have no modern government officials. This is particularly the case warehouses. The existing storage facilities are on the Ethiopia side as the government considers small in size and not well ventilated. In this regard, this type of trade in commodities and animals as the Moyale corridor is the exception as there contraband citing tax evasion and consequent are several storage facilities, most of which are loss of local and foreign exchange revenues privately owned (USAID, 2018). Finally, of particular (Umer, 2007; little, 2015). In addition, there is a importance to livestock cross-border traders is mis-placed perception among Ethiopian officials access to veterinary facilities, holding grounds, that Kenya is being a sole beneficiary from the and water points but these infrastructures are cross-border trade between the two counties poorly developed in the border areas of most (Akilu, 2008). 14 (Little and Mohamoud, 2005, Awour, 2007; Mahmoud, 2008). 15 Internet users are individuals who have used the Internet (from any location) in the last 3 months. The Internet can be used via a computer, mobile phone, personal digital assistant, games machine, digital TV (ITU, 2017) 16 The Somali Regional government at the time accused the Ogden National Liberation Front (ONLF) of being responsible destruction of the trucks (Eid, 2014). 34 SECTION 7 | MAJOR CHALLENGES IN CROSS-BORDER TRADE IN HOA Lack of access to market information is a well- kinsmen, friends, and associates. Less than 10 known constraint to cross-border trade in the percent of the total number of traders have access Horn of Africa. Pastoralists and agro-pastoralists to formal sources of credit. Along the Moyale in the border areas usually have little information Corridor, local stakeholders involved in the cross- about the price of their commodities or animals border trade have not been using formal financial in their local and other markets (Adugna, 2006; services (USAID, 2018). This is partly due to religious Awour, 2007, Little, 2007). Hence, livestock reasons as many of the traders are Muslim. or crops pricing is characteristically highly personalized and dependent on the severity and Livestock trade in Horn of Africa has been urgency of household needs rather than formal regularly constrained by disease outbreaks (Akililu standards. For example, along the Ethiopia-Kenya 2013, Tiki, 2014). In the south and southeastern cross-border trade routes, farmers in Borana Ethiopia, accessing veterinary services for animals zone and in Mandera arrive at markets with no crossing the border is minimal. The prevalence knowledge of the price of their commodities of animal disease, absence of robust provision of and animals on the day. Instead, they obtain the veterinary services and lack of effective monitoring information from brokers and other producers, and sustainable disease reporting systems across either at end markets or at markets in Borana zone countries in the region intensifies the risk of spread itself (Pavenello, 2010). However, some organized of livestock diseases. The occurrence of animal cross-border cooperatives and associations disease across the border affects both exporting in Ethiopia and Kenya have come together to and importing countries. Animals disease in the share access to information about prices. In region affects not only the intra-regional trade Borena zone, for example, there has been a well- but also trade to the Middle East. For instance, organized system whereby traders’ cooperatives Ethiopian and Somalia faced three animals export and private traders share price information on bans from Middle Eastern countries from 1997/8 cattle, goats and sheep. Producers, on the other to 2010 due to an outbreak of Rift Valley Fever. hand, were excluded from the information loop and hence had very little bargaining power in the Animals and food exports are often subject to price negotiations (Little, 2010). high taxes in the region. In addition to fees, the government of Ethiopia has often applied exports An inadequate formal banking system and limited bans and export taxes on agricultural products and access to credit effectively act as a barrier to entry products such as hides and skins. For example, at for small entrepreneurs into the cross-border the border town of Moyale, Ethiopia, in addition livestock trade in the region. Farmers also have to municipality tax, local officials collect fees at limited access to formal credit even though most town markets when an animal is sold and another of them possess a herd of substantial value (Aklilu tax if the animal crosses the border for resale in et al, 2013). As such farmers and small traders rely Kenya. Compared to cattle, tax on goats and on a range of different informal financial institutions sheep is quite high. Based on livestock prices in to support their business. Little (2001) found 2013, tax on goats and sheep was 2.5 times more that about 95 percent of cross-border traders in than tax on cattle or camel traders (Little, 2015). Southern Ethiopia obtained credit informally from (This section to be updated). 35 CROSS-BORDER TRADE IN THE HORN OF AFRICA References Aklilu, Y. (2002). 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