The Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA) has sounded the alarm that the value of illicit trade is overtaking that of legal trade activities in Ethiopia.
A series of studies published by the Chamber last week reveals that the Customs Commission’s regulatory capacity is limited to covering just 10 percent of the contraband trade in Ethiopia.
Members of the Chamber presented their findings during the second Anti-Illicit Trade Summit held on December 28, 2023. They shed light on five studies on the status of illicit trade in the livestock, pharmaceutical, tobacco, textile, and logistics industries, as well as a separate study on the legal frameworks surrounding illicit trade.
The studies found that illicit trade is chronic in these industries, strangling competition and fueling health complications as harmful, sometimes carcinogenic goods, are smuggled in unchecked.
Each of these industries, excluding tobacco, has seen the market share of illicit trade rise to at least 50 percent in recent years. Illicit tobacco trade, however, has fallen from an estimated market share of 66 percent to 50 percent.
The performance of livestock export, in particular, has seen a shocking decline in the last decade. Livestock exports generated more than USD 148 million in 2014/15. The figures had fallen to less than USD 17 million in 2022/23.
Alebachew Nigussie (PhD), director of enterprise management at the Ministry of Industry, presented the study on illicit livestock trade, which claims that 90 percent of the contraband live-animal trade is out of the regulatory oversight of the Customs Commission.
He attributes the lack of capacity to a shortage of customs checkpoints.
The research study estimates that more than 1,200 heads of cattle are smuggled past the country’s borders in trailers and low-bed trucks each day. Illicit trade hotspots include the towns of Elidar, Galafi, Afambo, Aysha Dawele, and Togochale.
The study estimates the value of the illicit livestock trade at USD 19 million every month.
This money partly goes to neighboring countries such as Somalia and Kenya, where traders buy Ethiopian livestock on the illicit market and re-export the animals, typically to Gulf countries.
Officials at the Customs Commission have their reservations about the studies presented by the Chamber.
Segni Safa, Director of Intelligence at the Commission, refutes the findings.
“Whether the studies include all research criteria required for a complete assessment is questionable,” said Segni.
However, the director did not deny the Commission is facing problems at some of its checkpoints.
“Security issues are keeping personnel at our checkpoints from performing their duties,” said Segni. “Issues in the country’s north and conditions surrounding Moyale are examples.”
The Customs Commission reports seizing contraband valued at 3.6 billion birr during the first quarter of this fiscal year.
Nonetheless, the study on the country’s textile industry indicates that 53 percent of the market is controlled by contraband trade.
Agazi Gebreyesus, secretary-general of the Ethiopian Textiles and Apparel Producers Association, presented the research on the textile industry, which indicates that a flood of second-hand clothing from markets in the US, Taiwan, Thailand and Europe has smothered domestic manufacturers.
The study reveals an up to 40 percent reduction in domestic textile and apparel production as a result, and a reduction of up to 50 percent in direct and indirect employment in the textile industry.
It also estimates that 13.7 billion birr worth of contraband clothing was smuggled into the country between 2012 and 2018, accounting for 48pc of domestic textile and garment supply.
“Only 10 percent of contraband textiles entering Ethiopia are seized,” said Agazi.
The Customs Commission reports the seizure of 1.5 billion birr worth of textiles over the last five years. Textiles and clothing valued at an estimated USD 54 million are smuggled into the country every year, with the government thought to lose close to USD 45 million in revenues annually as a result.
The ministries of Health and Industry estimate the Ethiopian pharmaceutical market’s value at USD one billion. Upwards of 85 percent of this market demand is met via imports, of which illicit imports account for a whopping 35 percent share.
“Customs agents almost always find illicit drugs when they conduct a search or investigation,” said Worku Badada (PhD), an associate professor of pharmacology at Adama Hospital Medical College.
He presented the study on illicit pharmaceutical trade, which reveals that more than a third of antimalarial drugs in Ethiopia are unregistered.
Data from the UN shows that as many as 267,000 deaths in Sub-Saharan Africa are linked to counterfeit and substandard antimalarial medicines every year.
The studies presented by the Chamber on illicit trade in the logistics sector highlights that the value of goods smuggled into and out of Ethiopia is increasing at an exponential rate.
“Data from the Customs Commission only shows what was seized,” said Melaku Ezezew (Eng.), president of the Chamber. “This is just the tip of the iceberg. We can only imagine what the real value of illicit trade looks like.”
Fesha Yetagesu, a state minister of Trade, disclosed illicit trade and capital flight are inextricably linked.
“Most capital flight, 55 percent, occurs via the illicit trade market,” he told The Reporter.