Profitability of the informal cross-border trade: a case study of four selected borders of Botswana

Abstract

In this study, the views of 520 informal cross border traders, obtained using systematic sampling and snow ball techniques from four selected border posts in Botswana, were used to show how profitable ICBT is. The results of the analysis show that the monthly profit generated by ICB traders is over ten times the minimum wage of workers in Botswana and gross profit margin from this trade is 54.99%. Whereas about two million United States dollars is generated as profits from the exported goods in the ICBT annually, the corresponding profits from imported goods is over five million United States dollars. A multiple regression analysis shows that the two most significant (p < 0.01) positively correlated variables and predictors of profit generated from ICBT are the initial startup capital (r = 0.807, n= 520) and the number of years in ICBT business (r = 0.221, n = 520). The study recommends that the Government of Botswana should recognize ICBT as one of the arms for poverty alleviation and policies should be put in place to regulate this trade, enhance access to funding for ICB traders to start up their business, as it has potentials to help in economic diversification. Key words: Profitability, informal, cross-border, trade, gross profit margin.