IMPACT OF INFORMAL CROSS BORDER TRADE OF LIVESTOCK ON PASTORALISTS’ INCOME: THE CASE OF MOYALE DISTRICT, SOUTHERN ETHIOPIA

Abstract

Ethiopia is believed to have the largest livestock resource in Africa. However, lack of modern marketing channels, low market-oriented livestock production and other unclear factors are challenging for livestock trade through the informal channel. Empirical evidence on the determinants and impact of participation in informal cross-border trade of livestock is limited. This study therefore examined the impact of informal cross-border trade of livestock on income among the Moyale district pastoralists of the Borana Zone. Both primary and secondary data sources were employed. Primary data were obtained through households survey, focus group discussions and key informant interviews. A multi- stage sampling technique was employed to select kebeles and 260 sample households. This study also obtained and interviewed 36 livestock informal traders who were identified using the snow ball technique. The collected data were analyzed using descriptive statistics, marketing performance evalution methods, Heckman two-stage and endogenous switching regression. The results of this study indicate that the main actors in informal cross-border trade of livestock in the Moyale district are pastoralists, trekkers, collectors, small and large-scale informal traders. The share of pastoralists is highest when they directly sell to small-scale informal traders, accounting for 91.73% in small ruminants and 84% in large ruminants. In the first stage Heckman, results show that participation in informal cross-border trade of livestock is significantly and positively influenced by the amount of credit received, but negatively affected by education level, sources of market information and distance to the border market. In the second stage Heckman, results indicate that the quantity of livestock supplied to informal cross-border trade from the study area is significantly and positively influenced by the number of livestock owned, and negatively affected by the distance to the border market. Participation in informal cross- border trade of livestock is associated with a 41.3% gain in average income. This study concludes that socio-economic and institutional factors play important role in determining participation and quantity supply, and pastoralists are more likely to enjoy higher income by participating in informal cross-border trade of livestock. Given the significance of informal cross-border trade of livestock in improving pastoralists’ income, policies should be directed towards formalization and reducing the constraints that hinder participation. Particularly, the findings imply that increasing of number of livestock owned by promoting improved production should be encouraged and supported by credit provision, and improvement in marketing facilities should be considered to minimize the long-distance to the border markets. Integrated and differentiated policy interventions that promote participation in non-farm activities, and formalize informal cross-border trade of livestock should be considered to ultimately improve the income of pastoralists in the study area