The Informal Sector, Hybrid Governance, and Legitimacy

The fact that the state regulatory framework may be largely absent in certain contexts does not mean that there is a complete absence of regulatory practices, as the statist discourse would have us believe. Instead, processes of regulation and legitimation should be understood beyond a narrow statecentric view. This is supported by the concept of “hybrid governance,” which highlights how governance is the outcome of complex “processes of negotiation, contestation and bricolage” (Hagmann & Péclard Reference Hagmann and Péclard2010:544) among a number of actors, groups, and forces (including state or nonstate, local or national) and through which state institutions are sustained, contested, and remade (see also Cleaver et al. Reference Cleaver2013).^{Footnote 3} Under these circumstances, the state no longer has a monopolizing or privileged position “as the political framework that provides security, welfare and representation . . . . It has to share authority, legitimacy and capacity with other structures” (Boege et al. Reference Boege2008:10). Governance in this situation is no longer “state governance,” but rather “hybrid governance.” The analytical advantage of this approach is twofold: we move away not only from a strict legal-rational Weberian understanding of the state, but also from the concepts of “failed” or “collapsed” statehood, which are often used to analyze situations of limited state presence.

Focusing on hybrid governance practices allows us in particular to highlight the profound difference between the state’s image and its practices. While the image of state autonomy is particularly powerful—“a power separate from, even above, the fractious groups interacting in a given space” (Migdal & Schilchte Reference Migdal, Schlichte and Schlichte2005:6)—the practices of state agents often contest this, as they are influenced by a variety of nonstate groups and incentives. This has certainly been observed in the study of cross-border trade (see Titeca & De Herdt Reference Titeca and De Herdt2010, Reference Titeca and De Herdt2011), in which the state’s regulatory interventions often do not correspond to the “image” of the state, but rather result in “practical norms” that are different from official norms (Olivier De Sardan Reference Olivier De Sardan2009). For example, state agents might decide to apply unofficial lower taxation rates for cross-border traders or not to tax certain categories, such as disabled traders or mothers with babies. Although this is in theory illegal (and does not correspond to the “image” of the state), these practices help the state to function.

The absence of the state regulatory framework and authority, or situations of “fragile statehood”—in which “the state has not yet permeated society and extended its effective control to the whole of society” (Boege et al. Reference Boege2008:6)—does not necessarily lead to a “vacuum of authority” (Rotberg Reference Rotberg and Rotberg2003:21), but instead has to be seen as an outcome of negotiation processes among a variety of actors. The fact that state agents do not have a monopoly on regulation does not mean that regulation is absent. For example, the work of Raeymaekers (Reference Raeymaekers2010) shows how rebels and traders provide governance in eastern DRC, while Menkhaus (Reference Menkhaus2007) shows how “governance without government” is provided in Somalia by a range of Somali nonstate actors. Lund’s (Reference Lund2006) idea of “twilight institutions” highlights this hybridity between state and nonstate agents. In twilight institutions, regulatory processes defy clear-cut distinctions between state and society, public and private; institutions that are not part of the government and often are not considered legal often exercise major functions of public authority and affect the execution of the state’s authority. In this context, public authority is not something that is static but instead is in a constant process of formation, with governance practices varying in different fields (Bayart et al. Reference Bayart, Geschiere and Nyamnjoh2001, cited in Lund Reference Lund2006) and in different places (Titeca & De Herdt Reference Titeca and De Herdt2011). With regard to the informal economy in sub-Saharan Africa, MacGaffey argues that the “real economy of Zaire is not haphazard but institutionalized, operating according to a system of rules known to all participants” (1991:152). More recently, it has been shown how social regulations and “extralegal” regulatory mechanisms underpin informal cross-border trade in particular (see Flynn 1997; Titeca Reference Titeca2006, Reference Titeca2009b; Raemaeykers Reference Raeymaekers, Wilson and Donnan2011). As Roitman (Reference Roitman and Hibou2004) highlights in the Chad Basin, there exist emergent sub- and transnational regimes of power and authority that have effective control over economic resources and are in direct competition with the nation-state. In other words, the “real” governance of the economic sector involves a variety of state and nonstate actors, and in this context it is better to speak of a “hybrid” or “pluralization” of economic regulatory authority.^{Footnote 4}

The hybrid nature of these governance practices has profound implications for their legitimacy; the negotiated character of governance practices itself implies that legitimacy is not a stable or given factor. Rather, it is a “conflict-ridden and open process” involving a variety of actors such as “‘big men’ and politicians as well as their audiences and ‘judges’” (Lentz 1988:47). A number of analyses focus on how actors construct or establish their legitimacy by means of “bricolage” (Hagberg Reference Hagberg2006; Moore Reference Moore, Cohen and Toland1988; Forster Reference Förster2010) and the different “repertoires” they use in doing so. Another way of looking at legitimacy is to look specifically at how the “audience” and “judges” (i.e., the citizens and population) perceive particular practices, how they accept or contest the legitimacy of these practices, and how these perceptions and responses affect state activities and state-building. In both ways, legitimacy is continuously reestablished through conflict and negotiation among the different actors.

By analyzing a number of commodities and attitudes toward taxation and state involvement in the trade of goods in West Nile in general and Panyimur in particular, this article, then, shows how the regulation of these goods involves hybrid institutions based on particular ideas of what constitutes legitimate economic practice. This has profound implications on the way in which the Ugandan government functions and regulates trading practices in the area. As will be seen, the state does not have a regulatory monopoly on institutions, which instead are the outcome of negotiations and power configurations among the different actors involved. Notions such as legality and illegality, in other words, are secondary to the functioning of these hybrid institutions.

Setting the Scene: Panyimur and Cross-Border Trade

Informal cross-border trade in the marginalized West Nile region of Uganda has long historical roots, predating colonial intervention. There is a close ethnic interconnectedness between this region and contiguous countries. Members of the main ethnic group of northwestern Uganda, the Lugbara, also live across the border in northeastern Congo. Members of another ethnic group, the Kakwa, live in the three bordering countries, while the Alur people (the dominant group in Panyimur) live on both sides of the Uganda–DRC border. Colonial intervention, which tried to tax long-standing economic interactions, pushed much of this trade into informality. In Uganda’s postcolonial period, refugee movements across the different borders further encouraged cross-border interactions (see Titeca Reference Titeca2009a; Meagher Reference Meagher1990). Finally, the collapse of the Ugandan economy in the 1970s, the lack of a clear policy to address the costs of structural adjustment programs, and rising poverty levels pushed the economy countrywide into the informal sector (Muwonge, Obwana, & Nambwayoo Reference Muwonge, Obwana and Nambwayoo2007) and the border region of West Nile into the informal cross-border trade. As a result, most of the towns in West Nile survive on this informal trade, and Panyimur is no exception.

Arrive in Panyimur midweek and you find a small, quiet, and mostly impoverished town on the shores of Lake Albert. There is one unpaved road running through the town. Head eastward on the weekly bus and after a long and bumpy ride you will reach Kampala; head west along an ever deteriorating road and you will arrive in eastern DRC. At the time of research the region was seriously disadvantaged by a lack of infrastructure—none of the roads were tarmacked, making travel and transportation of goods difficult, and this was exacerbated by the lack of public transport. The roads that did exist were narrow and potholed, some becoming unnavigable in the rainy season. This has improved somewhat of late with the discovery of oil in Lake Albert. On most days in Panyimur there is a small market catering to the basic needs of the local community, a handful of boats at the landing site, and one or two shops selling manufactured goods. However, stay a few days longer and on the weekly market day you will see this “marginalized” fishing community become a cluttered, heaving market bustling with thousands of traders from across Uganda, the Congo, Kenya, and South Sudan as Panyimur is transformed into a trading center for the entire West Nile region and beyond. It is an area known throughout the region for its fish market, around which markets for other consumer goods have sprung up.

Cross-Border Trade and Regulatory Authority

As the above examples suggest, the Ugandan state by no means has a monopoly on the regulation of cross-border trade in Panyimur, nor does it have the capacity to implement all of its regulations. In the case of charcoal, for example, the office involved (the National Forestry Authority) does not have the capacity to visit Panyimur regularly, and thus is rarely present. Similarly, the Uganda Revenue Authority (URA)—which is supposed to regulate cross-border trade—does not have a nearby office and can visit the area only sporadically. In this context, the state lacks the capacity to enforce its regulatory framework. As a URA official declared, “We can’t actually chase all these smugglers: we cannot waste our resources and all these small guys crossing the border with some foodstuffs or other goods. They are too many. We have to try and focus on the big ones!” (interview, Kampala, March 4, 2011). Moreover, any attempts at doing so are seen as illegitimate by the local population. Even in Arua—the regional center where these state institutions are based—state agents encounter similar problems in implementing state regulations (Titeca & De Herdt Reference Titeca and De Herdt2010).

The fact that the state does not exercise regulatory authority over these commodities does not mean, however, that this border trade is unregulated or that it occurs entirely outside the law. Public authority, rather, is what we have called a “hybrid” affair, exercised in a twilight area between state and society, public and private. The charcoal traders, for example, while dealing in a product that is strictly illegal, are regulated, as we have seen, by a range of formalized arrangements with the local authorities: traders have to pay for licenses and market dues, and the market is regulated by a tender. Similar arrangements are in place for the other products: many of the commodities involved (fish, fuel, timber) do not adhere fully to national regulation but rather are governed by a locally negotiated system. In many cases, however, the system includes the evasion of market dues, and the non- or partial payment of taxes, practices that are in fact venerated rather than stigmatized. One trader, speaking of a colleague, said, “He dodges his taxes, and why not? Look, he has managed to make some money, the government aren’t going to help us, we have to help ourselves” (interview, Panyimur Trading Centre, March 15, 2009). These practices are based on deeply held perceptions of what constitute socially acceptable economic practices, involving what Raeymaekers (Reference Raeymaekers, Wilson and Donnan2011) calls “the social foundation of economic rationality.” The “particular ways cross-border markets are being reproduced as socially accepted institutions” (2011:319), in other words, says a great deal about the twilight area between legality and legitimacy and the nature of this “bricolage” or hybrid arrangement.

Let us look at petrol first. Given that petrol never crosses at official border points and is traded secretively, people are aware that its trade is not carried out legally. Despite this, there is no local perception that the OPEC Boys’ activities are unethical or illegitimate. Rather, there is a general sense of camaraderie and cohesion in the community’s ability to outsmart the government officials, exemplified by the involvement of local residents in warning illegal fuel sellers of the approach of revenue officials. According to one of the OPEC Boys, “they are ringing us when they see someone coming, they don’t want us to get caught” (OPEC Boys focus group, Panyimur Trading Centre, April 3, 2009).

Similarly, the production and sale of charcoal are not deemed to be in any way illegitimate, despite being explicitly illegal. This is mainly a result of the ubiquitous use of charcoal for cooking, even by the wealthiest in the community. The use of charcoal cannot be prevented simply by banning it, particularly in a region where its production and widespread use are representative of the impoverished manner in which many people live. And it is not feasible for people to conceptualize traders who are providing a vital resource, particularly in the face of no viable alternative, as behaving illegally. The case of the timber trade, however, is less clear cut. On the one hand, the way in which the trade is conducted is similarly ambiguous: while some traders follow most of the formal regulations necessary for cross-border trade (crossing at the official border points, paying standardized fees at the border, and paying transport dues in Panyimur), others who pass through official border points manage to bribe their way across, relying on the collusion of government officials. On the other hand, the timber trade, for the most part, is perceived by the population as less legal than the trade of petrol or even the explicitly illegal charcoal, despite its apparently greater adherence to government regulations. Why is this the case? This brings us to the next point: the different “registers” used to judge legitimacy by the local population, and how these relate to taxation and cross-border trade.

The Registers of Legitimacy in the Informal Cross-Border Trade

In a study of legitimacy and “big men” in Ghana, Lentz (1998) shows how judgments of legitimacy tend to differ depending on the relationship of the “audience” to the individual men. She refers to this audience as “moral communities” that have different judgments and expectations of legitimacy, depending on the specific context and the claims they wish to make. These different registers of legitimacy and moral judgment are managed both by the “big men” themselves and by those who judge them (see also Comaroff & Roberts Reference Comaroff and Roberts1981, cited in Lund Reference Lund2006).

A similar argument about legitimacy can be applied to the subject of cross-border trade, on which the views of the “moral community” not only differ over time (Lund Reference Lund2006:693), but also among different commodities. As a moral community, a population judges the legitimacy of the trade in each commodity in two different registers. First, the legitimacy is evaluated according to the fulfillment or nonfulfillment of the “social contract” between the state and the citizens by which the state promises redistribution of the proceeds involved. In a context in which this “social contract” is perceived to a large extent as unfulfilled, informal cross-border trade is also judged according to a second register, as the main survival mechanism for the population.

As many scholars have shown, state enforcement of its regulatory framework is closely related to the legitimacy of its practices; “state actors must legitimize their authority to appear acceptable to those they govern” (Abrams Reference Abrams1988:76, cited in Hagmann & Péclard Reference Hagmann and Péclard2010:543). This is particularly pertinent for taxation of goods and for the “formal” character of the economy. The way in which taxes are paid and public revenue is collected can be seen as recognition (or not) of the authority of the state actors involved (Lund Reference Lund2006:696). The less legitimate the state is perceived to be, the less inclined the population will be to pay taxes. This notion of state legitimacy is closely tied to how the state fulfills its duties in the “tax-mediated social contract” (Moore & Putzel Reference Moore and Putzel2000:20). On the one hand, taxation is seen as the citizen’s obligation toward the state. On the other hand, the state is expected to deliver services in return for taxes. If the state does not honor its side of the contract, both taxation and the state itself will be considered illegitimate.

Taxation is thus at the heart of the social contract, or “the agreed upon rules of the game that govern the distribution of resources and obligations across society” (Addison & Murshed Reference Addison and Murshed2001a:2). Social contracts are particularly important for the legitimacy of state institutions, as “the creation of a legitimate state is intimately bound up with the creation of fiscal institutions that are acceptable to the majority—or at least do not provoke mass revolt” (Addison & Murshed Reference Addison and Murshed2001b:1–2). This is related to the way resources are spent, such as the distribution of fiscal spending (in which certain groups may feel marginalized), but also with the imposition of taxes. In other words, the state’s authority is largely based on the extent to which it fulfills its claim to legitimacy. As Lund (2006:693) argues, “The exercise of authority is intimately linked to the legitimacy of the particular institution. Not only in the sense that an institution has to be legitimate to exercise authority, but especially because the actual exercise of authority also involves a specific claim to legitimacy.” The less the state is able to comply with this legitimacy register—its “tax-mediated social contract”—the less legitimate it appears.

These ideas are relevant for cross-border trade in West Nile and Panyimur. For example, although the trade in timber is not very dissimilar from that of other commodities, it is seen as illegitimate; the profits associated with timber are believed to be extremely high, with wealthy individuals tending to dominate the trade and government officials perceived to benefit inordinately from it. Larger timber traders in the region smuggle their goods relatively easily through their connections with government officials, while smaller traders run much bigger risks: they smuggle timber across the border on bicycles, and do not possess the necessary connections to prevent confiscation. Moreover, since timber is not a product that is heavily consumed by the regional population, cheaper timber would not particularly benefit the population; as one female fish trader said, “some timber . . . is coming through here but not much. Anyway, it is not for us, we are building our homes traditionally. The timber . . . it is for the rich men” (interview, Panyimur Trading Centre, March 19, 2009).^{Footnote 7} As a result, unlike with other goods, when large-scale timber traders have their goods confiscated, there tends to be a sense that they got what they deserved, or indeed that the confiscation was just for show, given the collusion between timber smugglers and the local government.

Although the trade in fish follows a similar pattern as the one in timber, the regional community views it very differently in terms of legitimacy. This difference is largely connected to the perception of the fish trade as an egalitarian enterprise and the fact that people in this region rely to a significant extent on their fishery resources as a source of high-quality protein and income generation through local sale and exports. According to one trader, “We need fish to survive, so everyone is doing it. It’s not legal, but there’s nothing wrong with it. We know that, the government knows that, that’s why they aren’t chasing the fish traders like they chase the timber smugglers” (traders’ focus group, Panyimur Trading Centre, April 19, 2009). Also, the fish trade is not seen to disproportionately enrich government officials. A similar example is the trade in charcoal, which—unlike the other commodity trading—is completely illegal, but seen as highly legitimate: there is no viable alternative to the use of charcoal in much of Uganda, so banning it seems to reflect a complete lack of understanding on the part of the government of how marginal communities survive on a day-to-day basis. Also, individuals who produce and sell charcoal are usually living in extreme poverty. The mere existence of the charcoal market is indicative of the poor economic conditions in the area, since the production of charcoal is extremely laborious and the profit margins are miniscule. Therefore, individuals tend to resort to charcoal production and sale only in the absence of other viable economic opportunities.

A final example of the complex registers in which legality or illegality is evaluated is the payment of market dues, which is largely avoided because of the relative burden they impose. These market dues are perceived to be illegitimate based on a belief that monies are misappropriated, since the market was developed largely through the efforts of the traders themselves and the state has hardly invested in it. The perception of misappropriation of market dues has been reinforced by the belief that a district official held the tender for two of the more profitable markets in the town, whereas legally in Panyimur subcounty no individual or entity can hold more than one tender at a time. At a community meeting held during the research period there was a lot of animosity directed toward this individual, who was accused of enriching himself at the expense of his electorate. A number of respondents gave this as an example when asked why they avoided paying market dues. As one female Congolese fish trader living in Panyimur said,

Furthermore, the general secretary of the Business Community felt that it was the businesses themselves that were not only facilitating local economic development, but ultimately carrying out government functions: “We are doing the work of the local government. It creates some tensions, but if they are not doing it, then we must” (interview, Panyimur Trading Centre, April 12, 2009).^{Footnote 8}

In summary, it is not the way in which a product is traded or crosses the border that ultimately shapes community perceptions of legality or legitimacy, but rather who is perceived locally to benefit from the trade of that product. Local ideas of what constitutes a legitimate tax are based on ideas of redistribution of the proceeds, and these views also have to be understood within a larger political-economic context. As described elsewhere (Titeca Reference Titeca2009a; Titeca & De Herdt 2012), people in West Nile and northern Uganda in general perceive themselves to be marginalized by President Museveni’s regime. They feel they are being suppressed by the government and denied the necessary investments for development and access to key positions in government and the civil service.^{Footnote 9} They have traditionally voted with the opposition, and a range of rebel movements have been founded during the Museveni regime such as the Lord’s Resistance Army in Acholiland (Adam et al. Reference Adam2007), the West Nile Bank Front, and the Uganda National Rescue Front II in West Nile (see Gersony Reference Gersony1997). The people in Panyimur share these sentiments of marginalization and exclusion, believing that the central government either neglects them or actively punishes them for the region’s association with Amin’s discredited regime. As one trader argued, “people in the government don’t want us to develop, because they fear that if we develop we are going to support rebel forces here” (interview, Arua, May 20, 2012). The residents of the Panyimur subcounty have indeed not benefited from the economic development that has been experienced by their southern countrymen. In this context, taxes are perceived to be illegitimate because there is no reciprocal provision of public services or development of the area. Rather, people believe, as another trader said, that “the money is going to the government to oppress us!” (interview, Arua, May 19, 2012). This became particularly evident during a “tax education day” in West Nile in early 2012 when many people spoke about the “uselessness” of tax, which was “only used for the south.” A widely voiced sentiment was that “the government only continues to suppress us through inadequate services: electricity is poor, roads are poor, and worst is the employment sector: people from here never get jobs!” (interview with NGO program officer, Arua, May 19, 2012). A female produce trader said, “These are not taxes, it is just more money for the government workers, they are stealing what little we have” (interview, Panyimur Trading Centre, April 12, 2009); according to a male fuel trader, “the idea of dodging taxes is rampant. If you go full legit, you will a lose a lot and the money is not being used well. We are not benefiting” (interview, Panyimur Trading Centre, April 2, 2009).

In this context, people feel that the only option is the informal cross-border trade, which is perceived as a “source of economic freedom and empowerment” (Roitman Reference Roitman and Hibou2004:32) and an indigenous way to fund development. This does not mean that any activity involving wealthy businesspeople and government officials is considered illegitimate. It rather highlights how a particular arrangement that does not respect the social contract and “survival” needs of the community is registered as such. A local saying (in Alur) is “dhyang camu kubalake”—“cattle eat where they belong”—meaning, in this context, that local trade should be for the benefit of the local people. The way in which government officials participate in the timber trade is seen as an extension of broader political-economic power relations in which the government and wealthy businesspeople are “invading” an activity that should be directed to the population’s survival. But a contrary example of this is the very lucrative contraband trade in cigarettes and small batteries (“dry cells”) in West Nile, which to a large extent is monopolized by a small number of wealthy traders with privileged access to government officials (particularly army officials) who manage to smuggle these goods into the country and distribute them easily. Although this coalition leads to an almost de facto monopoly of the cigarette and batteries trade, this trade is not seen as illegitimate, because these large-scale traders have been very active in providing services to the wider region. They have constructed churches, built roads, provided health care—in other words, they largely adhere to the “social contract.” They are therefore perceived, as one NGO actor said, to be useful citizens who are “providing services where the state has failed” (interview, Arua, July 12, 2012) (see Titeca 2012).This position is also reflected in the community’s collusion in warning the OPEC Boys about approaching revenue officials.

The views of the local population were perhaps expressed most pointedly in the language of predator and prey, thief and victim, that is used commonly to refer to the government and electorate: the URA “swoops” down on traders (interview with trader, Panyimur Trading Centre, April 17, 2009) and “snatches” their goods (focus group discussion with OPEC Boys, Panyimur Trading Centre, April 3, 2009). This notion of the state as ravaging predator is not peculiar to Panyimur, and similar sentiments were regularly expressed throughout the course of the research. In this region, therefore, the state has failed to accomplish the task of making state “predation” legitimate and other forms of “predation” illegitimate: legal taxation is considered an illegitimate and unfair incursion by the state into the local economy, whereas avoiding certain taxes and breaking certain laws is deemed to be legitimate and is indeed admired by the majority of the population.

Hybrid Governance, Regulation, and Power

A key question that remains is why particular practices persist despite being considered illegitimate by a sizeable “moral community.” For example, why does the trade in timber continue to function, although it is considered largely illegitimate? In order to understand this, it is necessary to consider the difference between a “moral community” and what Bierschenk and Olivier de Sardan (1997) call a “strategic group.” While a “moral community” exists primarily in an abstract sense—referring, for example, to a particular population such as that of the small-scale traders—a strategic group “defend[s] shared interests in the appropriation of resources, in particular by means of social and political action” and “var[ies] according to the specific problems involved, i.e., according to the local issues” (1997:240–41). In other words, strategic groups form and disintegrate in the course of specific struggles and undergo continuous reproduction and transformation (see Lund Reference Lund2006). In this process, the production of public authority and how regulatory practices manifest themselves are based to a large degree on power. In the timber trade, wealthy businessmen, in collusion with local government, are dominant and therefore are a “strategic group” with an interest in perpetuating this profitable trade. Although the population finds this trade illegitimate, no “popular” strategic groups have been formed to defend their opposing interests.

In the case of fuel, by contrast, the traders have organized themselves as the relatively powerful OPEC Boys; they are present all over the area, are large in number, and have a form of organization. They clearly act as a strategic group that is able to translate its judgments into concrete actions. In different areas in West Nile, the OPEC Boys have on several occasions attacked government institutions (such as the police or revenue authorities) when government actors had done something they considered illegitimate, such as using excessive violence against one of the smugglers. Since the trade is illegal, they still have to make particular “arrangements” with government actors, but their relative power allows for the existence of what is considered a “legitimate” social contract by all actors involved. In the past, breaching this contract has had far-reaching consequences; when there were periods of increased confiscation of fuel in the late nineties, for example, a number OPEC Boys joined rebel groups in the area.

Fishermen function as a similarly effective strategic group. In 2002 an incident took place in which the Fisheries Department seized and burned the nets of seventy-five fishermen and confiscated their fish. These nets were illegal: they were undersized and led to the trading of undersized fish in the market. The government action, however, sparked local protest among the community of fishermen, and the wider population threatened to vote for the opposition in the upcoming elections. Ultimately, the government compensated the affected fishermen, despite the fact that they were breaking the law.