E-Commerce and the Digital Economy

Digital Economy and Continental Integration: Creating value for Africa

This session explored the opportunity created by the African Continental Free Trade Area (AfCFTA) to lift Africa in the digital era through a concerted digital policy for the continent. Panelists presented the dimensions that need to be factored in by African policymakers to make sure States be ready to engage in e-commerce and that digital trade leaves no one behind and contributes to SDGs.

Speakers shared lessons learned from various countries or initiatives that should inspire policy makers as they negotiate and implement this regional trade agreement provisions on e-commerce. Key lessons and learnings include using a bottom up approach to make sure businesses’ -and especially SMEs- needs, challenges and level of readiness are considered in shaping the right e-commerce provisions. Policy makers need to understand the local culture to unlock the potential of e-commerce and digital trade. Countries also need to make the right investments in infrastructure to increase coverage. The private sector cannot operate the digital transformation alone; governments will need to be deeply involved to secure an inclusive development of digital trade. Cross border e-commerce should be at the heart of this regulatory framework to ensure scaling up SMEs platform businesses. Finally, the e-commerce provisions of AfCFTA should promote a digital economy ecosystem which will remove trade barriers, manage risks and place the interests of consumers and SMEs, which provide 80% of employment in the continent, at the heart of its priorities.

CUTS, with the financial support of GIZ, conducted a research project on e-commerce and African integration, with a focus on analyzing measures to ensure African e-commerce policy agenda is inclusive. CUTS released a first study on the effects of specific e-commerce provisions in trade agreements, and relevant lessons for small developing countries including in Africa. The second will look at mainstreaming gender measures in the digital trade agenda for inclusive development. The third study, which findings were presented in the session, explored approaches for African countries to tap into opportunities for e-commerce within the AfCFTA framework and present user-friendly information for policymakers among the complex and new world related to the digital economy. Among key findings, CUTS explained that the AfCFTA offers a unique opportunity to mobilize African leaders and policy makers to create an enabling environment for e-commerce, given its inevitable global rise.

CUTS highlighted the implications of e-commerce for SDG 5, 8, 9 and 17, if used in an inclusive way, and the Agenda 2063 of the African Union, which mentions the importance of promoting e-commerce to further accelerate the African integration. While Africa is called to expand its exports outside of the continent, CUTS reiterated that intra-African trade is key for the continental development, as this is where African countries could benefit from the most growth and value addition. This is why the AfCFTA e-commerce protocol must support SMEs to adopt the right business models to promote intra-African trade. CUTS exposed the components that could be included within strong regulatory frameworks that would allow SME navigate cross border e-commerce process chains successfully, such as infrastructure, e-government, e-finance, e-payment, customs, trade agreements, customers rights protection, dispute settlement, trust issues, cybersecurity, data protection, etc.

The study suggests 4 steps to make AfCFTA succeed in its role to promote intra-African trade using e-commerce. This involves (1) building on the already existing African Union Digital Transformation Strategy; (2) developing a bottom up ecosystem approach from SMEs and customers to policymakers; (3) scaling up national and regional strategies and policies to promote a digital ecosystem, taking into consideration e-trade, e-logistics, and e-legislation to facilitate cross-border payments and interoperability between financial and ICT businesses; and (4) formulating common positions toward issues in multilateral negotiations over the digital economy development, given the numerous challenges posed by a complex world filled with unclear definitions, new and multi-layered concepts, and plagued by a very steep digital divide among and withing countries.

The World Food Programme (WFP) offered another perspective on the role of the AfCFTA and the digital economy to help fighting hunger and support food supply chains in Africa. WFP shared three findings: the first is that regional trade integration can play an important role to support SDG 2 and achieve the zero-hunger objective. A third of the WFP 8 billion USD budget is dedicated to development, especially to support rural livelihood and food security. More resilient rural livelihoods have a direct effect on curbing the need for humanitarian operations. The second finding is that AfCFTA offers a great opportunity to support WFP procurement efforts to buy food from smallholders and promote rural development. The agreement can also support B2B e-commerce trade with smallholders and hence reinforce the food supply chain. China used a similar strategy to lift its smallholders’ farmers and Africa needs to learn from that experience. The agreement can also be a catalyst for youth employment in rural areas. For this, digital access and skills will need to be reinforced. The third finding is around current challenges. One challenge relates to investments in infrastructure, such as warehouses and storage but also digital infrastructure, which is currently lacking at various degrees across the continent. Buying platforms need to consider the supply chain component, with smallholders’ farmers often being in isolated zones. China stood 15 years ago where Africa is now, so this challenge can be overcome, although the main additional obstacle is the number of different countries involved in Africa.

The UN Economic Commission for Africa (UNECA) offered its view on what should be the priorities of AfCFTA policy makers when devising a continent-wide protocol for e-commerce. It recalled the importance of learning from previous attempts, using the case of WTO. This organization failed to negotiate a global mandate on e-commerce, because the proposals presented were designed for large markets and big digital companies. Small countries did not see their interest in such global protocols. AfCFTA is an opportunity to use a bottom up approach that will put emphasis on the processes needed to allow SMEs scaling up their business. UNECA also made several substantive suggestions, especially on the cooperation framework, to make sure policy makers can collaborate across borders to look at trade issues such as competition, harmonized regulations, etc. UNECA also pledged for AfCFTA to become a space to discuss challenges and controversial components linked to e-commerce.

The last panelist, sharing the perspective of African trade negotiators, elaborated on what the negotiators for the AfCFTA will need to address adequately the digital economy and e-commerce components of the agreement. The core message is one of collaboration with specialized organizations like the WTO to achieve a holistic approach and robust e-commerce rules. An effective collaboration between WTO and AfCFTA negotiators will offer the latter an opportunity to tap into very relevant experiences in relation to digital economy and e-commerce and ways to find solutions to current challenges and to harmonize legal systems across the region.

In conclusion, panelists and participants acknowledge the important challenges ahead that need to be tackled for Africa to reap the benefits of the digital economy and e-commerce. E-commerce started in developed countries and created a steep digital divide with the rest of the world. Currently, only 1.3% of e-commerce worldwide is done in Africa. The current pandemic also forced governments to review the effectiveness of their domestic and regional supply chains, in a world where international trade has been highly disrupted. Digital economy and e-commerce are a key component to strengthen both regional integration and national security and resilience in face of upcoming similar threats. This should involve creating one market for goods and services in Africa, along with African-based digital infrastructures and data governance systems. AfCFTA must be the platform for consolidating e-commerce rules and regulations across the continent and discuss openly disagreements. This is an opportunity for Africa to become a global player in trade and have the voice of the continent heard.