Paul Esselaar Alison Gillwald Ashly Hope Gavin van der Nest John Stuart a tralac collection© 2020 tralac, Australian Government and the Government of Sweden First published May 2020 Published by the Trade Law Centre (tralac) P.O. Box 224, Stellenbosch, South Africa, 7599 ISBN: 978-0-9946861-6-9 Editors: Trudi Hartzenberg, Ashly Hope and John Stuart Language editors: Alta Schoeman and Lucinda Cruickshank. We would like to thank Verena Wehmeyer for assistance with language editing. All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. Acknowledgements This publication has been supported by the Australian Government through the Department of Foreign Affairs and Trade. The views expressed in this publication are the authors’ alone and are not necessarily the views of the Australian Government. The support of The Government of Sweden in the publication of this book is acknowledged. The Swedish International Development Cooperation Agency (Sida) does not necessarily share the views expressed in this material. Responsibility for its contents rests entirely with the authors. ii Table of Contents INTRODUCTION: THE AFRICAN CONTINENTAL FREE TRADE AREA AND THE DIGITAL ECONOMY 1 CHAPTER 1: THE DIGITAL ECONOMY IN AFRICA 9 A FRICA ’ S DIGITAL CONNECTIVITY DIVIDEND IN WAITING 9 John Stuart 9 D IGITAL C ONNECTIVITY NEEDED TO UNDERPIN THE A FRICAN C ONTINENTAL F REE T RADE A REA 13 Alison Gillwald 13 CHAPTER 2: TRADING, E-COMMERCE AND THE DIGITAL ECONOMY 17 T RADING IN THE DIGITAL ECONOMY 17 Ashly Hope 17 E NGAGING WITH THE INTERNATIONAL E - COMMERCE TRADE AGENDA FOR STRUCTURAL TRANSFORMATION IN A FRICA 20 Ashly Hope 20 CHAPTER 3: PARTICULAR ISSUES IN THE DIGITAL ECONOMY 23 L EVERAGING THE TRADE INFORMATION DIVIDEND FOR A FRICA 23 John Stuart 23 C ROSS - BORDER E - COMMERCE : A N OPPORTUNITY FOR WOMEN 27 Ashly Hope 27 E DUCATION IN THE 21 ST C ENTURY D IGITAL W ORLD 30 John Stuart 30 W HERE TO FOR A FRICA ’ S S ILICON V ALLEY ? 35 John Stuart 35 iii I MPROVING ACCESS TO FINANCE THROUGH FINTECH 40 Ashly Hope 40 A DIGITAL INDUSTRIALISATION POLICY ? 44 Ashly Hope 44 CHAPTER 4: AFRICA IN THE DIGITAL ECONOMY 49 John Stuart 49 CHAPTER 5: THE RISING POTENTIAL OF E-COMMERCE FOR TRADE AND DEVELOPMENT IN AFRICA 69 John Stuart 69 CHAPTER 6: AFCFTA AND THE DIGITAL REALITY OF TRADE TODAY 108 Ashly Hope 108 CHAPTER 7: DIGITAL LEDGER TECHNOLOGY – OPPORTUNITIES FOR AFRICA’S TRADE 137 Gavin van der Nest 137 CHAPTER 8: WHAT IS COMESA’S DIGITAL FREE TRADE AREA AND SHOULD SADC HAVE ONE TOO? 160 Ashly Hope 160 CHAPTER 9: ALIGNING DATA PROTECTION LAWS IN AFRICA TO FACILITATE E-COMMERCE 172 Paul Esselaar 172 CHAPTER 10: FINDING AFRICAN SOLUTIONS FOR THE TAXATION OF DIGITAL TRADE: CASE STUDIES OF THREE AFRICAN ECONOMIES 179 Ashly Hope and John Stuart 179 FINAL THOUGHTS 212 Introduction: The African Continental Free Trade Area and the Digital Economy At any given moment, international trade is being transacted across Africa. The supermarket buyer emails the supplier she met at a recent trade show to place a sample order. The car manufacturer uses the proprietary supply chain software for their company to obtain more seatbelts for the factory. The graphic designer sends a branding package via an online freelance platform to her client. The informal cross-border trader WhatsApps her customers for today’s orders. The farmer checks the weather app. New accounting software is downloaded from abroad. A truck driver uses an online map to navigate a new route. A shipper secures warehouse facilities using the online booking system of a logistics firm. A customs agent processes a shipment of goods using ASYCUDA.1 A firm researches new markets for its products. A learner buys a new laptop from an online store across the border. A migrant mine worker sends money home to his family. A consultant submits a report. A student watches the lecture of their degree course online. A tourist pays a deposit for a table at that hot new restaurant they will visit on their upcoming holiday. A couple streams a Nollywood film. An entrepreneur gives a motivational speech to new businesses. A project manager manages a multi-country project. A radiographer analyses an x-ray image sent from her colleague in a neighbouring country… The wheels of international trade are powered by the Internet. From the smallest informal trade to a major supply agreement, contracts are transacted online; whether via email, e- commerce store, or digital platform. Any formal trade relies on the Internet for implementation – financing, documentation and logistics are all digitally driven, and becoming more and more so. Whether it is an emailed order, an online purchase, or merely the financial arrangements behind the transaction, the Internet will inevitably be used in conducting international trade. 1 The UNCTAD Automated System for Customs Data (ASYCUDA) is an integrated customs management system for international trade and transport operations in a modern automated environment. https://unctad.org/ en/Pages/DTL/TTL/ASYCUDA-Programme.aspx Introduction 2 | This is not the future; it is not some hazy tomorrow that we cannot predict. This is the current reality of trade, even on a continent where connectivity lags and digital literacy is low by international standards. It is crucial to the success of the African Continental Free Trade Area (AfCFTA) that the reality of today’s digital economy is recognised and reflected. The AfCFTA Agreement itself has a role to play. Although not shaped as the kind of 21st century agreement that would provide a rules- based framework for the digital economy, as suggested in Chapter 6, there are areas, still to be negotiated, that have potential to shape the free trade area in a more digital-friendly way. More importantly, the AfCFTA is not just a free trade agreement, it is a flagship project of the African Union (AU), situated within Agenda 2063, Africa’s framework for structural transfor- mation. This means that the development of the continental free trade area need not rely only on the text of the AfCFTA Agreement but will be supported by a suite of other Agenda 2063 initiatives. It is through these initiatives that African Union (AU) members have the best chance and the most promising opportunities to create a free trade area that does not stand in the way of the digitisation of the economy and encourages trade and economic development within the digital economy. The trade-related benefits to be derived from the digitalisation of the economy are well known, but bear repeating. In particular, our work suggests digitalisation can: • enable e-commerce • reduce transaction costs • reduce barriers to cross-border trade • automate production, thereby improving efficiency and reducing costs • improve logistics. In addition, digitalisation is transforming how we trade in services – from offshoring, to cloud services, to online outsourcing – the Internet has made all kinds of new services trade possible. E-commerce and digitalisation particularly offer opportunities for marginalised groups, such as young people, rural citizens and women to more easily engage in the economy – but policies are needed to ensure that access gaps are narrowed. Introduction | 3 In short, there are huge opportunities for digitalisation to increase and improve Africa’s trade environment, but in any case, when it comes to the digital economy, as John Stuart points out in Chapter 5, “…it is not as if Africa or any other economic grouping has a choice in whether or not to participate.” Digitalisation will be an inevitable part of trade in 2020 and beyond. This volume brings together tralac’s work over the past five years (updated where necessary) on the digital economy, e-commerce, information communication technology and related developments. In the following chapters, we present data on the current state of the digital economy in Africa; identify some of the most important interventions for catch up; examine some of the key trade policy issues arising from digitalisation; and present policy recommendations for making the most of this fundamental economic and social shift. Where things stand Underpinning trade in the digital economy are three key foundational requirements: • physical and digital infrastructure that enables connectivity: including baseline infra- structure, such as electricity connection as well as affordable Internet infrastructure and devices providing (especially mobile) access • skills: including baseline literacy, digital and financial literacy, as well as more advance- ed digital skills • an enabling regulatory environment: including baseline ease-of-business require- ments as well as digitally focussed regulation, such as on privacy, consumer rights and data protection. Our data analysis (see Chapters 5 and 6) shows a persistent but narrowing gap between African countries and the rest of the world in measures of e-commerce readiness and digital development. This horizontal gap also disguises vertical gaps – African countries diverge dramatically among themselves on measures of digital readiness, with some countries enjoying low-cost Internet access and sophisticated regulatory regimes, and others with poor infrastructure and low access. Introduction 4 | Despite the ongoing digital divide, there are many bright spots. World class tech hubs such as ‘Silicon Cape’ and ‘Flat 6 Labs’ in Cairo incubate globally competitive tech start-ups, while more venture capital is starting to flow to African businesses. Similarly, African-focussed ventures such as Jumia, Mall for Africa and Marketplace Africa are expanding and demonstrating the possibilities of e-commerce on the continent. Ag-tech, fintech and ed-tech start-ups are also proliferating – offering both new digital services and greater access to existing services. The promise and potential of digital ledgers/blockchain is recognised and is already being used in areas including asset management, cross-border payment and settlement, and identity management. In Africa, as elsewhere in the world, digital ledger technology offers enormous efficiency gains in trade logistics and financing but will need regulatory and political support, such as that being driven by Common Market for Eastern and Southern Africa (COMESA) under its Digital Free Trade Area initiative (See Chapter 8). What are we doing about it? Along with the AfCFTA, many initiatives are already in train at the continental level that are aimed at addressing the requirements that are necessary to enable the digital economy. While the baseline infrastructure, skills and regulatory environment are essential to the realisation of the goals of the AfCFTA in examining the current initiatives, we focus on the foundational requirements that are particular to the digital economy. This is both to narrow the scope and is based on the assumption that getting the baseline requirements in place is already a priority and an essential condition precedent to the realisation of a comprehensive free trade area. Chief amongst the Agenda 2063 programmes that will drive the enabling infrastructure for trade in Africa are the Programme for Infrastructure Development in Africa (PIDA), Accelerated Industrial Development for Africa (AIDA) and Boosting Intra-Africa Trade (BIAT). It is within these projects that work will be undertaken to generate the hard and soft infrastructure necessary to encourage trade within this digitised economy. Next >