E-commerce holds huge promise for enhancing free trade in Africa
If the transformative power of digitalization is effectively harnessed, it can significantly contribute to prosperity in Africa.
E-commerce can significantly boost free trade across Africa and therefore help realize the objectives of the Africa Continental Free Trade Agreement (AfCFTA), participants at UNCTAD’s eCommerce Week 2019 were told.
“E-commerce has the potential to lift intra-African trade from the current rate of 18% and to boost Africa’s share of global trade, currently estimated at less than 3%,” said Ajay Kumar Bramdeo, the African Union’s ambassador to the United Nations in Geneva, at a session on “Digitalization and the realization of the African Continental Free Trade Area for digital transformation in Africa.”
Participants celebrated the impending entry into force of the AfCFTA, a milestone achieved on 2 April when the agreement reached the minimum number of ratifications required, 22, thanks to its approval by Gambia’s parliament.
The AfCFTA seeks to create an integrated African market of 1.27 billion consumers, expected to reach 1.7 billion by 2030, with an aggregated gross domestic product of up to $3.4 trillion, said Amani Abou-Zeid, the African Union commissioner for infrastructure and energy.
Digitalization has the potential to lead not only to Africa’s digital transformation, but also to serve as a catalyst for the continent’s overall structural transformation, Ms. Abou-Zeid said.
Hurdles to overcome
However, various issues need to be addressed for Africa to take advantage of current technological innovations and facilitate the achievement of the objectives of the AfCFTA, which was adopted by African Union nations at a summit in Rwanda in March 2018
“In many African countries, adequate and affordable information and communications technology (ICT) connectivity to enable digitalization to take place is still an issue,” Ms. Abou-Zeid noted.
The other issue is whether Africa currently has the legal framework and enabling environment for digital trade and other digital-related activities to flourish in the future AfCFTA market. Other concerns include trust, data privacy and cyber security.
“We are moving towards an integrated African market. Isn’t it appropriate to factor in the digital dimension of such a market?” Ms. Abou-Zeid said.
She underscored the importance of synergies between development and technical partners, noting that though only 1% of all funding provided under Aid for Trade is currently allocated to ICT solutions and multilateral development banks are investing just 1% of their total spending on ICT projects, Africa still boasts a plethora of initiatives related to digital trade.
Digitalization is the new coal
UNCTAD Deputy Secretary-General Isabelle Durant observed that the rate of digitalization remains uneven across Africa. “In some countries, less than 10% of the population uses the internet and only 18% of households have access to it throughout the continent. In most African countries, less than 5% of the population currently buys online,” she said.
In this respect, the AfCFTA represents a godsend. “Digitalization could be to Africa what coal and steel have been to the European Union,” Ms. Durant said.
The European Coal and Steel Community, created in 1951, was a foundation stone of what eventually become the wider European economic union
The AfCFTA offers Africa the opportunity to build its digital infrastructure, both at the national and regional level, and to have a common regulatory framework, consistent competition laws, and their functional application, Ms. Durant.
Digitalization and the AfCFTA offer small and medium-sized enterprises in Africa the opportunity to expand across borders if the existing digital divide is bridged and an enabling environment is created, various speakers at the session noted.
“Digitalization allows businesses to unlock the potential of the Internet, to go beyond small national markets and to scale up their operations,” said Kamil El Khatib, an ICT policy analyst at the African Development Bank.
“The African continent is fragmented but we will unite it digitally,” said Cedric Atangana of Wecashup, a pan-African payment platform. The fifth edition of eCommerce Week – an annual gathering that draws leading e-commerce figures, start-ups, policy makers and officials from around the world – is taking place in Geneva from 1 to 5 April. The theme of this year’s week, which comprises dozens of sessions, is “From Digitalization to Development”.
Last December, UNCTAD organized its first-ever regional edition, Africa eCommerce Week, hosted by Kenya.