As we’ve all witnessed in our own lives in the past year, Covid-19 has accelerated e-commerce and digital trade globally. This growth has enabled digital platforms such as Amazon and Alibaba to become “gatekeepers” in the digital economy rapidly changing the manufacturing landscape itself by “transforming goods into rentable services”. But this digital growth has not been experienced equally, and for an E-commerce Protocol to the African Continental Free Trade Area (AfCFTA) present a unique and critical opportunity to bridge the digital divide between countries in Africa and the rest of the world.
The digital divide is starkly demonstrated by the fact that the value of five Big Tech firms– Alphabet, Amazon, Apple, Microsoft and Facebook- reached $7.5 trillion by 2020 -three times the nominal gross domestic product (GDP) of all African nations combined. Even within Africa, just 10 countries are responsible for 94 per cent of all online business on the continent, with the share of digitally-deliverable services, such as ICT, business and financial services, in total services trade varying from a mere 4.6 in Gambia to 81 per cent in Ghana, as reported by Banga and Banga in their forthcoming paper. There are many ways that the AfCFTA can accelerate digital industrialisation across Africa though, and take the opportunity to learn from the experiences of South-South trade deals on e-commerce already in action.
Getting the narrative right; moving from e-commerce to digital industrialisation
Post 2010, there has been an important reversal of a long-run de-industrialisation trend in sub-Saharan Africa (SSA), with an expansion of production by small-scale firms to meet domestic demand. This implies that manufacturing can still be an important stepping-stone for economic growth and job-creation in Africa. But how long will this window of opportunity last? Digital technologies are rapidly changing the manufacturing and trading landscape. Even with the same level of internet access, evidence suggests the manufacturing productivity gains realised by African countries are lower than that by the rest of the world, potentially due to poorer overall physical infrastructure and absorptive capacity.
In fact, increasing digitalisation in the context of a digital divide can potentially increase re-shoring and limit offshoring, slowing down global manufacturing trade, as has been observed since 2011, leading to a slow-down in technology diffusion. Without a robust productive baseline and attention towards the contextual dynamics of productive transformation, it is even harder now for African countries to experience productivity increases from technology and be able to catch up. Technology absorption and adoption is therefore not a given, which the “leap-frogging” discourse often fails to account for.
It is therefore important that the AfCFTA develops a comprehensive protocol on digitalisation which goes beyond facilitating e-commerce to targeting digital industrialisation in Africa, anchored in economic diversification and structural transformation – a movement from agricultural sector to higher productivity sectors such as manufacturing- through digital development. Of critical importance are questions of data governance, who own data? Who can process it and where? And which rules will govern its transfer? Here, African governments can make use of latecomer advantage and benefit from learning from other countries. To achieve this, rather than looking to North-South trade agreements, much can be learned on both digital trade protocols and enforcement from South-South deals.
African Union can learn from South-South trade deals
The most common digital trade provisions in existing South-South trade agreements is that related to data protection and privacy, which features in 23 per cent of the agreements. This is followed by electronic trade facilitation (22 per cent) and consumer protection (21 per cent), while bans on data localisation are the least common (8 per cent). Countries of the global South seem to regard bans on data localisation requirements as unnecessarily eroding their policy space in a fluid regulatory area. All South-South trade agreements currently allow countries to ask for the transfer of, or access to, source code – a higher-level computer language in which programmes are usually written and owned by a person, as a condition for the import, distribution, sale or use of such software. This is in alignment with what African firms and governments need; in a recent survey of African businesses, 90 per cent expressed the importance of accessing digital intelligence generated by platforms using the data provided by the private sector. A regional approach under the AfCFTA could therefore be useful in negotiating such access to source code for market access.
Another challenge facing the African Union is how deep the commitments in the AfCFTA should be and how enforceable. South-South trade agreements on e-commerce tend to involve a lot of ‘soft’ language and ‘best endeavours’, rather than binding obligations to solidify common positions on negotiating topics while retaining policy space. The differences in enforcement of e-commerce provisions are likely more political than economic; countries in the Global South, including African countries, have sovereignty-based concerns or a different attitude towards industrialisation, based on varying colonial pasts and collective identity.
In the longer-term, digital industrialisation in Africa can contribute towards sustainable and inclusive economic growth and productive employment. But there is a need for the AfCFTA to develop a continental digital industrial policy as part of Africa’s wider industrial policy agenda. And it must be a policy that not only facilitates development of national cross-border African e-commerce platforms but also strengthens public data infrastructures, such as those that can enable general digital transactions, protect personal data privacy and derive value from sectoral data, and ultimately increase African competitive advantage and drive the continent’s economic growth.
