E-commerce can be an important contributor to Africa’s structural transformation.
E-commerce is not just about online shopping. E-commerce is variously defined as the purchase and sale of products (such as physical goods, digital products or services) transacted over computer networks. This can be business to business, for example, an architecture firm selling design services to a property development firm. Or a factory sourcing components online. It can be business to consumer, for example, an online retailer selling an e-book to a consumer. Or a consumer buying airtime using their smartphone. It can be consumer to consumer, for example, someone selling their used guitar to another consumer over an internet platform. It can be consumer to business, for example, a blogger selling advertising space on their blog.
E‑commerce connects small businesses to big markets, consumers to a wealth of consumables. For consumers it promotes competition and transparency and improves choice while driving up quality and driving down prices. It enables value chains and facilitates innovation. In fact, on B2B ICT use, Africa ranks ahead of South Asia (World Economic Forum B2B ICT use, 2015). E-commerce not only creates a new channel for trade but also improves the efficiency of trade – by lowering transaction costs and reducing transaction times. In this way the e-commerce agenda is inextricably linked to the trade facilitation agenda.
Even the most ambitious of regional trade agreements covering e-commerce – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – only includes four mandatory disciplines in addition to non-discrimination – the bedrock of open trade –open data transmission, no localisation requirements for computing facilities, no forced transfer of source code and no customs duties on electronic transmissions. Importantly, countries can still impose value added taxes on electronic transactions, and may still require local computing facilities for legitimate public policy reasons, such as prudential requirements.
These are areas Africa needs to address for our its development, and doing this in the context of trade agreements gives the external nudge to do this sooner rather than later. It will be good for African economies, and it will be good for trade.
When discussing trade in financial services, in communications… we are implicitly discussing e-commerce. ICT services, agro-processing and tourism will be critical elements of a 21st century structural transformation in African countries – and each of these will benefit from trade rules on e-commerce. Of course, e-commerce is also critical to more traditional industries – in 2018, manufacturing involves outsourced and insourced goods and services many of which are driven by digital transactions. E-commerce is critical to the integration of – particularly smaller – businesses into value chains.
E-commerce is at the sharp end of much greater structural shifts in the global economy. Robots can now make clothes, we can 3D print cars. Money travels on the blockchain and algorithms respond to our questions and make our decisions. These shifts legitimately raise questions about jobs, and production, how we work, how our economies can develop. But Africa won’t move forwards by clinging to old ideas.
Africa is not going to “industrialize” by refusing to allow data to cross borders. Our economies won’t develop by demanding access to source code. But encouraging innovation? Creating a skilled, flexible and digitally literate workforce? Perhaps. In areas like fintech, African countries, African people have shown that they can be the best in the world.
These digital industries do not need to be protected, they need to be enabled. To connect and compete with their peers in London, New York and Silicon Valley. To get the inputs they need to develop their markets.
Africa lags the rest of the world in internet penetration. As a continent, e-commerce readiness is mixed – from very high to very low. Of course we should be concerned about those who are unable to participate in the digital economy, particularly those who are already excluded – women, youth, those with disability. And policy makers should be doing everything they can to create the infrastructure to enable digital connectivity. This won’t just benefit those engaged in e-commerce, but the whole community. Trade rules in and of themselves will not exacerbate the digital divide, nor alleviate it. What they can do is enable governments, donors, private investors to direct resources to addressing the digital divide.
By refusing to engage with the international trade agenda on e-commerce, the most damaging digital divide may well be one that Africa creates by failing to integrate into the global digital economy.