Part 3
The OECD defines an e-commerce transaction as the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders. The payment and the ultimate delivery of the goods or services do not have to be conducted online. This is a more restrictive concept than digital trade, which is the trade in goods and services across borders using the Internet. It includes the transmission of information and data. The AU has defined it as: “all trade that is digitally ordered and/or digitally delivered”. One feature of digital trade is that part of the transaction is digital, for instance, the ordering or the delivery. It is not the characteristics of the product or service that makes the transaction a digital one. When someone orders and pays for a shirt online, the fact that it is a physical shirt is irrelevant. What is important is that the shirt was ordered digitally. In effect, digital trade is just cross-border trade, using digital channels. Digital trade involves a chain of actors and activities, involving telecoms and internet service providers, technology service providers, e.g., cloud hosting and data analytics, regulators, producers, consumers, and trade service providers. Underpinning digital trade is the movement of data.
E-commerce improves resource allocation and enterprise competitiveness
E-commerce can lead to better allocation of resources and improve the competitiveness of businesses in general. Also, e-commerce and digital trade can support entrepreneurship, creativity and innovation and encourage the formalization and growth of micro, small and medium enterprises (MSMEs). E-commerce also promotes the integration of MSMEs into value chains and markets, reducing the investment required for a company to become visible in the global market. In this way, e-commerce can help to bridge the distance to international markets for African countries particularly in the services sector, as this form of trade is less susceptible to the constraints of being landlocked, where their location and small size might be a challenge. E-commerce can thus contribute to the realization of Sustainable Development Goal (SDG) 17 - which, as a reminder, is about "revitalizing global partnership for sustainable development".
"Implementation of the AU Protocol by AU Member States has been slow"
Despite the opportunities presented by e-commerce, there are several challenges for African countries attempting to enter this industry. The limitation factors include:
- inadequate infrastructure and use which continues to perpetuate the digital divide;
- underdeveloped financial and payment systems;
- poor ICT literacy, in particular skills related to e-commerce;
- low purchasing power and consumer confidence;
- and imperfect national legal systems and policies.
The challenges are additional to existing traditional trade barriers and they particularly impact on African least developed countries, according to UNCTAD, suggesting that a lot remains to be done to achieve a supportive legal environment as well as the requisite infrastructure to effectively use e-commerce in Africa. The gaps observed in the policy and legal frameworks on e-commerce, digital trade and the digital economy are attributed to a large extent to the limited understanding and knowledge of policy and lawmakers. In response, a number of African countries have become more active on the e-commerce front, including introduction of e-commerce taxes, adoption of new legislation, or convening of stakeholder’s event to discuss e-commerce and digital trade related matters. For example, Nigeria. Other than the challenges and risks that exist at the national level, there are also regional and continental issues in the case of Africa, which have hindered the development of cross-border e-commerce across Africa. A number of regional and continental legal frameworks have been established to address some of the e-commerce related issues such as cyber security, personal data protection and the harmonization of cyber legislation in Africa.
In addition, some countries have started regional collaboration in some areas of e-commerce. Yet, implementation of the AU Protocol by AU Member States has been slow. The DTS now provides a comprehensive strategy for the roll out of e-commerce in Africa, so it is hoped that this coupled with the AfCFTA will galvanize governments to reform legislation and regulation to enable the implementation of technologies that can help to drive innovation and change the lives of their citizens.
In addition to the challenges, there are also risks associated with e-commerce, including: job losses associated with automation, market concentration leading to reduced competition and monopoly; revenue loss by governments due to the ability for companies to circumvent financial regulations, the restricting of “policy space” of African governments to support local digitalization; the competitiveness of African companies; and most importantly the risk of a structural gap, which will maintain African countries at the periphery of the new economic system in the 4th industrial revolution era.
To be continued…
Tribune (in 4 parts) by Beatrice CHAYTOR, Senior Expert – Trade in Services, African Union Commission.