Digital trade way to go for Africa

In a recent conference the AfCFTA secretary general, Wamkele Mene, advised the urgency in digitisation of trade in Africa. The business environment has experienced a rise in e-commerce and digital trade, while the regulatory framework and institutional bodies are not in place for us to regulate the new way of doing business.

It is against the foregoing that the AfCFTA negotiations on digital trade and e-commerce slated for Phase III have been moved to Phase II.

AfCFTA Phase II negotiations on Protocol for Intellectual Property Rights, Investment and Competition Policy are scheduled to be completed in December.

Negotiating phase on digital trade and e-commerce has been revised and moved upwards to Phase II negotiations.

At WTO level, negotiations on digital trade and e-commerce have received active attention unlike in the past. Except for Nigeria, Africa has taken a lackadaisical approach on the regulation of e- commerce as their efforts are still directed at unpacking the effects of digital trade within the WTO.

Nigeria has participated in the WTO e-commerce negotiations.

The issues tabled before the WTO are whether a moratorium on customs duties on e-commerce should be made permanent and also the definition and treatment of digital products.

The question is whether these digital products should be treated as goods under GATT or as services under GATs or just as other goods?

The moratorium was supposed to end in June 2020 after which the Ministerial Conference 12 was to review the position. Due to the coronavirus, this has not happened with the Ministerial Conference 12 scheduled for June 2021.

It becomes difficult to understand how the AfCFTA negotiations on digital trade and e-commerce underway will unfold when the Ministerial Conference 12 has been penned for June 2021.

The AfCFTA becomes operational in two months’ time. The delays of cargo at entry points, complex customs procedures and duplication of roles by border agencies call for mainstreaming digital technology in trade to improve trade facilitation.

The WTO has made it an obligation for its members to institute National Trade Facilitation Committees that offer a multi-agency platform that will not only identify trade bottlenecks within the environment of trade but will also serve as a feeder to Government on the design of the regulation framework on digitisation. It is important that the policy and regulation on trade facilitate and not impede trade.

The hall mark of international and regional trade will be the total elimination of paper documents within the digital trade ecosystem. According to the World Economic Report — paperless trade enables the creation of real-time information on movement of cargo and promotes transparency. It further provides an audit trail that benefits Government immensely.

The report further reveals how fraud can be reduced as well as early detection of money laundering. Illicit financial flows that continue to bleed the fiscus of African economies could be curtailed by the digitisation of trade processes.

The benefits to traders within the paperless systems may mean reduced delays at customs borders due the eliminated processes of documentation as well as the reduction of rent–seeking behaviour usually promoted by inefficiencies in trade systems.

Furthermore, the paperless system reduces trade costs, while it also becomes easier for micro small medium enterprises to take advantage of e-commerce to reach international markets.

According to the IMF report, e-commerce grew by 24 percent in 2019. The IMF report classifies 25 percent of Sub-Saharan Africa’s population as active online paying customers.

The AU Digital Transformation Paper of 2020 reveals that only 36 percent of Sub-Saharan Africa has smart phones. These statistics reveal that Africa lags behind in terms of e-commerce hence the call for digital technologies as part of trade reform.

As noted by the AfCFTA secretary-general, the high cost of trade in Africa can be associated with different regulations obtaining in different countries within Africa.

The digital technology such as the single window concept is offered as one of the solutions to minimise costs of doing trade in Africa. However, it is not without challenges. Countries may not be able to fulfil the 5 key elements that define a single window concept.

The five key elements comprise: parties involved in trade and transport; standardised information and documents; single entry point; fulfilling regulatory requirements and single submission individual data.

The main aim of single windows is to electronically coordinate and centralise trade related processes to reduce submission of documents repeatedly.

However, this may have challenges in African countries without a clear single entry point. Single windows may fail to distribute the information to the regulatory authorities forcing traders to submit the information multiple times hence the ensuing costly delays.

In order for paperless trade to enable efficient international trade, governments will be expected to accept data generated by customs administrations and other regulatory agencies without further demanding original paper documentation. That may be difficult for countries reliant on revenues generated by imports.

The need to co-ordinate electronically across borders has become urgent and important. In the past, Africa has been inactive in streamlining trade with digital technology.

If the AfCFTA is to succeed the high cost of doing intra–regional trade in Africa, this has to be addressed since it lies within digitisation of trade processes. Active participation on digital trade within the WTO is no longer an option for African countries.

Sitshengisiwe Ndlovu: MBA/UNCTAD: Trade and Gender Linkages/ IAC Dip/Cert: Trade in Services and SDGs: Robert Schuman Center of Advanced Studies/IDEPCert: Making the African Continental Free Trade Agreement Work. She writes in her personal capacity.: For more on trade matters visit her blog on website: owitzimbabwe.org