Boosting Digital Trade in Africa – lessons for effective technical assistance (WorldBank)

Arguments

Digital trade presents significant opportunities for more trade and more inclusive trade in Africa

Supporting facts:

• Digital trade has changed the sources of comparative advantage, making transport infrastructure constraints less important and digital connectivity more significant for African countries

• Improved connectivity and regulatory framework can significantly reduce trade costs

Topics: Digital trade, Africa, Inclusive trade

Although digital trade in Africa is growing, the continent’s share in digital trade remains very small

Supporting facts:

• Digital trade in Africa accounts for only one percent of digitally delivered services

• African countries like Ghana, South Africa and Morocco have shown faster growth in digital services exports

Topics: Digital trade, Africa

To harness the benefits of digital trade, a supportive ecosystem is required, which includes infrastructure, skills, e-payments and a suitable legal and regulatory framework

Supporting facts:

• African countries suffer from an affordability issue, indicating a need for a more competitive telecommunication service provision

• The World Bank’s digital acceleration project in Rwanda is facilitating last mile connectivity and skills development

Topics: Digital trade, Africa, Supportive ecosystem

Eight African countries are showing interest in being part of the pilot study.

Supporting facts:

• The eight countries are Benin, Cote d’Ivoire, Ghana, Kenya, Mauritius, Nigeria, Rwanda, and Togo.

Topics: African Countries, Pilot Study

Market openness needs to take place with supportive and flanking regulatory policies in place.

Supporting facts:

• Unilateral market liberalization alone doesn’t guarantee outcomes in all services sectors

• Predictability and certainty that certain conditions are not going to change might foster investment and trade

Topics: Market liberalization, Regulatory policies

Countries are not necessarily reluctant to undertake new commitments.

Supporting facts:

• There hasn’t been a negotiation led or that was even close to a conclusion where we would have seen more commitments

Topics: Trade commitments, WTO negotiations

The need for more collaboration and information sharing among various sectors, especially with regards to UNECA’s initiatives

Supporting facts:

• UNECA’s initiatives were mentioned as something to look forward to and joining forces with.

Topics: Collaboration, Information Sharing, UNECA’s initiatives

Lowering tariffs on mobile phones and IT equipment should be considered to increase their affordability

Supporting facts:

• Some countries have joined the IT agreement whereby they don’t impose tariffs on the importation of IT goods, enabling better access and affordability.

Topics: Trade Policy, Mobile phones, IT equipment, Tariffs

Considering the heterogeneous nature of the market and demand-driven approach in their joint initiative with the bank

Supporting facts:

• In the joint initiative with the bank, countries ask to be piloted and involved in the exercise. The initiative hasn’t received requests from particularly successful countries like Ghana or South Africa

Topics: Heterogeneity, Demand-driven Approach, Joint initiative

Report

This shift allows African countries to compete globally based on their digital capabilities rather than geographic proximity. Improved connectivity and regulatory frameworks can substantially lower trade costs, facilitating greater participation of African businesses in global trade. However, digital trade in Africa currently contributes only one percent to the global market for digitally delivered services, highlighting the continent’s limited share.

Despite this, countries such as Ghana, South Africa, and Morocco have experienced faster growth in digital services exports. To fully leverage the potential of digital trade, a supportive ecosystem is essential. This entails investing in high-speed internet access, enhancing digital skills and literacy, enabling e-payment systems, and establishing appropriate legal and regulatory frameworks.

For example, the World Bank’s digital acceleration project in Rwanda aims to enhance last-mile connectivity and skills development, creating a conducive environment for digital trade. Eight African countries, including Benin, Cote d’Ivoire, Ghana, Kenya, Mauritius, Nigeria, Rwanda, and Togo, have expressed interest in participating in a pilot study.

However, it is unclear whether these countries are part of the Joint Study Group (JSL). The pilot study could offer valuable insights into fostering digital trade in Africa and devising strategies to overcome barriers. Market openness must be accompanied by supportive regulatory policies.

Relying solely on unilateral market liberalization does not guarantee favorable outcomes across all service sectors. To encourage investment and trade, predictability and certainty regarding unchanging conditions are crucial. Thus, a balanced approach that combines market openness with appropriate regulatory frameworks is necessary.

Highlighting trading partners’ commitments to market openness is vital for accessing export opportunities. Although countries have unilaterally liberalized their markets, they have not formally bound these commitments. Open markets may not remain open, but they can present export opportunities if trading partners’ commitments are consistently upheld.

Countries are not necessarily resistant to undertaking new commitments in WTO negotiations. However, there haven’t been negotiations that have resulted in substantial commitments. This indicates the need for further discussions and agreements to promote digital trade and create a conducive environment for global trade.

Collaboration and information sharing are essential, particularly through initiatives like the United Nations Economic Commission for Africa (UNECA). Increased collaboration among various sectors can generate innovative ideas and policies to address the challenges and opportunities of digital trade. Lowering tariffs on mobile phones and IT equipment should be considered to enhance their affordability.

Some countries have already joined the IT Agreement, which eliminates tariffs on IT goods’ imports, leading to improved access to technology and the promotion of digital trade. Given the heterogeneous nature of the African market, utilizing a demand-driven approach is crucial.

Tailoring digital trade strategies to accommodate each country’s unique requirements and preferences can yield better outcomes. The joint initiative with the bank recognizes the need for a demand-driven approach and the involvement of diverse countries in the exercise. Market contestability is encouraged under the General Agreement on Tariffs and Trade (GATT) as a necessary condition for a competitive environment.

However, while competition policy may not be available in the World Trade Organization (WTO), it emphasizes the importance of fair competition and reducing inequality. In conclusion, digital trade in Africa presents significant opportunities for increased trade and inclusivity. To fully capitalize on these opportunities, African countries must develop a supportive ecosystem encompassing improved connectivity, skills development, e-payment systems, and appropriate legal and regulatory frameworks.

Collaborating with international organizations like UNECA, promoting market openness with supportive regulatory policies, and adopting demand-driven approaches are key to harnessing the benefits of digital trade and fostering economic growth in Africa.

Arguments

WTO rules and services limit a country’s ability to regulate in the public interest

Supporting facts:

• Many development experts note that a lot of supporting regulation, like privacy, consumer protection, labor rules, rule of law, and other infrastructure, are necessary to gain from digital trade.

Topics: WTO, Regulation, Public Interest

Commitments to WTO don’t automatically increase the readiness for digital trade

Supporting facts:

• If countries liberalize their services without building up their domestic production, they’re actually going to be swarmed by imports. This doesn’t help their exports to join WTO services commitments. It does not help their exports just because they open their services to foreign providers. They actually get more foreign providers without increasing their exports.

Topics: WTO, Digital Trade, Commitments

Africa’s share in global digital trade is very low

Supporting facts:

• 80% of African marketplaces operate within a single country, 14% dominated by global players, only 6% operate within several countries

• Only 37% of people in Africa have internet access, mostly concentrated in urban areas

Topics: Digital Trade, E-commerce, Cybersecurity, Digital Infrastructure, Connectivity

Challenges faced by Africa in terms of digital trade include issues related to logistics, accessibility, affordability, and data governance

Supporting facts:

• Infrastructure and road network are main challenges

• 35 countries have some low data protection laws

• High costs of access and lack of trust in digital transactions due to cybersecurity concerns are other issues

Topics: Digital Trade, E-commerce, Data Governance, Cybersecurity

Need for basic infrastructure like electricity to enable digital trade

Supporting facts:

• Digital trade requires digital infrastructure and electricity.

• Without electricity, development is hindered.

Topics: Digital Trade, Infrastructure, Electricity

The informal market in Africa contributes significantly to the GDP

Supporting facts:

• The informal market in Africa is key contributor to GDP.

Topics: Informal Market, GDP, Africa

The need for the informal market to use digital trade

Supporting facts:

• If more of the informal market were using digital trade, Africa will progress.

Topics: Digital Trade, Informal Market

Importance of assisting all African countries, not just the technologically advanced ones

Supporting facts:

• Countries like Ghana and South Africa are progressing because of their technological advancements.

• Assisting all countries, irrespective of their current technological standing, would help the entire continent progress.

Topics: Technology, Infrastructure, Equity, Africa

Need for accessible public education, particularly for the informal market

Topics: Public Education, Informal Market

The AFCFTA has a chapter on digital trade and they are developing protocols on that, as well as on competition policy.

Supporting facts:

• AFCFTA integrates the whole Africa continent as to one market

• There are many regional competition authorities in Africa.

Topics: AFCFTA, Digital Trade, Competition Policy

The challenges facing digital economy in Tanzania is the ownership of smartphones

Supporting facts:

• The best for digital economy is to have a smartphone

Topics: Digital economy, Smartphone ownership, Tanzania

Report

Discussions on digital trade in Africa have raised several important points. Development experts argue that supporting regulations, such as privacy, consumer protection, labor rules, and the rule of law, are crucial for reaping the benefits of digital trade. However, it has been expressed that the rules and services of the World Trade Organization (WTO) limit a country’s ability to regulate in the public interest.

This sentiment stems from the belief that WTO commitments do not automatically enhance readiness for digital trade, as countries that liberalise their services without simultaneously developing domestic production may find themselves overwhelmed by imports. This imbalance hinders their ability to engage in digital trade effectively.

In addition, concerns have been raised about the origins and intentions of digital trade rules. It is argued that such rules were created by US-based big tech corporations and do not prioritise the support of African Micro, Small, and Medium Enterprises (MSMEs).

The suggestions put forward by African representatives in the Joint Statement Initiative have reportedly been overlooked, leading to the perception that the digital trade rules predominantly serve the profit-driven interests of US-based big tech companies. On the other hand, it is highlighted that developing countries, like the United States, also require the flexibility to regulate policy in order to address their own unique challenges and goals.

This indicates that developing countries need policy space to adapt and respond to the demands of digital trade effectively. Africa’s low share in global digital trade is another pressing concern. Several challenges hinder Africa’s participation in this evolving landscape. Issues of infrastructure, accessibility, affordability, data governance, and cybersecurity weigh heavily on the continent’s ability to engage in digital trade.

For instance, it is noted that 80% of African marketplaces operate within a single country, with only 6% operating across several countries, which limits their participation in global digital trade. Furthermore, internet access is limited to just 37% of the African population, primarily concentrated in urban areas.

These challenges must be addressed to unlock Africa’s potential in the digital trade arena. To address these challenges, there is an advocacy for collective work and information sharing among organisations. Collaboration can help identify effective solutions to ensure Africa’s proper representation in global digital trade.

The United Nations Economic Commission for Africa (ECA) has taken steps in this direction by developing a trade exchange platform to support the African Continental Free Trade Agreement (AfCFTA), which integrates the entire African continent into a single market. The importance of basic infrastructure, such as electricity, is emphasised for enabling digital trade.

Without access to reliable electricity, the development of digital trade is severely hindered. The informal market in Africa, which contributes significantly to the continent’s GDP, holds great potential for progress through the utilisation of digital trade. By encouraging more participants from the informal market to engage in digital trade, Africa can achieve further economic growth.

It is stressed that assistance should be extended to all African countries, regardless of their technological advancements. By providing support and resources to all nations, Africa as a whole can progress, and the continent’s overall development will be enhanced. The need for accessible public education, particularly for those involved in the informal market, is an important consideration.

Adequate education will empower individuals and businesses to leverage digital trade opportunities and contribute to economic growth. The African Continental Free Trade Agreement (AfCFTA) recognises the importance of digital trade and includes a specific chapter on it, as well as the development of protocols on competition policy.

In terms of enforcing competition and addressing digital trade issues, it is suggested that a joint approach by the Africa Competition Forum, which comprises various competition authorities across the continent, would be more effective and impactful. Moreover, the limited ownership of smartphones poses a significant challenge to the digital economy in Tanzania.

Increasing access to smartphones is seen as a viable solution to boost the digital economy and enable wider participation in digital trade. In conclusion, the discussions surrounding digital trade in Africa touch on critical issues such as regulatory limitations, the role of big tech companies, infrastructure challenges, and the potential of the informal market.

Collaboration, policy flexibility, investment in infrastructure, and the adoption of digital technologies are key factors that will enable Africa to fully realise the benefits of digital trade.

Arguments

There is a need for more regional digital market integration as enablers for digital trade

Supporting facts:

• The World Bank has been engaged in fostering digital development across Africa for many years.

• New generation of regional projects are starting to look at more regional digital market integration.

Topics: Digital Trade, Digital Market Integration, Digital Development

Though digital coverage has increased in Africa, more emphasis is needed on usage, cost, and digital skills

Supporting facts:

• By 2021, 84 percent of people on average across countries in Sub-Saharan Africa lived in areas where 3G service was available.

• Africa East is lagging behind other regions, both in terms of coverage and in terms of usage.

• Africa East is, after Africa West, is still the most costly in terms of digital access.

Topics: Digital Coverage in Africa, Digital Usage, Digital Skills

Smartphones are part of the affordability challenge that requires different interventional steps

Supporting facts:

• Looking at taxation regimes and regulatory and enabling environment

• Specific schemes targeting specific population segments

• Working with operators

Topics: Smartphones, Affordability, Intervention

Emphasizing integrated planning in terms of infrastructure

Supporting facts:

• World Bank has projects on transport logistics and electrification

• Coordination along infrastructure lines to ensure interoperability

Topics: Infrastructure, Integrated Planning

Countries in Eastern and Southern Africa show heterogeneity

Supporting facts:

• Noted variation amongst countries like Kenya, South Africa, South Sudan and DRC

• Recognition of interdependency among these countries

Topics: Countries Difference, Eastern and Southern Africa

Micro-enterprises are not really seeing the value of digital

Supporting facts:

• Affordability is a factor with both cost of data and devices

• Part of the problem is not recognizing the value of digital technologies

Topics: Micro-enterprises, Digital Value

Importance of enhancing competition in the sector

Supporting facts:

• Existence of policy instruments outside of these lending programmatics

• Recognition of vertical and horizontal challenges in the sector

Topics: Competition, Technology Sector

Report

The World Bank has been actively involved in fostering digital development across Africa for many years. However, there is a pressing need to further enhance regional digital market integration in order to enable digital trade. While digital coverage has increased in Africa, there is still a lack of emphasis on usage, cost, and digital skills, particularly in Africa East which lags behind other regions in terms of coverage and usage.

Additionally, Africa East remains one of the most costly regions in terms of digital access. On a positive note, digital trade has the potential to improve inter-regional trade, create new types of jobs, and enhance productivity. Enabling cross-border payments and implementing digital solutions at border points and logistics systems can greatly facilitate trade.

However, it is important to ensure that individuals possess the necessary skillset to participate effectively in the digital economy. Harmonisation of regulations and coordination are crucial for facilitating digital market integration. The Eastern Africa Regional Digital Integration Project places a heavy emphasis on regional regulatory and policy harmonisation and coordination.

Efforts are being made to develop e-commerce strategies in the Eastern Africa Community (EAC) in order to ensure that such initiatives are harmonised. The affordability of smartphones poses a challenge that requires intervention. This includes examining taxation regimes, regulatory frameworks, and creating specific schemes that target different population segments.

Collaboration with mobile network operators is also important in addressing this issue. Emphasising integrated planning in terms of infrastructure development is crucial. The World Bank is actively engaged in various projects related to transport logistics and electrification, with a focus on coordination to ensure interoperability.

There is notable variation among countries in Eastern and Southern Africa, such as Kenya, South Africa, South Sudan, and the Democratic Republic of Congo. It is important to recognise the interdependency among these countries and tailor digital development efforts accordingly.

Micro-enterprises are not fully realising the value of digital technologies. Affordability, both in terms of data and devices, is a significant factor hindering their adoption. Additionally, there seems to be a lack of recognition of the value that digital technologies can bring to micro-enterprises.

Enhancing competition in the technology sector is also of great importance. The existence of policy instruments outside of traditional lending programmatics and the recognition of vertical and horizontal challenges in the sector emphasise the need to address competition issues. In conclusion, while the World Bank has made significant efforts in promoting digital development in Africa, there are several areas that require further attention.

These include regional digital market integration, usage, cost, and digital skills, smartphone affordability, integrated planning, harmonisation of regulations, variation among countries, micro-enterprises’ utilisation of digital technologies, and competition in the technology sector. Addressing these challenges can help unlock the full potential of digital development in Africa.

Arguments

Pierre Sauvé notes how African economies are making stead progress in leveraging digital technologies and digital trade for sustainable development

Supporting facts:

• Overall, developing countries are becoming significant players in digitally delivered services

• African countries account for less than 1% collectively of digitally delivered services, although the trend is very much one of growth

Topics: Digital Trade, African Development

Sauvé highlights the necessity and central role of technical assistance to play in making sure that the benefits of the digital revolution is shared more broadly

Supporting facts:

• Least Developed Economies account collectively for 0.2% of digitally delivered services in 2022, half of which is from Bangladesh

• Technical cooperation missions are common in the WTO staff nowadays

Topics: Technical Assistance, Digital Trade

The World Bank has a focus on regional solutions and digital market integration

Supporting facts:

• The World Bank has been fostering digital development across Africa for many years.

• They have a comprehensive set of interventions, investments and policy reforms.

• Recent projects are aiming to develop digital markets through a regional lens.

Topics: Digital Development, Digital Market Integration, World Bank, Regional Harmonization

Harmonization in the digital realm is challenging

Supporting facts:

• Pierre Sauvé pointed out that it is difficult to achieve complete harmonization in other areas of trade.

• He questions whether the digital realm is easier for achieving harmonization.

• He referred to the European Union’s experience with harmonisation in services trade as an illustration of the difficulties in achieving harmonisation.

Topics: Digital Market Integration, Standardization, Regulatory Divergence, Harmonization

Pierre Sauve acknowledges the reluctance of several developing countries to make WTO commitments.

Supporting facts:

• Only one opportunity to make such commitments ended in 1994, and 1997 for the basic telecoms negotiations.

• Many of these countries prefer preferential or unilateral agreements.

Topics: WTO, Trade, Developing countries

Sauve emphasised the difference in how countries operate within WTO and how they behave unilaterally or under preferential agreements.

Supporting facts:

• Several developing countries have revealed their preference for market opening commitments in preferential agreements.

Topics: WTO, Trade

Report

In his discussion, Pierre Sauvé examines the progress of African economies in leveraging digital technologies and digital trade for sustainable development. While developing countries are making significant strides in digitally delivered services, African countries collectively account for less than 1%. However, there is a positive trend of growth in this area.

Sauvé emphasizes the crucial role of technical assistance in ensuring that the benefits of the digital revolution are shared more broadly. He highlights the need to address technical and connectivity gaps that hinder the adoption and utilization of digital technologies in Africa.

The World Bank is actively involved in fostering digital development across Africa. They have implemented various interventions, investments, and policy reforms to support this goal. Specifically, the World Bank is focused on developing digital markets through a regional lens, recognizing the importance of regional solutions and digital market integration.

Harmonization in the digital realm presents several challenges. Sauvé refers to the European Union’s experience with harmonization in services trade as an illustration of this difficulty. He questions whether achieving harmonization in the digital space is easier than in other areas of trade.

Sauvé acknowledges the reluctance of several developing countries to make commitments within the World Trade Organization (WTO). Instead, these countries often prefer preferential or unilateral agreements. This reflects a different approach to trade negotiations compared to operating within the framework of the WTO.

Lastly, Sauvé asserts that the level of investment attraction is determined by the value assigned to binding commitments. The willingness to make and uphold such commitments influences investors’ confidence and their decisions to invest in a particular country or region.

In conclusion, Sauvé’s analysis highlights the progress made by African economies in leveraging digital technologies and digital trade. However, he recognizes the challenges of technical gaps, connectivity, and harmonization that need to be addressed. The involvement of institutions like the World Bank and the importance of technical assistance are emphasized.

The hesitation of several developing countries to make WTO commitments and their preference for preferential agreements are also noted. Overall, Sauvé’s insights shed light on the complexities and opportunities associated with digital development and trade in Africa.