This is the 28th post in a blog series to be published in 2022 by the Secretariat on behalf of the AU High-Level Panel on Emerging Technologies (APET) and the Calestous Juma Executive Dialogues (CJED)

Trade expands economic efficiency, thereby reducing poverty, increasing job opportunities, enhancing entrepreneurship, and strengthening economic activities. However, there has been some divide and mismatch between product producers and traders accessing the markets.

Trading via digital technologies has the potential to improve market access for Africa in order to achieve the African Union's Agenda 2063[1]. By providing trade and market access platforms, digital technologies such as information and communications technology (ICT) can significantly promote socioeconomic advancement and growth[2]. After products and services have been produced through value addition such as farming, food processing, and manufacturing, digital enterprises can strengthen their distribution to reach previously inaccessible markets[3].

Some African countries have increased broadband penetration and investments in order to attract venture capital to the continent's ICT, entrepreneurship, and innovation. This is intended to bring Africa up to speed with the rest of the world as an information and integrated e-economy society. The African Union's Digital Transformation Strategy for Africa has emphasized the importance and significant potential of e-commerce for Africa's economic development (2020-2030).[4] This strategy seeks to provide a comprehensive strategic framework to transform Africa across numerous areas digitally.[5] For example, the African Continental Free Trade Area (AfCFTA) has provisions for African countries to develop harmonised regulatory approaches to issues such as data governance and electronic transactions to support e-commerce trade facilitation and management systems.[6]

Africa has made significant strides towards facilitating the buying and selling of goods and services by enabling technological payment systems such as e-wallets, M-PESA, and mobile money, among others.[7] These financial and payment systems facilitate the transmission of funding, finance, and data over an electronic network. Thus, it is envisaged that by 2025, Africa will have more than half a billion e-commerce traders and users.[8] This represents a market with a consistent Compound Annual Growth Rate (CAGR) of 17%.[9] This remarkable development is attributable to several factors, including Africa's youthful population and a sizable digital market.

Fundamentally, the various digital payment platforms implemented across the African continent demonstrate observed e-commerce and incremental usage. Furthermore, the widespread use of smartphones and other mobile devices has increased internet penetration. As a result, the continent's mobile e-commerce and online shopping have grown.[10]

The advent of the COVID-19 pandemic has further exposed the need to enhance e-commerce in Africa. Due to the pandemic and lockdowns, people had limited movement. As a result, they adopted e-commerce platforms for purchasing products and services.[11] Therefore, the cumulative exposure to e-commerce platforms during this period influenced Africa's progress and development and the need to strengthen the continent's e-trade and e-commerce systems. This effectively enhances Africa's Gross Domestic Product and increases market access.[12] On the other hand, the United Nations estimated that over 30 million African people might experience poverty and acute food insecurity if economic activities such as agriculture, healthcare, education, and manufacturing are not boosted and strengthened.[13] Thus, by facilitating e-commerce platforms, African countries can enhance the transfer of products from one side of the continent to another and enhance job creation.

The African Union High-Level Panel on Emerging Technologies (APET) believes that channeling fiscal and monetary mechanisms to boost the liquidity of small-to-medium-enterprises (SMEs), households, and informal workers, particularly in the most vulnerable economies, can help Africans strengthen their e-trade and e-commerce responses. These provisions can assist African countries in better managing and facilitating trade systems. For example, the African Continental Free Trade Area (AfCFTA) implementation has been delayed as a result of the COVID-19 disruptions. As a result, progress in AU Member States' national plans to liberalize goods and services to establish and accelerate implementation processes has stalled. However, by implementing e-commerce, this process can be accelerated, intra-continental trade systems can be adopted, and information and data sharing based on e-commerce trade activities can be improved.

APET encourages partnerships between African institutions and local entrepreneurs with international communities, development partners, and governments to strengthen e-commerce and e-trade systems and coverage. This can help accelerate progress toward subsequent phases of AfCFTA implementation, such as investment, competition policy, and intellectual property rights. This can also help the innovation transformation program, especially in terms of regional integration and digitalization. Such frameworks can also reduce the system's vulnerability to peripheral trade and commodity price shocks, expand the region's beneficial transformation, and foster human, societal, and economic resilience.

Additionally, APET notes that inefficiencies in African borders negatively affect cross-border trade activities between African countries.[14] This is also deterring internal and external business transactions as the border inefficiencies reduce the mobility of goods and services across African countries.[15] For example, African countries such as Zambia have re-strategised their trading mechanisms since the COVID-19 pandemic to significantly grow their e-commerce platforms and systems, especially domestic retail, wholesale, utility, and mandated government payments. As such, the Zambian Information Communications Technology Agency (ZICTA) reported that the total number of active internet subscriptions increased from 10.3 million at the end of 2020 to 10.4 million by the end of 2021.[16] This represented a growth rate of 1.3% and an internet penetration rate of 56.7 per 100 inhabitants.[17] The improved internet networks, reasonably priced data services, and the expansion of networks by operators vigorously competing for clients contribute to the incremental subscription from only 7.9 million in 2018.[18]

Financial institutions such as banks and telecommunication companies are exploiting the benefits of the e-commerce market.[19] Since people are purchasing goods and services online through varied financial transactions, banking and telecommunication institutions are profiting from utilising mobile devices, ATMs, credit cards and debit cards. Furthermore, to encourage the utilisation of e-commerce beyond the COVID-19 pandemic, the Zambian government has enhanced communication infrastructure, such as satellites to house base stations, resulting in expanded data access coverage.[20]

The Zambian government is enabling a business-to-business (B2B) portal with a database of suppliers and buyers. Electronic tools accompany this to enable buyers to submit their bids and receive responses from service providers.[21] The website intends to promote trade between major businesses and neighbourhoods in small and micro businesses.[22] The private sector's participation, such as mobile telecommunication operators, also provides unstructured supplementary data services to support key industrial activities.[23] Financial institutions such as banks communicate through short messaging services (SMSs) to Zambian citizens to provide access to accounts for purchasing goods and services and process payments to service providers. This enables Zambians to process their government tax collection facilities and their pension from respective agencies.[24] They can additionally purchase electricity and water utilities and process their cable television and insurance subscriptions. All these mechanisms enable sustainable e-commerce platforms and enhance business activities.

APET realises there has been rapid growth over the past several years in Zambia's telecommunications sector. This was attributable to the progressive regulatory approach and robust competition that Zambia has adopted to enable growth within the e-commerce sector. To this end, this approach has enabled several private sector providers and legacy telecommunication parastatals to offer consumers and businesses competitive data and voice services.[25] For example, Zambia is currently implementing the Information and Communication Technologies Act Number 15 of 2009 to regulate the telecommunication sector in the country.[26] On the other hand, Zambia Information and Communications Authority (ZICTA) is an independent ICT sector regulator. This enables oversight and competitive considerations for the public and businesses to facilitate safety and protection from data breaches and abuse.[27]

APET observes that such liberal policies and regulatory provisions are growing Zambia's e-commerce market. The growth rate is higher for smartphone-enabled e-commerce. This is because, since the outbreak of the COVID-19 pandemic in Zambia, the utilisation of smartphone-enabled e-commerce has significantly increased.[28] Particularly, this was observed within the domestic payments in retail, wholesale, utility, and obligatory payments to the government. As mentioned earlier, the total number of active internet subscriptions increased exponentially during COVID-19. This was attributed to the enhanced data networks, inexpensive data services, and the expansion of networks by operators aggressively competing for customers.[29]

Furthermore, the various Cyber Security and Cyber Crimes Act that has established the extra-territorial reach has allowed for law enforcement interception of communications without notification of private citizens. This provision allows for cybersecurity inspection access to prevent cybersecurity offences and hate speech in any form of communication, including social media.[30] Thus, the penalties for hate speech and Data Protection Act are enhancing the primary data privacy and protection legislation in Zambia. Furthermore, data localisation requirements for sensitive data and the establishment of the Office of the Data Protection Commissioner have enabled regulation control, data processors and licensing data auditing.[31] This is essentially encouraging local data usage and data centres to enable Zambia to have better control of the locally generated data. To this end, the active revisions to the Data Protection Act will potentially relax the data localisation requirements and compel steep costs for accessing offshore data centres.

Domestic e-commerce has seen the majority of Zambians purchase electricity tokens and digital TVs, pay their water bills, and conduct cardless transactions using e-wallets. As a result, Zambia has seen an increase in the use of smartphone-enabled e-commerce channels for credit and debit card purchases and other financial transactions, as well as automated teller machines (ATM) bill payments, kiosk payments, and mobile devices.. [32] Furthermore, cross-border e-commerce has also observed incremental online purchases from the United States of America's eBay and Amazon platforms, the United Kingdom's eBay, and China's Alibaba.  This enables the trade of various products range such as electronics, footwear, clothing, and accessories to motor vehicle spare parts and motor vehicles. Additionally, it is envisaged that there will even be greater growth in the region once Amazon is launched in South Africa.[33]  

However, there are inherent risks to online purchases, such as receiving defective or low-quality merchandise and products advertised with false information. Other difficulties include limited contact information, withdrawal rights, non-receipt of the purchased item, non-standard or unclear terms and conditions, and additional costs from service providers such as customs duty, value-added tax, and import declaration fees. However, these issues can be addressed by implementing user- and customer-friendly policy and regulatory frameworks. In addition, APET notes that Zambia has established an e-commerce Intellectual Property Rights (IPR) Office as well as a Patent and Company Registration Office to address awareness and compliance issues. These agencies, however, are not involved in enforcement. Furthermore, while these agencies do not issue official guidelines on what constitutes e-commerce IPR violations or how to file complaints, they do provide assistance to e-traders.[34]

Some examples of financial technologies and platforms include Kazang Pay. Kazang Pay is Zambia's biggest point of sale (POS) terminal network responsible for selling various prepaid products and services.[35] Fundamentally, this system can accept card payments from a single POS device. On the other hand, the Timpa X POS can accept SASSA, Visa, Mastercard debit and credit cards. Furthermore, customers can deposit their money into their bank accounts using Kazang.

Additionally, iShop Zambia and Dot Com Zambia are shopping platforms that enable users to purchase goods online from Zambia. This can be utilised by international retailers even when located outside the country, such as in the United Kingdom, the United States of America, South Africa, and China. Furthermore, common payment methods for Zambia's e-commerce and online transactions include mobile money, credit and debit cards, ATM and kiosk payments, and websites.[36] For example, pay www.bills.co.zm  is a payment service that enables customers in Zambia to settle their utility bills and television subscriptions and purchase airtime using VISA, and MasterCard means.

Zambia has also introduced and adopted some digital marketing houses hosted on various websites to offer free space for advertising. Even though these websites do not guarantee viewing benchmarks, they allow companies to purchase airtime on big digital screens located at major city intersections.[37] This enables viewers to see the products as they walk or drive by those intersections. In addition, there has been an incremental usage of social media, especially in areas with sufficient mobile data coverage. As such, this mode of advertising remains a popular form of advertising in larger cities.

Furthermore, most Zambians are incrementally utilising social media to watch and read the news and events and access marketplaces. This is improving business networking and socialisation and providing voice and video calls. Notably, Facebook and YouTube tend to attract a youthful audience, and WhatsApp is commonly utilised among all age groups. However, neither Twitter nor Instagram is widely utilised in Zambia.[38]

APET encourages African countries to maintain the momentum gained on e-commerce platforms during the COVID-19 pandemic's peak. This has proven to create a favorable trading environment and ensure affordable market access. As a result, African countries should create an enabling environment for e-commerce by ensuring lower transactional costs, faster customs clearance protocols and time frames, and improved supply chain management systems. An enabling environment like this can help e-commerce businesses reach new and emerging markets, as well as gain access to previously difficult-to-find customers. This will increase productivity, inclusiveness, and consumer choice.

Consequently, APET observes that e-commerce can potentially enhance the exports of products when domestic companies are successful in breaking into export markets as well as regional and intracontinental markets. This can help Africa establish more effective connections in national and regional markets and enhance continental supply chains for the African Continental Trade Agreement (AfCTA). This provision also decreases the negative impacts of the geographical limitations currently impeding successful trade between African countries.[39] APET also notes that e-commerce can potentially increase the current 18% intra-African trade rate and the less than 3% share of the world trade if well adopted and implemented.[40]

APET is encouraging African countries to address the digital divide caused by inadequate ICT infrastructure and use, underdeveloped finance and payment systems, and limited ICT literacy. This can particularly bolster the capacity of e-commerce capabilities, enhance purchasing power and customer confidence, and strengthen the national legal systems.[41] Thus, APET challenges African countries to create a more enabling and favourable regulatory climate and strengthen the necessary infrastructure to efficiently employ and deploy e-commerce systems and mechanisms across the African continent.

Finally, APET encourages African countries to mitigate the risks associated with e-commerce while capitalizing on the opportunities presented by e-commerce. This includes youth self-employment, increasing use of artificial intelligence, internet of things technologies, and blockchain-enabled technologies. However, African countries should manage job losses by creating a conducive environment for potential job creation through entrepreneurship, market access, and affordability, as well as providing incentives to entrepreneurs, such as tax breaks. This can effectively improve enabling financial regulations and African businesses' competitiveness, as well as bridge the structural gap in intra-continental trade systems. Such frameworks can also improve Africa's online retail and accelerate African economies' digitalization..

 

Featured Bloggers – APET Secretariat

Justina Dugbazah

Barbara Glover

Bhekani Mbuli

Chifundo Kungade

Nhlawulo Shikwambane

 

[1] https://www.oecd.org/greengrowth/sustainable-agriculture/2739771.pdf.

[2] https://www.rvo.nl/sites/default/files/2019/12/Digital-Farming-in-Kenya.pdf.

[3] https://unctad.org/system/files/official-document/der2019_en.pdf.

[4] https://au.int/en/documents/20200518/digital-transformation-strategy-africa-2020-2030.

[5] https://repository.uneca.org/bitstream/handle/10855/43939/b11990296.pdf?sequence=1&isAllowed=y.

[6] https://set.odi.org/wp-content/uploads/2021/04/Digital-trade-provisions-in-the-AfCFTA.pdf.

[7] https://unctad.org/news/mobile-money-holds-key-financial-inclusion-africa-experts-say.

[8] https://www.mckinsey.com/industries/financial-services/our-insights/the-future-of-payments-in-africa.

[9] https://www.trade.gov/rise-ecommerce-africa.

[10] https://www.statista.com/topics/7288/e-commerce-in-africa/.

[11] https://www.oecd.org/coronavirus/policy-responses/coronavirus-covid-19-sme-policy-responses-04440101/.

[12] https://www.worldbank.org/en/region/afr/overview.

[13] https://blogs.worldbank.org/africacan/three-challenges-and-three-opportunities-food-security-eastern-and-southern-africa.

[14] https://www.worldbank.org/en/topic/trade/publication/monitoring-small-scale-cross-border-trade-in-africa-issues-approaches-and-lessons.

[15] https://www.statista.com/statistics/1233745/share-of-consumers-shopping-more-online-due-to-covid-19-in-selected-african-countries/

[16] https://www.zicta.zm/storage/posts/attachments/yHbXO12wlR9X6r4dPSix0AVZKwjJnbPKOctJy4aM.pdf.

[17] https://www.lusakatimes.com/2022/03/03/active-mobile-subscriptions-in-zambia-increase-from-19-1-million-to-20-2-million-in-2021/.

[18] https://www.qfmzambia.com/2022/03/02/zambia-records-increased-access-and-use-of-ict-services/.

[19] https://www.trade.gov/country-commercial-guides/zambia-ecommerce

[20] https://openknowledge.worldbank.org/bitstream/handle/10986/35342/9781464817144.pdf.  

[21] https://www.usaid.gov/sites/default/files/documents/USAID_Zambia_DECA_Report_Jul2022.pdf.

[22] https://www.trade.gov/country-commercial-guides/zambia-ecommerce

[23] https://www.cgap.org/blog/what-ussd-why-does-it-matter-mobile-financial-services.

[24] https://pubdocs.worldbank.org/en/230281588169110691/Digital-Financial-Services.pdf.

[25] https://www.trade.gov/country-commercial-guides/zambia-ecommerce.

[26] https://www.parliament.gov.zm/sites/default/files/documents/acts/Information%20and%20Communication%20Technologies%20Act%2C%202009.pdf.

[27] https://www.bowmanslaw.com/insights/corporate-services/zambia-regulatory-developments-on-cyber-security/.

[28] https://unctad.org/news/zambias-e-commerce-firms-stay-course-amid-pandemic.

[29] http://www.chinafrica.cn/Homepage/202111/t20211130_800264608.html.

[30] https://www.unodc.org/e4j/zh/cybercrime/module-2/key-issues/offences-against-the-confidentiality--integrity-and-availability-of-computer-data-and-systems.html.

[31] https://www.dataguidance.com/notes/zambia-data-protection-overview.

[32] https://www.dandc.eu/en/article/zambians-are-increasingly-using-mobile-phones-move-money-online-platforms.

[33] https://www.businesswire.com/news/home/20220824005625/en/Global-E-Commerce-Market-Report-2022-Key-Players-Alibaba-Amazon-Ebay-Others-Driving-27.4-Growth---ResearchAndMarkets.com.

[34] https://www.export.gov/apex/article2?id=Zambia-Protecting-Intellectual-Property.

[35] https://www.trade.gov/country-commercial-guides/zambia-ecommerce.

[36] https://staxpayments.com/blog/understanding-pos-debit-charges/.

[37] https://www.marketingevolution.com/marketing-essentials/what-is-a-digital-marketing-platform-marketing-evolution.

[38] https://www.coursehero.com/file/p6e0mll/Traditional-news-media-now-also-have-an-active-online-presence-with-their-own/.

[39] https://au.int/sites/default/files/newsevents/conceptnotes/34658-cn-cn-draft_concept_note-11062018_eng_1.pdf.

[40] https://www.brookings.edu/blog/africa-in-focus/2021/05/19/why-the-extent-of-intra-african-trade-is-much-higher-than-commonly-believed-and-what-this-means-for-the-afcfta/.

[41] https://blogs.worldbank.org/digital-development/too-many-africans-cannot-access-technology-they-need-world-bank-initiative-aims.