AU Watch

An Agenda for the AfCFTA Protocol on E-Commerce

E-commerce has been included in the African Continental Free Trade Area (AfCFTA) through a decision of the African Union Heads of State and Government Assembly in February 2020 and will be integrated through a third phase of negotiations. This decision could potentially lead to expanded market space for e-commerce players on the continent. Over 260 e-commerce start-ups were operating in Africa in 2017, and in 2020, the International Trade Centre identified 630 B2C e-commerce marketplaces operating on the continent. These players would also include businesses and institutions which use e-commerce channels.

Rates of use of e-commerce channels vary across the continent – 1 per cent of Africa’s e-commerce marketplaces are responsible for 60 per cent of the marketplace traffic on the whole continent, while 11 per cent of the marketplace websites enable financial transactions. 89 per cent of platforms are classified sites with sales made offline. On the UNCTAD B2C e-commerce index. in 2018, three countries alone accounted for 50 per cent of active online shoppers in Africa. It is important to highlight that measurements of e-commerce in Africa tend to focus on trade in physical goods through electronic channels within national economies. For a more robust picture, it would be necessary to cover the trade of person-supplied services (such as tutoring or design), as well as digital/electronic goods and services (software, games, content, payments) accounting for national and cross-border flows. Moreover, these measurements often concentrate on business to consumer e-commerce. There are other forms of e-commerce to be captured including business to business, government to consumer, government to business, among others.

Following the outbreak of the COVID-19 pandemic and the increasing reliance on e-commerce channels in a range of sectors, there have been calls for the AfCFTA e-commerce negotiations to be brought forward. It then becomes necessary to ask how e-commerce, which in most parts of Africa is in the nascent phase, could be treated in the AfCFTA – which is primarily an instrument for trade liberalisation. What are the issues and approaches which could be considered?

1. E-Commerce in Trade Agreements

There are several definitions of e-commerce, which essentially capture commercial transactions occurring through electronic channels[3]. The definition of the World Trade Organisation (WTO) covers “production, distribution, marketing, sale or delivery of goods and services by electronic means”. The “sale or purchase of goods or services” is the definition given by the Organisation for Economic Cooperation and Development.

No matter what definition is applied, e-commerce and related issues are integrated into trade agreements through provisions or chapters covering topics such as data localisation, cross-border data flows, consumer protection, information protection, prohibition of customs duties, promotion of e-commerce, most-favoured-nation treatment, amongst others. Typically, there are four main categories used to organise issues related to e-commerce in trade agreements:

Category
Issues covered
1. Market access
Customs duties, digital products, non-discrimination for electronic and digital products, cross-border flows
2. Rules and regulations
Consumer protection, protection of personal information, electronic supply of information, domestic electronic transaction framework
3. Facilitation
Paperless trade administration, cooperation, transparency, electronic authentication
4. Enabling Issues
Technology infrastructure and related matters

At multilateral level, since 1998, there has been a moratorium on e-commerce negotiations at the WTO, and since 2017, efforts towards global negotiations have been revived. The African Group is opposed to the introduction of e-commerce rules at the WTO on the grounds that the definitional issues have not been settled, e.g., whether products delivered by electronic means are goods, services or both. Also, the Group has argued that African MSMEs are not yet ready to compete with global technology giants, and e-commerce negotiations might serve as a pathway to a deeper liberalisation agenda which would have negative implications for the policy space of African governments. The Group want the World Trade Organisation to deliver on the Doha round of negotiations before agreeing to a new mandate which includes e-commerce. In 2019, the moratorium was extended to June 2020 and would have been addressed at the WTO 12th ministerial conference. However, with the postponement of the conference, it might seem that there are more immediate and pressing concerns for the WTO in the form of selection of a Director General and the re-establishment of a functional dispute settlement mechanism.

Bilaterally, Economic Partnership Agreements between some countries/regional blocs and the European Union contain clauses on regulation and facilitation issues related to e-commerce. E-commerce has been proposed as a topic for the USA-Kenya free trade agreement (to be negotiated from 2020). Also, e-commerce features in the Morocco-USA FTA 2004. This FTA has a chapter which covers the supply of services through electronic means, the prohibition of customs duties on digital products, most-favoured nation treatment, and national treatment.

A multiplicity of issues can be treated by an AfCFTA e-commerce protocol, potentially covering the issues within the four main categories of e-commerce issues in trade agreements. Additionally, a protocol could lead to preferential treatment for electronic goods originating within AfCFTA State Parties. However, a key question is whether it is practical, at this time, for State Parties to follow the standard liberalisation approach with e-commerce. Liberalisation in the AfCFTA takes the form of progressive elimination of tariffs and the removal of non-tariff barriers. A useful starting point would be to consider the treatment of e-commerce in Africa’s policy structures, to see the priorities and approaches already determined.

2. E-Commerce in Africa’s Policy Agenda

E-commerce is prominent in the policy agenda across the continent. South Africa in 2014[10], Nigeria and Kenya in 2019 introduced legislation to apply taxes on certain types of transactions through electronic channels or the platforms through which transactions occur. Egypt has adopted an e-commerce strategy, , while other countries, including Rwanda and Uganda have integrated the promotion of e-commerce into national digital policies and strategies. Similarly, at the level of regional economic communities, SADC has an e-commerce strategy, and COMESA has announced the launch of a digital free trade area.

At continental level, the e-commerce agenda is captured in the African Union Convention on Cybersecurity and Personal Data Protection (2014) and the African Union Digital Transformation Strategy (2020-2030). The Convention sets out standards, principles and actions to be taken by AU member States in the areas of e-commerce, electronic contracts, personal data protection, electronic advertising, and security of electronic transactions. However, the Convention is not immediately binding- it requires ratification by fifteen countries to become a binding and actionable instrument. As at June 2020, there were five ratifications. Similarly, the Strategy presents policy objectives related to e-commerce including; the creation of a continental digital single market aligned with the AfCFTA; the emergence of an enabling regulatory framework for e-commerce at continental level; the creation of a single African payments area; and solutions to challenges such as parcel delivery and payments. The African Union Digital Transformation Strategy is to be actualised by implementing strategies at national level.

3. AfCFTA E-Commerce Protocol: Issues to Consider

The Treaty Establishing the AfCFTA comprises an Agreement and three protocols on goods, services and the settlement of disputes. In essence, the protocols are the instruments which outline the objectives, state the guiding principles and stipulate the modalities for trade liberalisation in thematic areas. For example, Article 7 of the protocol on trade in goods obligates State Parties to progressively eliminate import duties or charges of equivalent effect, while Article 13 confers preferential treatment on goods originating in State Parties. Accordingly, the negotiations on trade in goods will lead to schedules of tariff concessions from AfCFTA State Parties. Similarly, Article 3 of the protocol on trade in services states the objectives of liberalisation, which include the fostering of domestic and foreign investment, progressive liberalisation of trade in services across the African continent on the basis of equity, balance and mutual benefit, by eliminating barriers to trade in services. The modality for services liberalisation is stated as successive rounds of negotiation, accompanied by the formulation of a continental regulatory framework for each sector – drawing from the acquis of regional economic communities. Following the first round of negotiations, State Parties will submit schedules of specific commitments in the five priority services sectors. Ultimately, it is the negotiations between AfCFTA State Parties which determine the depth of liberalisation in each area, with the protocols signposting ambition and mobilising action towards clearly defined objectives.

At this stage, substantive guidelines for negotiating the AfCFTA e-commerce protocol have not been determined. Direction from the African Union Assembly of Heads of State and Government is that Phase III of the AfCFTA negotiations will focus on a protocol for e-commerce. Also, the Assembly urged its member States to review their bilateral agreements on e-commerce to ensure that “Africa is able to negotiate and implement an AfCFTA Protocol on e-Commerce where Africa has full authority on all aspects of e-commerce such as data and products being traded under e-commerce, and to promote the emergence of African owned e-Commerce platforms at national, regional and continental levels as part of our preparations for the negotiation of an AfCFTA Protocol on e-Commerce.”

In contrast to the protocols on goods, services and settlement of disputes which incorporate elements of multilateral and regional agreements, there is yet to be a global agreement on e-commerce to use as a benchmark. This may prove to be a boon, as there is room for innovation and design of a protocol amenable to the objectives and direction of the AfCFTA, its State Parties and e-commerce players.

Recalling, the four categories of issues associated with e-commerce in trade agreements, it may be that market access covers those rules which prevent or limit outward payments, restrict access to some types of content or platforms, or require in-country company incorporation in to render services or engage in some sectors. The current priorities of African countries and regional blocs as they relate to e-commerce – and as expressed in policy instruments – seem to be in the other categories of rules and regulations, facilitation and enabling issues. Considering these multiplicities of interests, it is possible to suggest issues to be considered in the formulation of an agenda for the protocol on e-commerce:

  1. Definition: there are several definitions of e-commerce, with the most popular being those of the World Trade Organisation and the Organisation for Economic Cooperation and Development. It would be necessary to settle upon a definition of e-commerce suited for the objectives and direction of African trade liberalisation and integration. Additionally, there is often conflation in the use and meaning of e-commerce, digital trade and the digital economy, wherein these terms are used interchangeably on the same issues. A precise definition of e-commerce in the AfCFTA is central to the direction of the protocol.

  2. Scope: definitional clarity should enable a well-delineated scope of coverage. E-commerce is used to capture various forms of trade through electronic channels within national economies and across borders. These can include trade in goods; trade in services which can be person-supplied through digital channels or physically; as well as the trade of services such as content streaming. Also, products such as payments services may be provided in a stand-alone manner or be embedded within e-commerce channels. Furthermore, there are various channels for e-commerce including social media, marketplaces, applications, websites and platforms run by businesses or third parties. These various types of platforms and trades will need to be accounted for in the scope of e-commerce in the e-commerce protocol.

  3. Purpose: there are important questions to be explored, such as what the protocol on e-commerce should achieve for African countries. Also, what would be the benefits of the AfCFTA for the various types of e-commerce in the immediate and long-term? As the United Nations Economic Commission for Africa has noted, there is a diversity of practices in the treatment of e-commerce in trade agreements. Thus, it is possible for the AfCFTA e-commerce protocol to be made amenable to a range of objectives for e-commerce and the trade liberalisation agendas.

    In addition to treating orthodox market access issues, the protocol could explore approaches to promote the trade of electronic goods and services originating in Africa – which is related to Africa’s industrialisation and digitalisation agendas. Other themes around regulatory cooperation and convergence, as well as the use of e-commerce channels for trade facilitation should also feature in the e-commerce protocol. Issues such as standards and consumer protection will be applicable to trade through electronic channels, whether of physical or electronic goods/services.

    It is beyond the scope of the e-commerce protocol to directly address the infrastructural challenges which affect cross-border e-commerce within Africa. Nonetheless, it is possible for the protocol to identify, coordinate and boost initiatives/institutions which work to reduce the challenges associated with cross-border e-commerce such as the African e-commerce platform, the Pan-African Payments and Settlement Platform of AfreximBank and proposed customs green lanes in AfCFTA State Parties for priority products, as well as efforts to facilitate investments in infrastructure. The protocol is an important instrument for coordination, as it is electronic channels that will underpin the provision and access to market information, as well as logistics, payments, trade facilitation and other components of liberalising intra-African trade.

  4. Coherence: e-commerce does not exist in isolation, but intersects with a multiplicity of themes including technology, digital identity, data, cybersecurity, payments, consumer protection, standards, to name a few. AfCFTA State Parties will need to determine how this protocol will operate alongside existing laws and policies at national and regional levels. In addition, the e-commerce protocol will need to account for and support the objectives of the other protocols on investment, intellectual property and competition policy (to be negotiated in Phase II). This would be aided by these Phase II protocols also considering and capturing e-commerce issues as relevant.

The concerns raised by the African Group at the WTO are also worth considering. For example, the competitive landscape of a continental market should be factored in, as some platforms and businesses originating in some African countries will be better placed – with experience, technology, resources and skills – than platforms and businesses in others. AfCFTA State Parties will need to determine the balance between market access and the growth of their interests in e-commerce. Likewise, State Parties would be faced with the question of the extent to which rules related to e-commerce should emanate at continental level. Additionally, the positions of AfCFTA State Parties should reflect the realities and ambition of African e-commerce players. The African Union Heads of State and Government Assembly has already pointed to the objective of using the protocol to foster the emergence of African e-commerce platforms. In preparing the agenda for the AfCFTA e-commerce protocol, State Parties will need to engage with a range of interests in e-commerce to determine the actual state of cross-border e-commerce among African countries, and between African countries and other regions. Also, barriers to intra-African cross-border e-commerce for physical and digital goods and services should be concretely articulated.

Finally, the AfCFTA protocol could consider those issues which are on the agenda at multilateral and plurilateral levels. In this regard, the protocol can also support the formulation of an African position on e-commerce rules in the global context – and potentially lead to the actualisation of the ambitions for e-commerce already set out in the AU Digital Transformation Strategy. Already there are fractures in the African position, as in June 2020, six countries have indicated interest in the Joint Statement Initiative on e-commerce negotiations[20]. The AfCFTA e-commerce protocol is an important tool to preserve the consolidated African market in the digital sphere, and preclude other arrangements which could potentially undermine the liberalisation and integration agenda.