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E-Commerce in Africa

 E-Commerce in Africa

By Heinrich Krogman and Nkululeko Khumalo

African e-commerce is exploding, and it’s just the beginning.

In the final quarter of 2016 South Africa participated in two critical global economic governance summits as the lone continental representative: the 11th G20 summit hosted by  China and the 8th BRICS summit hosted by India. Both hosts placed e-commerce on the  agenda, signalling a desire to engage on the topic. Meanwhile, on the multilateral front  the WTO is exploring new trade issues beyond the Doha Development Round, in which e- commerce features firmly. But what does this all mean for Africa?

While the boom resulted in some improvements in the average African citizen's life, most  states and their populations still face serious developmental constraints. Africa's  dependence on commodities has put growth prospects at the mercy of international markets,  resulting in varied, episodic and skewed economic development.

In the past decade African states saw rapid economic growth tied to the commodities boom  from the early 2000s, followed by the commodities bust.

The majority of African consumers and producers still face considerable barriers to doing  business. The distances between consumers, retailers, and upstream suppliers, in  conjunction with poorly developed infrastructure, mean that markets are somewhat isolated  from their immediate geographic location. This isolation also means that competition is  limited which adversely affects price, variety, and ultimately restrains innovative  potential. The consequential, overarching issue arising from this is the limited economic  participation within and among African states.

Fortunately, the march of progress has delivered a means of conducting business that  transcends all these constraining factors - e-commerce.

The opportunity to market, buy and sell goods over the internet primarily offers consumers  more convenience: more options are available, occasionally at better prices, and with more  information. It also affords suppliers (notably SMMEs) better market reach, as markets can  be better targeted and extended beyond immediate location, at more affordable prices since  overheads from traditional brick and mortar operations can be avoided and numerous  business functions either automated or outsourced.

As e-commerce makes markets and opportunities more accessible its development could  benefit the marginalized members of society. Most notably it allows people who lack access  to capital to pursue opportunities that weren't economically feasible via old brick and  mortar operations. Women in isolated rural settings subject to traditional gender roles  would also benefit as they would be able to engage in long distance sourcing and selling.

However, e-commerce does require that consumers and producers have access to the internet  on devices able to run applications or access web pages. It's also helpful if options are  available to affect payment electronically, but this is not a prerequisite for e-commerce,  rather a facilitating factor. The recent increase in mobile technology uptake and the  widespread use of 'mobile money' in Africa inspires some confidence that all the necessary  components are present to build a growing e-commerce sector. Sadly, this is not enough.

Studies show that e-commerce sales can suffer from a lack of consumer trust in the absence  of comprehensive, enforceable, consumer protection laws. Furthermore, even though  transactions occur online suppliers might face order fulfillment issues given poor  infrastructure and cross-border trade barriers.

Less than half of all African countries lacking have comprehensive online consumer  protection legislation, and African states consistently rank at the bottom of the World  Bank Logistics Performance and Doing Business indexes. Of moderate concern is the lack of  fixed broadband connections within Africa, which is comparatively cheaper than mobile  broadband connections. However, the adoption of mobile broadband connections does seem to  be the best solution in the short to medium term as wider coverage can be granted at lower  initial investment cost.

Clearly there are domestic issues that should be addressed first, but e-commerce by its  nature is not contained within domestic markets. This means that agreements are required  to regulate cross-border e-commerce transactions. Developed countries, like the USA and  European Union, have already taken the lead in establishing frameworks for the inclusion  of e-commerce in trade agreements, most notably the Trans-Pacific Partnership (TPP) and  the Transatlantic Trade and Investment Partnership (TTIP). While the fate of these  agreements in the wake of Donald Trump's election victory in the US lies in the balance,  both include provisions on e-commerce and both are considered very progressive in their  content.

The TPP, for example, includes provisions on technical issues related to the cross-border  transfer of information by electronic means, location of computing facilities, non- discriminatory treatment of digital products and the hotly contested protection of  personal information.

These issues are by no means irrelevant in the African context and require due  consideration as the conclusion and implementation of these provisions could impact  Africa's capacity to attract ICT investment and conduct cross-border e-commerce  transactions. Considering that the majority of ICT and e-commerce enterprises are based in  developed countries, the adoption of these provisions would naturally become the benchmark  for the private sector. The result would be that African states and enterprises have to  comply with such regulations which in themselves could prove to be new entry barriers.

Countries who are not members of such progressive preferential trade agreements like the  TPP and TTIP are likely to become subject to these agreements at a later stage, either via  the private or public sector adopting regulations. It is in the best interest of African  states to effectively engage in multilateral negotiations on matters affecting the global  regulation of e-commerce. Considering the stagnation in the WTO it's worrying that South  Africa, as the sole African representative in global economic governance fora like the  G20, still seems reluctant to engage on the topic.

African countries should ensure that they create an enabling regulatory framework for e- commerce in their domestic markets, to harness the potential for economic growth. This  should be done in a way that prevents further marginalization of African people,  especially vulnerable groups, or exclusion from opportunities arising from 21st Century  ways of doing business.

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