INTRODUCTION
The effect of digitisation over the last decade has been widespread, and cuts across various aspects of daily life and by implication, the global economy. This has resulted in digital trade and e-commerce, which has greatly influenced and changed the concept of trade in many ways, both on a local/small scale and at an international/large scale. Digital trade has facilitated multinational value chains; blurred the pre-existing boundaries between the sale and delivery of goods and services and forced a realignment of legal and regulatory structures to capture the benefits of this digital economy.
It is in light of this prevailing reality that the African Continental Free Trade Area (AfCFTA) developed the AfCFTA Protocol on Digital Trade (the “Protocol”/ “AfCFTA Protocol”) to support and enable the acceleration of technology-driven innovation and commerce in Africa. This is particularly of importance to multinational companies in the technology space, whose operations cut across several jurisdictions in Africa.
In this newsletter, we highlight some salient provisions of the Protocol and the opportunities which the Protocol presents to businesses.
WHAT IS DIGITAL TRADE?
Digital Trade has been defined by the Organization for Economic Cooperation and Development (OECD) as encompassing “digitally enabled transactions of trade in goods and services that can either be digitally or physically delivered, and that, involve consumers, firms, and governments”. It is essentially commerce enabled by electronic means and covers both trade in goods and services.
The AfCFTA Protocol defines digital trade as “digitally enabled transactions of trade in goods and services that can either be digitally or physically delivered and that involves natural and juristic persons”.
THE AFCFTA PROTOCOL
Some of the objectives of AfCFTA as enshrined in the Agreement for the Establishment of the African Continental Free Trade Area include (i) the creation of a “single market for goods, services, facilitated by the movement of persons to deepen the economic integration of the African continent and in accordance with the Pan African Vision of “An integrated, prosperous and peaceful Africa” enshrined in Agenda 2063” and (ii) the creation of “a liberalized market for goods and services through successive rounds of negotiations.
The Agreement establishing the AfCFTA provides for a Protocol on Trade in Goods, with the main objective of creating a liberalized market for trade in goods through the progressive elimination of tariff and non-tariff barriers. It also provides for a Protocol on Trade in Services, which seeks to create a single liberalized market for trade in services by establishing measures to enhance the competitiveness of services.
In February 2024, the AfCFTA Protocol on Digital Trade was adopted. The Protocol seeks to support the actualization of the above-mentioned objectives of the AfCFTA by creating harmonized rules that will facilitate digital trade for sustainable and inclusive socio-economic development and digital transformation in Africa.
Provisions of the AfCFTA Protocol
The provisions of the Protocol which seek to facilitate digital trade among member states, and create a trustworthy digital ecosystem for business and consumers, are summarized as follows:
1. E-Commerce Market Access: The protocol makes provisions that ensure that digital products and services are accessible to member states without unnecessary restrictions. It mandates that there shall be no discriminatory treatment of digital products and services to prevent unfair trade/competition practices against foreign digital providers. It also prohibits the imposition of customs duties on electronic transactions, including digital content, software and other online products.
2. Limitation of Data Localization and Cross-Border Data Flow: The protocol limits the imposition of data localization measures, which require data to be stored within the country of origin. The aim is to prevent barriers that could hinder the digital trade flow. Data localization may however be permitted when there are strong justifications related to national security and public policy. Flowing from this, the Protocol encourages the free movement of data across borders through electronic means, provided that the purpose for such transfer is to conduct digital trade.
3. Data Governance: the Protocol encourages member states to adopt and enforce privacy protection measures in line with international standards, to ensure the protection of personal data during digital transactions. This will help build trust among consumers and businesses alike. The Protocol also urges member states to adopt data innovation, and measures to ensure cybersecurity and combat cybercrimes within their jurisdictions.
4. Regulatory Cooperation: The Protocol encourages regulatory cooperation and harmonization among member states to reduce regulatory barriers and ensure consistency in digital trade regulations.
5. Development of Digital Infrastructure: the Protocol requires member states to facilitate digital trade through measures such as allowing electronic trust services (such as e-signatures, e-seals, and e-time stamps), adopting and maintaining digital identity regimes for both natural and juristic persons, promoting digital payments and settlement systems, etc. It also provides for the continuous development of this digital infrastructure to enhance universal access to support participation in digital trade, such as providing consumers with access to the internet.
6. Digital Inclusion: the Protocol also seeks to facilitate digital trade inclusion and urges member states to facilitate the inclusion of women, youth, indigenous persons, rural and local communities, persons with disabilities, and other underrepresented groups in digital trade. Member states are required to ensure that MSMEs participate in digital trade by adopting measures such as rendering technical assistance, capacity building, and collaboration in every area relating to digital trade.
OPPORTUNITIES PRESENTED BY THE AfCFTA PROTOCOL
Some of the opportunities presented by the Protocol include:
1. Widened Market Access: With the introduction of the Protocol, businesses can access a larger market across Africa, without the regular barriers associated with cross-border transactions, especially with the elimination of custom duties on electronic transactions and other regulatory obstacles.
2. Improved Data Flow and Connectivity: the introduction of unrestricted cross-border data flows, which are essential for cloud computing, data analytics and digital communication is of advantage to businesses. This allows businesses to operate more efficiently by using centralized data storage and processing. For one, following the implementation of the Protocol, this may address some issues businesses face with respect to transfer of data to third parties as provided under the Nigerian Data Protection Act.
3. Enhanced Innovation and Technology Integration: with lesser restrictions on data and digital products, businesses have more opportunities to innovate and integrate technologies across borders.
4. Regulatory Consistency: as the Protocol encourages regulatory alignment among member states, businesses may no longer have to deal with complex regulations as they apply to different trade jurisdictions. There is more consistency, and a more predictable business environment, making it easier for businesses to plan and invest.
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5. Increased Collaboration: businesses can now explore new partnerships and collaborations across the continent and leverage on shared digital resources and infrastructure.
CONCLUSION
The Protocol presents great opportunities for African countries to establish an inclusive, sustainable and beneficial trade ecosystem. It will help in harnessing the transformative power of technology for economic development. Nigeria is also realigning its regulatory structures to provide for a more sustainable digital trade ecosystem The promulgation of the Digital Economy Bill is one of Nigeria’s strategies at adopting the Protocol, promising for a better digital trade ecosystem for businesses in Nigeria.
Aderonke Akex-Adedipe is the managing partner at Pavestones Legal.
Sharon Okpo is an associate at Pavestones Legal.
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