Digitalisation has reshaped the trade landscape across the world, and Africa has growing ambitions to tap into the opportunities offered by digital trade. In February 2024, the draft Digital Trade Protocol (DTP)1 of the African Continental Free Trade Area (AfCFTA) was agreed on. This article is the first in a series of two articles analysing the DTP and its implications for trade between Mauritius and Africa. This first article focuses on those provisions of the DTP which relate to Market Access and Non-Discrimination, Facilitating Digital Trade and Data Governance.
While there is no universally accepted definition of digital trade, the DTP defines digital trade as "digitally enabled transactions of trade in goods and services that can either be digitally or physically delivered, and that involve natural and juridical persons." Furthermore, a digital product is defined as "an electronic programme, text, video, image, sound recording, or any other product that is digitally encoded, that is produced for commercial sale or distribution, and that can be transmitted electronically except for a digitised representation of a financial instrument, including money." The Protocol specifies that the definition of a digital product should not be interpreted as reflecting a Member State's view that digital products constitute a good or a service. Examples of digitally deliverable goods and services include goods ordered via eCommerce platforms, video streaming services, software as a service (SAAS) and artificial intelligence services among others.
Africa's share of global digital trade is small but growing. The Global 2023 E-commerce Report shows that only 32% of the African population is engaged in online shopping compared to 55% in Asia and 66% in Europe.2 Nonetheless, the U.S. International Trade Administration forecasts a 17% annual growth rate (CAGR) of online African consumers, leading to half a billion online shoppers in the Continent by 2025.3 Between 2012-2022, digitally deliverable services (DDS) exports from Africa grew by about 60%, while DDS exports from Mauritius decreased by 40%. With regards to imports, between 2012-2022, Africa's DDS imports from the world increased by 17%, while Mauritius's imports decreased by 30%.
Figure 1: Digitally Deliverable Services Exports and Imports – Africa (2012-2022)
Source: International Economics Consulting Ltd based on
UNCTADStat
Digital trade in Africa has experienced significant advancements in the past few years, with the COVID-19 pandemic expediting this trend. This growth has, however, been limited to domestic digital trade. The DTP presents a key opportunity to advance the digital economy across the Continent as it facilitates market access and promotes the development of an enabling environment for digital trade through the harmonisation of standards and the legal framework. The DTP also supports the development of Information and Communications Technologies infrastructure and digital skills, which are key to fully leveraging the benefits of the Protocol.
Overall, the DTP aims to advance the AfCFTA's objectives by establishing harmonised rules, common principles and standards that facilitate and promote digital trade to foster sustainable and inclusive socio-economic growth and drive the Continent's digital evolution. The specific objectives of the DTP are shown in Figure 2.
Figure 2: Specific Objectives of the DTP
Source: AfCFTA Draft Digital Trade Protocol4
As per Article 3 of the DTP, the Protocol does not apply to government procurement or to information held or processed by a Member State or measures related to that information, including measures related to its collection, except for Article 39 of the Protocol. Article 39 stipulates that regularly updated open government information should be published or made available in a machine-readable format, allowing for searching, retrieving, use, reuse and redistribution. Article 4 provides Member States with the right to regulate within their territories to protect public welfare, pursue sustainable development, safeguard security interests and promote necessary public policy objectives.
With regard to market access and treatment of digital products, Article 5, which is bracketed, states that Member States will adopt an Annex on Rules of Origin (RoO) for determination of origin and for specifying the scope of digital products covered by the Protocol. Article 6.1, which is also bracketed, stipulates that a Member State cannot impose customs duties on digital products that are traded electronically from other Member States, in line with the scope and origin criteria of Article 5. Nonetheless, Article 6.2 clarifies that Article 6.1 does not prevent Member States from imposing internal taxes, fees or other charges on digital products provided that they are imposed in accordance with the AfCFTA. Furthermore, Article 7 states that a Member State shall not discriminate against "digital products created, produced, transmitted, contracted for, commissioned, or first made available on commercial terms in the territory of another State Party."
The DTP also facilitates digital trade by mandating the adoption of several digital services and promoting an enabling regulatory environment. These trade facilitation provisions are summarised in Table 1 below.
Table 1: Trade Facilitation Provisions of the DTP
| Article | Description of the Provision |
|---|---|
| Article 8 – Electronic Trust Services | Member States must recognise the legal validity, effect or admissibility of electronic documents as well as electronic trust services, including electronic signatures, electronic seals, electronic time stamps, or other electronic transactions such as electronic registered delivery services, among others. |
| Article 9 – Electronic Authentication | Member States must establish a regulatory framework for electronic authentication, enabling parties involved in electronic transactions to mutually select suitable authentication methods. Furthermore, they should have the opportunity to demonstrate to judicial or administrative authorities that their transactions adhere to the requisite laws and regulations in another State Party. Such a regulatory framework must not restrict the acknowledgement of authentication technology, methods, and implementation models. |
| Article 10 – Paperless Trading | Member States are required to accept electronic trade documents as legally equivalent to the paper versions of these documents. |
| Article 11 – Logistics and Mile Delivery | Member States will try to improve the regulatory environment for logistics services and related freight logistics services, ensuring fair market access and non-discrimination and applying domestic regulations transparently and fairly. Member States should also simplify licensing procedures for logistics services and handle license applications promptly and fairly. Moreover, Member States will try, in accordance with domestic laws and regulations, to promote transport coordination mechanisms to enhance infrastructure, support multimodal transport, and create compatible transport rules, facilitating logistics services and last mile delivery. Member States will endeavour to offer impartial, transparent, and non-discriminatory decisions and procedures for all logistics services suppliers and refrain from adopting policies that restrict competition. Member States are also encouraged to develop or enhance national addressing systems, postal services, and relevant infrastructure to facilitate last mile delivery. |
| Article 12 – Electronic Contracts | Member States must have laws or regulations that permit contracts to be concluded electronically and must not invalidate an electronic contract solely because it was concluded electronically. |
| Article 13 – Electronic Invoicing | Member States must have laws and regulations that recognise electronic invoices as legally equivalent to paper invoices. Member States must ensure that their electronic invoicing measures support cross-border interoperability with e-invoicing systems of other Member States. |
| Article 14 – Digital Identities | Member States must establish or maintain digital identity systems for individuals and legal entities in accordance with their laws and regulations. This article also requires that Member States develop an Annex on Digital Identities to promote interoperability. |
| Article 15 – Digital Payments |
Member States must improve access to and participation in digital trade by fostering interoperability between their digital payment and settlement systems. Member States must also support the creation of affordable, real-time, secure and inclusive cross-border digital payment systems. Furthermore, Member States to agree to:
Member States are also required to develop an Annex on Cross-Border Digital Payments. |
| Article 16 – Domestic Electronic Transactions Framework | This article requires each Member State to establish or maintain a legal framework for domestic electronic transactions, considering standards and guidelines from regional and international organisations. |
| Article 17 – Electronic Transferable Records | Member States are required to implement mechanisms to facilitate the utilisation of electronic transferable records, taking into account standards and guidelines from relevant regional and international bodies. |
| Article 18 – Digital Infrastructure |
Member States should make efforts to:
|
| Article 19 – Interoperability and Mutual Recognition | Member States are required to implement certification mechanisms and regulations for the mutual recognition of various electronic processes such as authentication, digital certificates, identities, timestamps, invoices and signatures. The DTP provides flexibility for Member States to maintain specific performance standards or certification requirements for certain transaction types in accordance with domestic laws and regulations. Member States should also promote interoperability across technologies and applications essential for digital trade, encompassing trade documents, authentication, signatures, payments, certificates, identities, cross-border data transfers, and digital infrastructure. |
Source: AfCFTA Digital Trade Protocol
With regard to cross-border data flows, as per Article 20, Member States must allow the cross-border transfer of data, including personal data, electronically for digital trade activities conducted by individuals from State Parties, subject to the Annex on Cross-Border Data Transfers. Exceptions can be made by a State Party to this rule if necessary to achieve legitimate public policy goals or safeguard essential security interests, provided these exceptions are not discriminatory, do not act as covert trade barriers, and only impose necessary restrictions on data transfers. The Annex on Cross-Border Data Transfers will detail legitimate public policy objectives, data usage guidelines, and limitations on third-party data sharing, including adherence to data protection laws and regulations set forth by regulators.
Article 21 on the Protection of Personal Data requires Member States to establish or maintain a legal framework, considering relevant principles and guidelines put forth by regional, continental, and international organisations, for ensuring the safeguarding of personal data for individuals participating in digital trade. Member States should also publish information or laws and regulations regarding personal data protection in digital trade, including avenues for individuals to seek remedies and for businesses to comply with legal requirements. Enterprises within a Member State's jurisdiction must also adopt, maintain, and publicly disclose their policies and procedures pertaining to personal data protection. Furthermore, Member States are obligated to implement mechanisms to facilitate individuals engaged in digital trade to assert their rights and lodge cross-border complaints concerning the protection of personal data. Additionally, Member States should work on creating national data protection authorities or similar bodies to enforce personal data protection laws.
Concerning data localisation, as per Article 22, Member States cannot mandate the use or location of computing facilities within their territories as a requirement for engaging in digital trade in the Member State. Nevertheless, exceptions to this rule can be made to accomplish legitimate public policy goals or for national security reasons. Moreover, the DTP fosters data innovation by encouraging Member States to collaborate on data-sharing projects, the development of policies and standards for data mobility, the development of data sharing frameworks and the creation of necessary data capabilities to fully leverage data-reliant technologies and services, among others.
It is crucial for Mauritian businesses to remain updated on the latest developments on the DTP to fully leverage the opportunities presented by the AfCFTA in digital trade. The DTP provides avenues for Mauritian companies to penetrate new markets in Africa, giving them access to a predictable online market across the Continent. By upholding a robust regulatory framework for data protection, the DTP also fosters trust among consumers and this is vital for business growth. Furthermore, the trade facilitation measures and provisions on the location of computing facilities under the DTP not only streamline procedures and reduce costs associated with digital trade but also provide certainty to businesses wishing to provide digitally deliverable goods and services in Africa.
International Economics Consulting Ltd (IEC) is an independent consultancy firm working with national and international development partners, governments, and the private sector to create value and promote sustainable growth and development. With extensive experience in trade policy, research, and negotiations, IEC can support governments and businesses deal with unfair trade practices and unforeseen consequences of free trade by providing analytical expertise and support.
Footnotes
1. It should be noted that the current draft protocol is a progressive document and is yet to be finalised. Several provisions in the DTP are bracketed, i.e. the provisions or certain words within them are still being debated.
2. RetailX et al. (2023), Global ecommerce report 2023, Available from: https://internetretailing.net/report-hub/global-ecommerce-report-2023/?sc_order=0a31bfe2-c7d8-4777-9a00-d7f59f5347e4
3. U.S. International Trade Administration (n.d.), The Rise of eCommerce in Africa, Available from: https://www.trade.gov/rise-ecommerce-africa
4. AfCFTA Secretariat (2024), Draft – Protocol to the Agreement Establishing the African Continental Free Trade Area on Digital Trade, Available from: https://www.bilaterals.org/IMG/pdf/afcfta_digital_trade_protocol_-_9_february_2024_draft.pdf
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