Digital Trade Dialogues: Spotlighting the African Union
 
eTrade Alliance African Union Commission Policy Dialogue

By Morgan Wilsmann, Erica Vambell, Kati Suominen

A year after the eTrade Alliance’s inaugural Digital Trade Dialogue with the African Union Commission (AUC), the Alliance and the AUC held a high-level dialogue with African policymakers and data protection officers to discuss a future regional data transfer regime for Africa, to advance MSME ecommerce and a robust, trade-creating African Continental Free Trade Agreement (AfCFTA). 

 

Dialogue participants were welcomed by John Kelley, Deputy Chief of Mission, U.S. Mission to the African Union (USAU) and Deputy Permanent Representative to the United Nations Economic Commission for Africa (UNECA), and Tapiwa Cheuka, Trade Policy Officer of the African Union Commission (AUC).

 

Introductory remarks lauded the African governments’ progress with AfCFTA and highlighted the need to bolster a digital strategy that promotes digital interoperability and cross-border data transfer among African governments and firms. 

Setting the stage: ongoing work to enable digital trade and MSMEs in ecommerce:

 

Nextrade Founder and CEO and Alliance Technical Director Kati Suominen introduced the eTrade Alliance's work, and presented insights from Nextrade’s research on the status of data transfer issues for African MSMEs’ engaging in ecommerce. African firms and especially MSME online sellers are already using data intensively, moving it across borders, and calling for data privacy transfer regimes that protect consumers’ privacy, enable firms to move and store data where it makes the most economic sense, and that ban server localization policies. Firms also call for more uniform data privacy rules, so as not to have to deal with multiple data privacy regimes when selling to foreign consumers and operating across markets. 

 

The survey and policy data are also available in a new report on data transfer in Africa. Suominen recommended African governments enable African firms to use and move data across borders safely and easily, work on convergence - ensure greater compatibilities among the proliferating national data privacy and transfer regimes. She also stressed the importance for data protection officers to explore the opportunities opened by technologies such as encryption and confidential computing for MSMEs to protect data privacy when data is in transit and use.

 

African Union and UNECA ongoing work to promote digital trade and MSME ecommerce in support of economic recovery

Souhila Amazouz, Senior Policy Officer, Department of Infrastructure and Energy, African Union Commission; Jamie Macleod, Trade Policy Expert and Lead on Ecommerce, UN Economic Commission for Africa; Mulualem Syoum, CEO, AeTrade Group; Moderated by Carl Manlan, Vice-President, Social Impact, CEMEA, Visa

 

The panel discussed various ongoing initiatives and approaches to enable MSME ecommerce in Africa. AUC recognizes digitization is key across all sectors, including health, education, and trade. An important step in operationalizing the AfCFTA is to develop a framework of digital interoperability as the data protection landscape is nascent. Despite recent initiatives in digitization, the level of regional connectivity and legal frameworks do not sufficiently facilitate online transactions and cross border trade. 

 

Expanding on Africa’s digitization journey, UNECA has released a report on harmonizing digital trade provisions among AfCFTA signatories. While there is a lack of information of what regulatory regimes actually look like across the continent, UNECA supports the notion that improving all of Africa’s internet cost and reliability, online payment capacity, digital skills, and delivery logistics are universal challenges. UNECA recommends prioritizing fostering trust across regimes to harmonize regulation for cross border taxation, e-signatures, and data privacy laws.  

 

From a private sector perspective, the traditional business mindset in Africa is not necessarily a competitive one. Because traditional business mindsets are not always conducive to growth, financial institutions are often reluctant to lend to small businesses. AeTrade, an African professional group focused on digital trade, uses alternative vetting procedures to circumvent financial institutions and create impact financing products for small businesses. Further, AeTrade brings together major stakeholders in logistics to come together and make possible real time quotations, flexible transactions, and online platforms to be inclusive as AfCFTA is operationalized.

 

Panel 1: Data transfer policies and technologies conducive to MSME ecommerce: business and policy perspectives on models around the world 

Reshma Bharmal-Shariff, Partnerships Director, Impact Projects, Ringier One Africa Media; Serge Ntamack, Government Affairs Director, Microsoft; Nono Malefane, Senior Director, CEMEA Government Engagement, Visa;  Nigel Cory, Associate Director, Information Technology and Innovation Foundation (ITIF); Deborah Elms, Executive Director, Asian Trade Center;  Henning Soller, Partner, McKinsey & Company; Drudeisha Caullychurn-Madhub, Commissioner, Data Protection Office, Mauritius; Mamoudou Niane, Director of Legal Affairs Personal Data Protection Commission, Senegal; Moderated by Kati Suominen, Founder and CEO, Nextrade Group 

This panel highlighted concrete data use cases from a range of African businesses, discussed policies that enable companies to access and benefit from data, and assessed emerging regional data transfer regimes around the world, in order to support African governments’ aspirations for digital trade and secure and robust digital ecosystems.

 

The panelists' main points focused on re-iterating the importance of digitization and its potential on the continent and finding better strategies to reach the underserved, looking to Asia’s success stories in establishing regulatory frameworks that allow for flexible data transfers.

There are great benefits to cross-border data transfers, yet these benefits are dampered by data localization requirements. A panelist cited a 2020 World Bank study that indicated productivity can decrease by 4.5% due to data localization policies, having nearly 2% impact on countries’ GDP. 

Panelists agreed that data localization would be a major barrier to growth across sectors and economies and impede cross-border ecommerce. A recent study by ITIF quantifies some of these costs.The primary need is to bring data closer to the African customer through appropriate data transfer mechanisms that allow for multi-country harmonization. ROAM, a leading provider of classified sites and marketplaces in Africa, provided the panel an example of how it uses trends and user experience data to design country-specific approaches throughout the African continent. As remote work becomes increasingly possible, young Africans are looking beyond borders, but are hindered by the lack of comprehensible regulations - underlining the need for more harmony between countries so that companies with cross-border footprints are able to network and empower job seekers.

A panelist presented findings that access to data lowers costs for companies, improves customer service, and promotes innovation. At the same time, as many businesses moved online for the first time during the Covid-19 pandemic, businesses are experiencing more incidences of fraud and security threats. These businesses are looking to governments for assistance in addressing and preventing cyber security breaches and maintaining data privacy. 

Panelists agree that firms who have gone online have weathered the Covid-19 pandemic far better than offline firms. What remains is the need for improved data transfer competency to support business processes. The Association of Southeast Asian Nations’ (ASEAN) 2018 Ecommerce Agreement and Model Contractual Clauses for Cross-border Data Flows was presented as a case study for African policymakers to consider. Given some of the constraints ASEAN may experience due to the diversity among the 10 member countries, the African Union could learn from the Ecommerce Agreement’s mandate to align regulatory provisions across the widest possible set of countries. Converging the regulatory environment will help small businesses access regional consumer bases and suppliers without navigating convoluted digital trade policies.

Mauritius also provides an interesting case study for peer African nations following the adoption of their 2016 data privacy law. Mauritius, being the eighth freest economy in the world and being well integrated in the global trade system, enjoys flexible data transfer regulations. A piece of Mauritius’s success is thanks to the focus on specific needs for micro and small enterprises.

Panel 2: Data Transfer Roadmap for Africa 

Alastair Tempest, CEO, E-Commerce Forum Africa ; Alison Gillwald, Executive Director, Research ICT Africa; Deborah James, Director of International Programs, Center for Economic and Policy Research; Michael Muchiri Murungi, Government Affairs & Public Policy Lead for Eastern Africa, Google; George Owuor, Director, Sub-Saharan Africa Public Policy, Mastercard; Olufemi Daniel, Lead, Data Regulations Monitoring and Compliance, National IT Development Agency, Nigeria; Moderated by Trudi Hartzenberg, Executive Director, TRALAC

 

This panel reflected on the prior dialogues and discussed data transfer models conducive to MSME ecommerce and digital economy in Africa, and the processes by which optimal models could be adopted and implemented. The panelists agreed it is imperative to consider the costs and frictions imposed by data localization practices where they occur. SMEs can lose out greatly when they do not have access to data on their target consumer base or competitors, especially in regards to innovation. As a solution, panelists explored many ideas, from an African cloud to stronger cybersecurity, better digital infrastructures, greater convergence of data privacy regimes, and consumer and business trust.   

However, this solution may take time, so as an interim solution, countries that lack data privacy regulations, or have discordant mandates, may engage in trade using model contract agreements. These agreements aim to provide a sound legal basis upon which parties to international contracts can enter into fair agreements despite potentially conflicting local data privacy laws.

Further discussion on data localization highlighted that data is not valuable if it is hoarded. Data must be acknowledged as a strategic asset with enormous public value that can be used as a tool to enhance the wellbeing and safety of citizens. There are important opportunities for the public sector to create an enabling environment for continental data policy critical infrastructure, digital infrastructure, data infrastructure, and an environment of trust. If the government controls access to data, its citizens must trust that data are being used for legitimate purposes and not for surveillance. Creating this environment within a single jurisdiction is favorable to many, yet the continent lacks the necessary political integration. Instead, focus should be on convergence of data policy frameworks that supports adoption of common systems and values that allows for fair data exchange. 

Panelists explored three areas that need proactive consideration when drafting data protection policies. First, there is a need to develop appropriate human infrastructure to support data protection measures through investments into innovation centers similar to Silicon Valley in the United States, and into digital literacy curriculums at educational institutions. Second, African economies can improve the digital infrastructure - for example, coastal cities have access to the internet yet experience insufficient last mile connectivity. Third, it would be beneficial for the continent to collaborate on digital policies and infrastructures.

The event agenda can be found here.