Africa’s Digital Economy: Cross-Border Data Flows under the African Continental Free Trade Area
The African Continental Free Trade Area (AfCFTA) is a game-changer as it seeks to promote integration and economic growth among 54 African states that have so far signed the AfCFTA Agreement.1 As digitalization continues to reshape global trade, the digital economy has emerged as a key catalyst for growth and development in the continent.2 The AfCFTA provides a transformative platform to energise the digital landscape. At the centre of this revolution, is the facilitation of cross-border data flows which will unlock immense opportunities for citizens, governments and businesses while enabling seamless connectivity.3 This blog will explore how cross-border data flows, under the AfCFTA, can revitalise Africa’s digital economy and pave the way for a prosperous digital future.
AfCFTA Facilitating Cross-Border Data Flows
In 2021, provisions under the AfCFTA were operationalised in a bid to create a unified African market by removing trade barriers and enabling the free movement of services, goods and investments.4 It is an ambitious initiative aimed at promoting economic integration among African countries. The AfCFTA seeks to create a single market for goods and services across the African continent.
At the heart of the digital economy is cross-border data flows.5 They enable the seamless exchange of information, services and products across borders, transcending physical limitations. In the context of AfCFTA, it is important to create a conducive environment for data flows to unlock multiple benefits such as:
Accelerate innovation: Access to huge data sets fuels innovation.6 By fostering cross-border data flows in Africa, the AfCFTA can catalyse the development of digital technologies, artificial intelligence, and data-driven solutions, enhance the continent’s global competitiveness, and transform industries. It will provide opportunities to work with huge data sets that will enable adequate training of AI systems. Furthermore, the development of digital infrastructure such as data centres and broadband networks will make it easier and more affordable to transfer data across borders.
Expand Market Access: Cross-border data flows enable businesses to tap into new markets beyond their national boundaries.7 With the removal of digital barriers, African companies can explore untapped markets across the continent and reach a wider audience. Harmonising regulations on data protection and privacy across Africa will make it easier for businesses to transfer data across borders.8
E-Commerce Growth: E-commerce and the digital economy are symbiotic partners.9 Streamlining cross-border data flows can allow consumers to access a diverse range of products and services, and boost online trade. Removal of such barriers will lead to growth of e-commerce and digital trade. This will increase online business activities and make it more cost effective.
Multilateral Companies: Multilateral companies with a digital presence in Africa are well-positioned to benefit from increased digital trade. They have the resources and expertise to scale their operations to meet the needs of a larger market. They also have the experience of operating in multiple countries. Under the AfCFTA on digital trade, companies such as Microsoft and Google could expand their operations to new African markets more easily and develop new digital products and services tailored for the African market.
AfCFTA Protocol on Digital Trade
The AfCFTA Protocol on Digital Trade, a baby of the AfCFTA will be a pivotal instrument to enable the digital economy across Africa.10 It is important to note that the AfCFTA protocol on digital trade is still under negotiation. Thus, most provisions discussed in this paper are not final. Furthermore, it is not yet clear how the protocol will affect various countries.
The draft Protocol aims at addressing the regulation of cross-border data flows. The Protocol aims to facilitate the free movement of data across borders which is crucial for digital trade.11 It proposes a reduction on the restrictions on cross-border data flows and fixing problems related to data sovereignty and data localization.
Other than promoting cross-border data flows, the draft Protocol promises other benefits: First, the Protocol aims to establish robust data privacy and protection measures. It will set standards for data breach reporting, data handling and consent mechanisms. Second, the Protocol will focus on creating an enabling environment for e-commerce by addressing challenges relating to electronic signatures, dispute resolution, consumer protection and online payment systems.12 Third, the Protocol will emphasise the need to invest in digital skills development, broadband networks and enhancing internet access. This will provide sufficient digital infrastructure and connectivity which is essential for the digital economy. Fourth, the Protocol will aim at addressing the protection and enforcement of intellectual property rights concerning digital services and products.
The implementation of the Protocol on digital trade will create a larger and more integrated market for goods and services in Africa. For example:
A Kenyan e-commerce company could use data from its Nigerian customers to improve its marketing campaigns and product recommendations.
A Ghanaian fintech could use data from its Tanzanian customers to develop new financial products and services.
A Rwandan software company could use data from its South African customers to enhance its software development process.
While the Protocol aims to oblige member states to facilitate free cross-border data flows. This could also be a challenge for countries without data protection laws, as they will not be able to prevent companies from transferring data to countries with weaker data protection standards.13 For example, Somalia does not have a data protection law. If the AfCFTA Protocol on Digital Trade comes into force, Somali companies will be free to store and process data in any country of their choice, without any restrictions from the Somali government. This could pose a risk to Somali citizens, as they will not have any legal recourse if their data is misused or exploited by companies.
Addressing the Elephant in the Room: Privacy, Security Concerns and Digital Divide
Whereas the benefits of cross-border data flows are self-evident, there are serious concerns related to data privacy and cybersecurity that demand attention.14 The AfCFTA must strike a balance between facilitating seamless data flows and safeguarding sensitive information. This will involve ensuring Member States implement robust data protection regulations and cybersecurity frameworks which will instil confidence among consumers and businesses by ensuring data is handled securely and responsibly. Notably, only 23% of South-South trade agreements include a provision on data protection.15 However, less than 2% of these commitments are hard laws, binding on the states. Most of the South-South Agreements are ‘best endeavour’ commitments.
One of the key provisions of the Protocol is the prohibition of data localization requirements. This means that companies will be free to store and process data in any country of their choice, regardless of where the data is collected. This could be a challenge for countries without data protection laws, as they will not be able to require companies to store data locally or to comply with their own data protection standards.16
Another challenge is the digital divide, with the growth of the digital economy, the AfCFTA must spearhead the initiative to bridge the digital divide. A pertinent problem in Africa is uneven access to internet connectivity and digital infrastructure.17 This results in huge disparities in the ability to access and fully participate in cross-border data flows. AfCFTA can put in place programs to improve digital literacy, skills training, promote inclusivity and build digital infrastructure.
Empowering Africa’s digital economy is a collective effort and the AfCFTA will play a significant role in this revolution. The operationalization of the AfCFTA will drive innovation, energise businesses and create novel opportunities for economic growth across the continent. The entry of the AfCFTA Protocol on Digital Trade is expected to play a pivotal role in shaping the future of digital commerce in Africa. As the two tools of regional integration take shape, it is apparent the digital era will present Africa with unprecedented possibilities. Furthermore, a strategic approach to data flows that strike a balance between promoting data sharing while safeguarding data and cybersecurity will pave the way for an interconnected and prosperous digital future for all Africans.
image is from freepik.com
1 Agreement Establishing the African Continental Free Trade Area, https://au.int/sites/default/files/treaties/36437-treaty-consolidated_text_on_cfta_-_en.pdf
2 Arreyndip, N.A., 2021. African continental free trade area (AfCFTA): projected economic impact assessment under future warming in CMIP6. Environmental Research Letters, 16(9), p.094046.
3 Beyleveld, A. and Sucker, F., 2023. Regulating Cross-Border Data Flows Under the AfCFTA Protocol on Digital Trade: The What, Why, How, Where, and When. Why, How, Where, and When (May 3, 2023).
4 Wapmuk, S. and Ali, J.M., 2022. The African Continental Free Trade Area (AFCFTA) and regional economic integration: Prospects and challenges. Zamfara Journal of Politics and Development, 3(1), pp.15-15..
5 Kugler, K., 2022. The impact of data localisation laws on trade in Africa. Policy Brief, 8.
6 Banga, K., Gharib, M., Mendez-Parra, M. and Macleod, J., 2021. E-commerce in preferential trade agreements: Implications for African firms and the AfCFTA. ODI Report.
7 Malatji, M., 2023. Accelerating the African continental free trade area through optimization of digital supply chains. Engineering Reports, p.e12711.
8 Ewulum, C., 2023. The Legal Regime for Cross-border Data Transfer in Africa: a Critical Analysis. Available at SSRN 4546964.
9 Abrego, M.L., de Zamaroczy, M.M., Gursoy, T., Nicholls, G.P., Perez-Saiz, H. and Rosas, J.N., 2020. The African Continental Free Trade Area: Potential Economic Impact and Challenges. International Monetary Fund.
10 Agreement Establishing the African Continental Free Trade Area, https://au.int/sites/default/files/treaties/36437-treaty-consolidated_text_on_cfta_-_en.pdf
11 Osakwe, S. and Adeniran, A.P., 2021. Strengthening data governance in Africa.
12 Mooneeram-Chadee, V., Ragoobur, V. and Seetanah, B., E-Commerce In The Afcfta Agreement: What Can Be Expected From The Protocol On Digital Trade? Special Theme:‘AfCFTA: Challenges and Opportunities’, p.109.
13 Lemma, A., Parra, M.M. and Naliaka, L., 2022. The AfCFTA: unlocking the potential of the digital economy in Africa (Vol. 13). ODI.
14 Apiko, P., Woolfrey, S. and Byiers, B., 2020. The promise of the African Continental Free Trade Area (AfCFTA). ECDPM Discussion Paper, 287, pp.1-16.
15 Banga, K., Macleod, J. and Mendez-Parra, M. (2021). Digital Trade Provisions in the AfCFTA: what can we learn from South-South trade agreements? Supporting Economic Transformation (SET) working paper series. ODI, London.
16 Kira, B., 2022. What to Consider Ahead of the AfCFTA Phase II Negotiations: Focus on Digital Trade Policy Issues in Four Sub-Saharan African Countries.
17 Apiko, P., Woolfrey, S. and Byiers, B., 2020. The promise of the African Continental Free Trade Area (AfCFTA). ECDPM Discussion Paper, 287, pp.1-16.