In an increasingly interconnected world, the digital economy is rapidly becoming the heartbeat of international trade and commerce. Yet, as the digital landscape continues to evolve, it becomes apparent that traditional trade agreements are struggling to keep up pace with the dynamic nature of the digital economy. 

This holds particularly true for African nations, where outdated trade agreements fall short in addressing the unique challenges and opportunities presented by the digital age. As Africa moves closer to realising the potential of the African Continental Free Trade Area (AfCFTA) and the aspirations of the African Union Agenda 2063, the importance of Digital Economy Agreements (DEAs) cannot be overstated. These agreements can serve as a catalyst for bolstering Africa’s digital economy, bridging the digital divide, and fostering greater economic integration within the continent.

Traditional trade agreements, often written long before the digital age, were designed with physical goods in mind. They lack provisions that address the nuances of the digital economy, such as e-commerce, data flows, and intellectual property rights. This outdated framework puts African states at a disadvantage when it comes to protecting their interests and leveraging the digital economy for growth.

Around the world, countries have recognised the importance of DEAs in the digital age. Notable examples include the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the United States-Mexico-Canada Agreement (USMCA), the US-Japan Digital Trade Agreement, the Digital Economy Partnership Agreement (DEPA) between Chile, New Zealand, and Singapore, and finally, the Australia–Singapore Digital Economy Agreement (SADEA).

These agreements establish rules and standards for digital trade, data protection, and intellectual property rights, providing a framework for businesses to thrive in the digital space. They incorporate a range of provisions that guarantee market access to parties to the agreement and prevent discrimination against the provision of a variety of digital services. DEAs additionally encourage the free flow of data, ensuring that data can be transferred across borders without unnecessary restrictions, making it easier to operate businesses beyond one particular jurisdiction, and expanding access to digital financial services by encouraging cooperation and development within the fintech industry.

The African Continental Free Trade Area (AfCFTA) constitutes a critical tool to achieve the economic transformation objectives for the continent set out in the African Union (AU) Agenda 2063 by increasing intra-African trade and investment.  Africa lags behind in terms of penetration of the digital economy in retail with respect to other regions. In 2019, only 30% of the African population engaged in online shopping, compared to 45% and 50% in South America and Asia. Only $22 billion in turnover was generated in regional business-to-consumer (B2C) e-commerce transactions, compared to $1,100 billion in Asia, and $30 billion worth of services were digitally delivered, substantially below the $790 billion in Asia.  The development of e-commerce and the digital economy is affected by a wide range of factors including digital and physical connectivity, the low number of people using the internet (30% of the total population), the low number of people using bank accounts or mobile money (40%), lack of secure internet servers and unreliable postal services. 

The potential for intra-African digital trade and e-commerce remains constrained by traditional restrictions such as logistical challenges, limited internet penetration and access to financial systems and those related to the management and governance of data. Cooperation and collaboration between countries is required to address issues such as consumer protection, authentication, data localisation, cross-border data flows, cybersecurity and data protection.  

The AfCFTA Protocol on Digital Trade can provide a framework for the convergence of domestic and regional policies. Despite the issues that need to be addressed, there exists a wide range of best practices in global bilateral agreements that could be drawn upon. An agreement with binding and enforceable provisions could provide a significant boost to continental integration in general, and the digital economy in particular. 

Opportunities presented by DEAs for Africa

Stimulating Innovation: DEAs can encourage innovation by protecting intellectual property rights and promoting cross-border collaboration among African tech entrepreneurs and businesses. This innovation can lead to the creation of homegrown solutions that address specific African challenges.

Economic Growth: A thriving digital economy can drive economic growth in Africa by creating new industries, generating employment opportunities, and attracting foreign investments.

Inclusive Development: DEAs can help bridge the digital divide by ensuring that marginalized communities have access to the digital tools and services they need to participate in the digital economy.

Trade Expansion: DEAs can facilitate trade in digital services and e-commerce, enabling African businesses to reach global markets and consumers.

Data Protection: These agreements can establish robust data protection mechanisms, ensuring that African citizens’ data is secure and fostering trust in digital transactions.

Conclusion

As Africa inches towards the AfCFTA and works towards realising the goals of Agenda 2063, it is worthwhile considering attempts towards a Digital Economy Agreement. These agreements have the potential to address the unique challenges and opportunities presented by the digital economy. By embracing DEAs, Africa can bolster its digital future, bridge the digital divide, and empower its people to thrive in the digital age.