Digital economy has vital role in unlocking trade

A man looks for trade offers on a computer

A man looks for trade offers on a computer. Africa has one of the fastest-growing penetrations of mobile subscribers with its internet economy estimated to grow to $180 billion by 2025.

Photo credit: File | Nation Media Group

May 2019 witnessed the historic inception of the Africa Continental Free Trade Agreement (AfCFTA), creating the largest free trade area. The IMF estimates that the AfCFTA will lift 30 million people from extreme poverty by eliminating the barriers to trade. 

There has been considerable discourse about the role of the digital economy in boosting trade in Africa. Governments are overhauling their systems in recognition of the opportunity provided by new technologies in boosting economic growth, improving governance, creating jobs and enabling more inclusive and sustainable trade. 

The continent has one of the fastest-growing penetrations of mobile subscribers with its internet economy estimated to grow to $180 billion (5.2 per cent of the continent’s GDP) by 2025. But that will depend on the ability of African countries to embrace and encourage digital transformation. 

Digitalisation and rapid technological advancement have increased the scale, scope and speed of trade. However, existing barriers and limitations prevent businesses from thriving in the digital economy and hinder digital trade by extension. 

First is poor broadband connectivity. Research shows only 40 per cent of Africa has internet access compared to 66 per cent globally, with disproportionate access in rural and urban communities. Affordability is also a major obstacle: Statistics show Sub-Saharan Africa has the most expensive mobile data prices. 

Ensuring affordable internet access and, consequently, promoting public-private partnerships for mobile infrastructure would boost the capacity to engage in digital trade. These investments must be accompanied by policies and regulations that create a conducive environment for trade. 

Data security

Secondly, data is key to the digital economy, providing essential information for innovation and boosting economic growth. But increased digitalisation of economic activities has given rise to data security concerns. In 2021, data breaches in Africa led to a 10 per cent reduction in GDP, hence a $4.1 billion loss. 

Appropriate policies and regulations on data protection, data privacy and cross-border data flows would promote the digital economy for development. Robust data standards offer protection to users while enabling the use of data for the development of new products and services. 

The digital economy is an untapped powerhouse for economic growth; a mixture of the right policies and political willingness for implementation can boost trade. But it calls for an ambitious agenda at the continental level in areas such as cross-border data flows, data protection, competition, AI and cloud computing and taxation.

The AfCFTA digital protocol provides an avenue to detail unambiguous and transparent rules to create an open and trustworthy digital environment for businesses. That will unlock the potential of digital trade and enable businesses, especially small and medium-sized enterprises, to expand their reach and tap into new markets in an increasingly interconnected global marketplace. 

Mr Kuria is the Cabinet Secretary, Ministry of Investments, Trade and Industry. @HonMoses_Kuria