Online trading

The success of the AfCFTA relies on a frictionless online trading environment

The African Continental Free Trade Area (AfCFTA) is expected to boost e-commerce and digital payments in Africa.

However, its success will largely depend on strengthening government policies and frameworks to build a safe and frictionless digital commerce ecosystem.

After six years of planning, strategy and coordination, the AfCFTA came into effect on January 1, 2021. Just 18 months after its inception, players in the payments ecosystem believe that creating an enabling regulatory environment is the next critical hurdle – and probably the hardest part of its implementation.

The AfCFTA is a free trade agreement between the 55 countries of the African Union. It is the largest in the world, in terms of participating countries, since the establishment of the World Trade Organization.

The agreement was established by the African Union and requires members to remove barriers to trade in Africa, such as the elimination of tariffs on 90% of goods, thus allowing free access to basic products, goods and services across the continent.

Discussing the success of intra-African trade on a continent with diverse central banking systems in over 2,000 languages ​​and over 41 currencies, industry insiders are convinced that new regulations and a common single currency are among the requirements that will make it prosper.

Emmanuel Khisa, Project Manager of Smart Africa, tells ITWeb that while the organization recognizes that selling online would be a driver for the AfCFTA, it also recognizes the myriad of challenges faced by e-commerce and payments players. cross-border on the mainland.

AfCFTA partner Smart Africa is a network of 30 African Heads of State and Government, including South Africa, which seeks to accelerate sustainable socio-economic development on the continent, through affordable access to broadband and ICT.

“Cross-border payments and the volatility of national currencies are one of the main challenges. E-merchants also face outdated customs procedures, with long border delays; poor transport infrastructure for deliveries, which excludes most rural areas; domestic non-tariff barriers that discriminate against foreign businesses (such as tax regulations that distinguish between local businesses and importers); the ‘digital divide’ that prevents many citizens from accessing the internet,” says Khisa.

“We understand that some online businesses are experiencing return rates above 33% due to insufficient addresses in most African countries. Differences between national laws (including the absence of basic consumer protection laws) prevent e-tailers from being able to negotiate on an equal footing. »

According to Khisa, new laws and policies introduced by governments should seek to bring national central banks together and consider the collaboration of private banks and switching systems, as well as e-commerce initiatives.

New policies should be based on addressing the challenges of fragmented regimes related to digital trade by establishing clear, consistent, transparent, predictable and mutually beneficial rules to govern digital trade between state parties, he adds.

“They should also create an expanded and secure digital market in Africa by establishing rules and regulations that promote consumer trust and confidence in digital trade.

“The AfCFTA Secretariat intends to draft a protocol on digital trade later this year. Smart Africa, as a partner of the AfCFTA, is supporting this protocol development process. Issues to be covered include electronic contacts, electronic documentation for customs clearance, addressing systems and basic e-commerce regulations, among other issues,” says Khisa.

Successful implementation of the AfCFTA could lift 30 million people out of extreme poverty, while raising incomes by another 68 million, according to the World Bank.

Karen Nadasen, CEO of PayU South Africa and President of the E-commerce Forum South Africa, believes that, as with the North American Free Trade Agreement and European Union free trade agreements, a common African currency or unique used by member countries will play an important role in the fluidity of payments.

Karen Nadasen, CEO of PayU South Africa and President of the E-commerce Forum South Africa.

Karen Nadasen, CEO of PayU South Africa and President of the E-commerce Forum South Africa.

“To create an enabling environment for the AfCFTA to thrive, African countries will need to consider implementing initiatives that make it less expensive and difficult to send money across borders, and consider the possibility of a currency centralized, similar to the euro in the EU region.

“Initiatives such as the Pan-African Payments and Settlement System and Smart Africa’s work on the Pan-African Plan are already paving the way for simpler and cheaper payment services on the continent.

According to Nadasen, currently, legacy payment systems mean there are hundreds of ways for people to make and receive digital payments, which becomes onerous at the merchant level.

“The implementation of new policies, with regards to open banking, will ensure that banks work with payment service providers, switches and ensure open APIs, transforming the banking industry within the AfCFTA.

“Data protection policies will harmonize data protection. Companies will be required to implement more advanced data protection and cybersecurity measures in their organization’s data infrastructure.

The continent will also need robust infrastructure to provide access, quality connection and good internet speeds, she notes.