From ODI an impact assessment of the AfCFTA Protocol on Digital Trade

A new paper from the Overseas Development Institute (ODI) makes a comprehensive assessment of the impact of the Protocol on Digital Trade of the African Continental Free Trade Area (AfCFTA). This Protocol represents a significant advancement in Africa’s journey towards economic integration and digital transformation. Its objective is to regulate and facilitate digital transactions across African nations, addressing critical elements such as data localisation, transnational data flow, cybersecurity, data privacy, electronic financial operations and digital payment systems. AfCFTA State parties will need to align their national policies and regulations to the provisions in such a Protocol, which is set to reshape the economic landscape of Africa by fostering a unified digital market.

In fact, the Protocol on Digital Trade of the AfCFTA seeks to overcome fragmentation and barriers that have so far hindered cross-border trade and economic collaboration among African countries. This opens unprecedented opportunities for businesses, especially small and medium-sized enterprises and entrepreneurs. Indeed, enhanced connectivity and reduced trade barriers are expected to spur innovation, attract investment and create jobs, driving economic growth and development across the continent.

However, despite this potential, there are also some challenges that the continent  will need to address. The main one, the significant gap in the development of digital trade, compared with other regions worldwide. The Protocol will try to bridge this gap by promoting digital inclusion and reducing the digital divide among African countries. To achieve this, it will be necessary to improve the continent's digital infrastructure, the cybersecurity measures, and ensure compliance with data protection laws.

From an economic point of view, the implications of the Protocol can be profound. It can give a significant boost to intra-African trade, which is disgracefully lower than in other regions. Indeed, digital trade agreements have been demonstrated to reduce trade costs significantly. Moreover, some studies indicate that a 1% increase in digital trade could lead to an approximately 1.044% increase in GDP per capita.

The Protocol’s potential impact on cybersecurity and data protection is also crucial. By establishing stringent cybersecurity measures and promoting the ethical use of emerging technologies, it aims to create a secure environment for digital trade. This is essential for building consumer trust and ensuring the long-term sustainability of the digital economy.

Furthermore, the Protocol addresses the social and environmental impacts of digital trade. It highlights the potential for digital trade to alleviate poverty, empower women and promote environmental sustainability. By facilitating digital inclusion, the Protocol aims to provide equal opportunities for all segments of the population, particularly women, youth and marginalised communities.

In conclusion, the AfCFTA Protocol on Digital Trade represents a landmark step towards a unified and prosperous digital economy in Africa. It offers a vision of an interconnected, innovative and inclusive continent, harnessing the power of digital technology for sustainable development. However, realising this vision requires addressing existing challenges, building capacities and ensuring equitable access to digital opportunities.

The implementation of the Protocol, the ODI paper concludes, will come with its own set of challenges. Among these, the disparities in digital infrastructure and readiness among member states, which could lead to uneven benefits and an increased digital divide. Addressing these disparities will require concerted efforts from governments, the private sector and international partners to invest in digital infrastructure, capacity-building and policy reforms. Another significant challenge lies in ensuring cybersecurity and protecting the privacy of digital transactions. As digital trade grows, so does vulnerability to cyber threats. Establishing robust cybersecurity frameworks and enhancing cooperation among member states will be crucial in safeguarding the digital ecosystem.

To maximise the benefits and mitigate the challenges, the paper provides a series of recommendations for different stakeholders:

For governments, the advice is to invest in digital infrastructure and education to enhance digital literacy and readiness. Obviously, efforts will be also necessary for aligning national laws and regulations with the Protocol’s standards and to foster an environment conducive to digital innovation and entrepreneurship.

For the private sector: it is recommended to leverage the opportunities presented by the Protocol to expand market reach and innovate. In particular, the advice is to engage in public–private partnerships  with governments to contribute to the development of digital infrastructure and capacity-building.

For international partners and investors: they should support the digital transformation of Africa through investments, technical assistance and capacity-building initiatives. Moreover, they should collaborate with African institutions to ensure the digital revolution is inclusive and sustainable.

Lastly, a role is foreseen also for civil society and academia, which should play a watchdog role to ensure that implementation of the Protocol is inclusive and respects human rights, including privacy and data protection. Apart from this, they should contribute to research and knowledge dissemination to inform policy and practice.