Africa’s Digital Transformation and the Integration of Services Markets

The African Continental Free Trade Area (AfCFTA) aims to create a continent-wide digital single market. The recent study by Anakai Xu (WTO) and Hildegunn Kyvik Nordås (CEP) explores the interaction between digital infrastructure, the regulatory environment governing digital services, and trade-related demand factors influencing the integration of African services markets. Their findings reveal that Africa has taken a different digital transformation path than other regions. Specifically, the continent’s early leapfrog into mobile telecommunications spurred rapid adoption of smartphones and related services but delayed the deployment of the high-speed fixed broadband needed for services market integration at scale. The authors have also found that Africa has introduced modern regulatory practices at an earlier stage in its digital transition than other regions, and that services trade is much less responsive to regulation as measured by the ITU’s regulatory tracker in Africa.

Services are among the sectors most affected by the digital revolution. Once digitized, services can be stored and transmitted over digital networks both within countries and across borders, easing the proximity burden of services. Although proximity is still essential for many services, advances in artificial intelligence (AI) keep expanding the set of tasks that can be codified and traded electronically. Hence, digital services are the most dynamic trading sector globally.

As new channels for shipping services abroad opens, trade rules and regulations developed in a different era become ripe for revisions. The stabilized text of the Joint Statement Initiative (JSI) released July 26 2024 marks the first set of multilateral rules for digital trade. In view of rising barriers to cross-border dataflows the JSI can be a timely backstop against further digital fragmentation. However, so far, the JSI focuses on trade facilitation measures, while leaving provisions on the measures that contribute to rising barriers, namely cross-border data flows, data localization and source code for future negotiations.

Meanwhile more than 100 regional trade agreements, including the African Continent Free Trade Agreement (AfCFTA), have provisions promoting electronic commerce. These typically go deeper than the JSI and have provisions for cross-border data flows while protecting personal data as well as disciplines on data localization requirement and protection of source code.