More than half of the world has moved online to access products and services they used to seek out in the physical, pre-COVID-19 environment. In March 2020, at the start of the pandemic, global internet usage surged by 50% to 70%[1]. It is therefore clear that participation in the growing global digital economy is crucial and it will allow governments to have a positive impact on businesses, especially small and medium-sized enterprises (SMEs), and consequently individual citizens. It is essential for African Union (AU) member states to be active, meaningful participants in this new environment, where data is the key currency.
In this new landscape, many companies – including those in the fintech industry (including the e-commerce and insuretech sub-sectors) – increasingly rely on remote technology such as cloud and data services to harness the benefits of this data-rich global economy.
Looking at ways to ensure that Africa participates and benefits in this new world, Vodacom Group has, in collaboration with African Union Development Agency (AUDA-NEPAD), released a policy paper entitled “Enabling Policy Frameworks for Digital and Data Services for Expanded Economic Growth and Development – A Focus on the SADC Region”. The paper highlights that one of the keys to unlocking Africa’s digital economic growth, and resulting digital financial inclusion, is to create an enabling regulatory environment that supports the secure flow of data between jurisdictions. At present, restrictive policies and practices continue to hinder the growth of the digital economy, along with the related socio-economic benefits across the continent.
The benefits of an enabling regulatory environment
One clear benefit of a supportive environment is economic. “AU member states looking to establish and maintain thriving economies should not be myopic about cross-border data, based on the opportunity that secure sharing can bring,” notes Stephen Chege, chief officer for external affairs at Vodacom Group. In fact, the ability to transfer, store and process data across borders is estimated to have increased global GDP by 10.1%[2] over the past decade.
Backed by an enabling regulatory framework, SMEs stand to benefit the most, now able to compete with larger, established firms on a more-level playing field. Chege explains: “If you look at the current business landscape, it’s clear that companies with access to online marketplaces and global payment networks are now able to reach consumers across the world. This is an important opportunity for Africa’s SMEs.” Considering small companies provide up to 80% of jobs across the continent[3], supporting them will have a positive, knock-on effect on unemployment levels.
What the Vodacom Group and AUDA-NEPAD propose is a regional approach, enabled by collaborative cross-border data sharing, to allow “near real-time visibility of the flow of food and essential goods at a global and local level”.
Insights and recommendations for Africa
To build a viable digital economy, policy makers should prioritise the secure and easily facilitated flow of cross-border data through an enabling regulatory environment. Unfortunately, many AU member states are not yet facilitating this flow. The policy paper highlights the current approach to cross-border data transfers within SADC and other selected countries and draws on contextualised international best practice for guidance to offer recommendations that policy makers across the continent can apply to create the necessary supportive regulatory environment.
To do this, member states should look at tackling the three main barriers, identified in the policy paper, that are hindering scalable data-centric growth in Africa’s digital economy. These barriers are overly restrictive data localisation requirements, unclear and under-used adequacy requirements or decisions, and a lack of standardisation in policy and legislative terminology. The proposed way forward, that allows for free data flows in a secure way to protect consumers and businesses alike, is that we should:
*accelerate implementation of the principles of Africa's regional economic integration framework (under the African Economic Community);
*advance regional co-operation through appropriate policies;
* kick-start regional cooperation by entering into trade agreements to allow for, amongst other things, cross-border data transfers; and
*prioritise regulatory reform in this regard.
By following the proposed steps, we will be able to reap the benefits of a digital economy that will open many new opportunities for trade and business, while also introducing significant socio-economic benefits. This is the first step on a path to a sustainable, digital-forward future for Africa.
Download the white paper here
[1] Beech, Mark. (2020) ‘COVID-19 Pushes Up Internet Use 70% And Streaming More Than 12%, First Figures Reveal’, Forbes, 25 March. Available at: https://www.forbes.com/sites/markbeech/2020/03/25/covid-19-pushes-up-internet-use-70-streaming-more-than-12-first-figures-reveal/?sh=f35eff43104e
[2] Manyika, James, et al. (2016) ‘Digital Globalisation: The New Era of Global Flows’, McKinsey Global Institute, 24 February. Available at: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-globalization-the-new-era-of-global-flows
[3] Runde, Daniel F, et al (2021) ‘Supporting Small and Medium Enterprises in Sub-Saharan Africa through Blended Finance’, CSIS, 7 July. Available at: https://www.csis.org/analysis/supporting-small-and-medium-enterprises-sub-saharan-africa-through-blended-finance
