How digitalisation is transforming trade in Africa

The digitalisation of trade has increased efficiencies in trade processes and changed how trade is conducted on the continent. However, a number of challenges need to be addressed in order to streamline digital trade and ensure its benefits are realised and shared inclusively. The New Times’ Tesi Kaven spoke to David Beer, the CEO of TradeMark Africa on the challenges, opportunities, and the future of digital trade in Africa. Below are the excerpts: How is digitalisation changing trade in Africa? We have seen improvements in the reduction of cost and time of trading across borders after digitalising many trade processes. At TradeMark Africa, we have implemented over 100 digital trade processes in conjunction with our government and private sector partners across Eastern Africa and even further. We have seen the average time to complete trade processes come down by around two thirds or 66 hours. That makes a big difference to exporters and increases their margins and makes them more profitable. We have worked with the government of Rwanda to put in place the electronic single window, which has reduced the time taken to complete those trade processes by half. We have also worked with the government of Kenya to put in place their integrated customers management system that reduced the time to clear air freight from about four days to just a couple of hours. In Uganda, we did the same thing and saw annual costs come down by about $26 million. So, digitisation is making a real difference in trade on the continent. How can digital trade grow and thrive amidst a widening digital divide? TradeMark developed an app for traders at the bottom of the pyramid to be able to access market information across borders. If I'm producing avocados in Uganda, I can look at price information across the border of Kenya, so I can sell my goods at a higher price. The app also provides a simple bookkeeping function that enables business owners run their businesses effectively. Products like these are making a difference, but there are some challenges. If traders are in rural areas and have trouble accessing the internet or accessing electricity, then the rapid digitalisation of trade across Africa risks leaving them behind. We need to look at the digital infrastructure and connectivity and ensure that more people have access to the internet. Digital literacy is also critical, helping people use and benefit from digital tools. There is work to be done at many levels. Apart from the digital divide, what other challenges are hampering the growth of digital trade in Africa? The digitalisation of trade processes has been a challenge. However, we have seen a real demonstration of proof of concept as far as digital tools are concerned and a rapid up-take by both governments and businesses, because it is a win-win for everybody. Businesses win because it's cheaper and quicker to export their products and governments win because they get their revenues from increased exports. There is also much work to be done to make e-commerce seamless on the continent. There are issues around data governance, cross-border payment systems and interoperability between countries. These can be solved if governments work together to create the regulatory frameworks that will enable e-commerce to really take off. What policy changes are needed to make digital trade seamless? We need policy shifts at the regional and continental level. For example, there is a need to harmonise regulations for cross-border payments. There's been some good initiatives already including the Pan-African Payment and Settlement System (PAPSS) by the African Export-Import Bank (Afreximbank) as well as the East African Payments System (EAPS) by the East African Community (EAC). But we really need to see how to make these systems work, especially for people at the bottom of the pyramid, who are using mobile money for cross-border payments and not just central banking. Also, harmonisation of data governance and intellectual property protection and making sure that those standards are at least mutually recognisable between countries is going to be really important. What's the future of digital trade? I think there is a future for digitised trade across Africa and there's a real opportunity to position Africa as a pioneer in green trade. The African Continental Free Trade Area (AfCFTA) Secretariat has had its digital trade protocol ratified, and we're really excited by that because that will create a harmonised framework across the continent. But the future is also one of new technology. Trademark has been working with the government of Kenya and the IOTA Foundation to develop a blockchain-based trade logistics platform so that you can put all of the documentation you need for a trade process in one place. The beauty of blockchain or distributed ledger technology is that it's non-falsifiable, so you can guarantee the genuineness of all documents. We're expecting this technology to dramatically reduce the need for verification and the number of checks, and therefore reduce on costs and time. We are also seeing customs agencies starting to use artificial intelligence to put in place better risk-based verification and management of goods that are coming in. Again, that increases accuracy of checks and reduces the number and burdensome nature of checks as well.

News

How digitalisation is transforming trade in Africa