REGISTRATION NUMBER: 2014/042417/08PRESIDENT: Sipho M Pityana VICE PRESIDENT: Martin Kingston CEO: Cas Coovadia NEDLAC CONVENOR: Kaizer MoyaneDIRECTORS: Busi Mavuso, Christopher Campbell, Deidre Penfold, Gwarega Mangozhe, Joe Mwase, John Purchase, Maurice Radebe, Roger Baxter, Stavros Nicolaou, Mthokozisi Xulu

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P.O. Box 652807, Benmore, 2010www.busa.org.za+27 11 784 8000

PARLIAMENTARY OFFICE9 Church Square, 1st Floor Graaffs

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IntroductionThis industry position paper contains an objective and consolidated view from the Private Sector

(Trade) concerning the digital trade strategy for South Africa. Emphasizing the importance

thereof in the present-day business space, digital trade and e-commerce absorbed some of the

economic damage caused by the COVID-19 pandemic. This was achieved by following some of

the examples found throughout the world (especially the US, EU and China), especially by

allowing consumers to order fresh produce online with home deliveries, enabling employees to

work from home and allowing service providers and essential goods providers to acquire

personal protective equipment (PPE) and sanitisers through e-commerce.

Although the digital economy provided a life-line during the desperate times recently

experienced, the pandemic further emphasized the need for improved technologies and digital

trade policies in moulding a significant business platform of the future, since the digital economy

is blurring the boundaries between goods and services and their accompanying jurisdictions. As

the economy changes globally, countries which do not embrace the digital economy risk being

left behind, which certainly includes South Africa. However, before the South African

government and the business community can create an environment conducive for safe and

secure digital trade, it is important to gain an understanding of the concepts concerning digital

trade. In aiding the understanding thereof, this industry position paper outlines some of the most

pertinent matters concerning digital trade.

The content includes: (1) Defining key concepts, (2) Trade in Services; and (3) Digital Trade

Policies.

BUSA SUBMISSION TO THE DEPARTMENT OF TRADE, INDUSTRY & COMPETITION (DTIC) AND NEDLAC ON A

DIGITAL TRADE STRATEGY FOR SOUTH AFRICADRAFT VERSION 2

SEPTEMBER 2020

Figure 1 - Schematic framework of possible digital trade strategies

Defining key conceptsTechnology is ever-changing the trading environment in new and exciting ways. Trade is

evolving at a rapid pace, with technologies such as artificial intelligence (AI), the Internet of

things (IoT), blockchains (and the emergence of digital currencies such as Bitcoin and

Ethereum) and 3D printing. It is thus of great importance that economies take full advantage of

this new digital revolution. A substantial group of World Trade Organisation (WTO) members

has attempted to keep the e-commerce and digital trading environment ‘barrier free’ through a

moratorium on custom duties on electronic transactions. Regrettably for the WTO and

participating members, South Africa and several other countries do not support the moratorium.

The discussions around this have highlighted a key problem within the digital trade discussions,

namely the lack of uniformity of what key concepts within the digital environment refer to. As a

consequence, accurately defining the concepts of e-commerce, digital trade and digital data has

become an integral part of effectively navigating this new era of trade.

E-commerce“E-commerce, also known as electronic commerce or internet commerce, refers to the buying

and selling of goods or services using the internet, and the transfer of money and data to

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execute these transactions. E-commerce is often used to refer to the sale of physical products

online, but it can also describe any kind of commercial transaction that is facilitated through the

internet”1..” Furthermore, e-commerce can take on several different forms, taking place between

various respective parties, including Business-to-Business (B-2-B), Business-to-Consumer (B-2-

C), Consumer-to-consumer (C-2-C), Government-to-Business (G-2-B), as well as Government-

to-Consumer (G-2-C).

The WTO defines e-commerce as “the production, distribution, marketing, sale or delivery of

goods and services by electronic means”2. The OECD, in turn, describes it as “..all forms of

transaction relating to commercial activities, including both organisation and individuals, that are

based upon the processing and transmission of digitised data, including text, sound and visual

images..”, and later added “business occurring over open, non-proprietary networks such as the

Interned, included the related infrastructure”3.The AfCFTA will be the first African trade

agreement that will incorporate e-commerce (which may be on the negotiating agenda in 2021)

and digital trade, although not specifically described as such, in the agreement.

Digital tradeDigital trade can be described as trade that is digitally ordered, digitally facilitated or digitally

delivered4. It is digitally enabled transactions of trade in goods and services that can be

delivered digitally or physically5. The OECD and WTO handbook on Digital Trade defines it

simply as “all trade that is digitally ordered and/or digitally delivered”6.

1 SAIIA. 2020. The Digital Economy and E-commerce in Africa – Drivers of the African Free Trade Area? https://saiia.org.za/research/the-digital-economy-and-e-commerce-in-africa-drivers-for-the-african-free-trade-area/2 WTO. 1998. Electronic Commerce. 3 OECD. Defining and measuring e-commerce. https://www.oecd.org/internet/ieconomy/1893506.pdf.4 Fayyaz, S. 2018. A Review on Measuring Digital Trade and E-commerce as New Economic Statistics Products. https://www.researchgate.net/publication/325734812_A_Review_on_Measuring_Digital_Trade_E-Commerce_as_New_Economic_Statistics_Products5 OECD. 2019. Trade in the Digital Era. https://www.oecd.org/going-digital/trade-in-the-digital-era.pdf6 OECD and WTO. 2019. OECD-WTO Handbook on Measuring Digital Trade. https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=SDD/CSSP/WPTGS(2019)4&docLanguage=En.

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Figure 2 – E-commerce and Digital Trade Examples7

Digital dataDigital data refers to all types of data that can be collected and stored on the internet. This

includes trade data, i.e. how much of a specific good a company exported to another company

in another country, the cost of the goods being traded as well as the cost of trade, how long it

took, and any other costs and decisions made during the process. Big data analysis and other

data analysis tools, can use this data to help analyse trade patterns, improve transportation

routes and reduce the cost of trade. Personal data, on the other hand, is data collected on a

specific person, including ID numbers (or social security numbers), addresses, contact details,

banking details, shopping preferences, online search histories, and anything else that a person

could share online.

It is important to note that in modern times, the bulk, if not all, international trade transaction has

a significant digital footprint. Similarly, with any trade agreement, from the smallest informal

trade to a major supply agreement, contracts are transacted online, whether via email, e-

commerce store, or digital platform. All these transactions generate data, which in turn needs to

be governed and regulated to a certain degree. It is therefore vitally important to create a

workable, reliable digital trade strategy for South Africa.

In addition to understanding what digitalisation means in trade, it is important to ensure that all

stakeholders and government officials are aware of and understand these definitions. 7 The World Bank. 2019. Facilitating Trade and Logistics for E-commerce. http://documents1.worldbank.org/curated/en/645791578285992456/pdf/Facilitating-Trade-and-Logistics-for-E-Commerce-Building-Blocks-Challenges-and-Ways-Forward.pdf

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Generating awareness through educational sessions, pamphlets and discussion groups should

be crucial to efficiently employ a digital trade strategy. This is key since mention can be made to

the fact that many pieces of legislation were drafted in the ‘pre-digital’ economy.

One of the most important agreements — the WTO Trade Facilitation Agreement — “ in its

current form extends only to trade in physical goods and is insufficient for the features of the

new economy”8, meaning that an ever-increasing part of global trade is missing from the

agreement. With that being said, a group of countries in the WTO are negotiating rules on e-

commerce and digital trade (although this currently falls outside of the mandate of the current

Doha Development Round). South Africa is not part of this discussion.

Capturing these matters in legal documents is crucial since “digital technologies are

transforming global commerce”9. In South Africa, the Consumer Protection Act (CPA) 68 of

2008 was also drafted in the ‘pre-digital’ economy. In fact, the CPA does not contain the word(s)

‘e-commerce’ nor ‘digital trade’.

Trade in ServicesTrade in services is a crucial component of digital trade, as a growing portion of trade in

services takes place digitally. Internationally, trade in services is governed by the WTO’s

General Agreement on Trade in Services (GATS), which entered into force in 1995. Within the

GATS, the WTO defines trade in services in terms of four distinct ‘modes of supply’10 (note the

discussion below).

Services in some cases can be delivered without the supplier and consumer needs to be in the

same geographical location during the delivery of the service, thus services can be traded

across borders without the need for the person(s) delivering the service to move across borders.

As of yet, the South African government (through various channels, such as the DTIC) does not

have an official policy or strategy for trade in services or digital trade. Widespread reference is

made to the ‘Digital Industrial Revolution’ throughout the Industrial Policy Action Plan (IPAP)

document11, however, no official policy exists. Although this is generally seen as a

disadvantage, it puts the government in a unique position to determine a trade in services

strategy that compliments digital trade.

8 Ricardo Meléndez-Ortiz. Facilitation 2.0: Enabling trade in the digital age. 2020.9 WTO. World Trade Report 2018. https://www.wto.org/english/res_e/publications_e/world_trade_report18_e.pdf 10 WTO. Trade in Services. 2015. https://www.wto.org/english/thewto_e/20y_e/services_brochure2015_e.pdf11 The Department of Trade and Industry. Industrial Policy Action Plan. 2018. https://www.gov.za/sites/default/files/gcis_document/201805/industrial-policy-action-plan.pdf.

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Along with the rapid development of the internet and digital systems, came the rapid

development of trade in services, and especially trade in information and communication

technology (ICT) services and ICT-enabled services. For the consumer, this has been

showcased with services such as Uber and Airbnb taking markets by storm. ICT services

include programming, system integration, IT infrastructure management, IT support services,

content management, application testing and data warehousing. ICT-enabled services, services

that are not reliant on, but enhanced by ICT include call centres, payroll, transcription, data

mining, engineering, journalism, head office services and even medical diagnostics.

Two types of services that tend to pop up when referring to ICT services (within the realms of

trade) are offshoring and online outsourcing (OO). Offshoring refers, simply, to the situation

where businesses move certain aspects of their process to foreign countries to benefit their

business in terms of either cost or efficiency. Online outsourcing, on the other hand, occurs

when a company (usually medium or large enterprises) employ individuals with a specific skill

for a specific project, through online interactions, e.g. tasks that require technical or academic

knowledge, such as web designing or simple software development.

Distribution, although not strictly an ICT service, is directly linked with the rapid growth of e-

commerce. As e-commerce and the digital economy develops and grows, the need for the door

to door delivery and thus, distribution, grows with it. Therefore, it is vitally important that the

negotiations on digital trade and e-commerce encompass distribution services. The WTO notes

that, although distribution services are included in the new services negotiations (General

Agreement on Trade in Services), which have its origins in January 1995, little attention has

been given to this aspect of trade during e-commerce discussions. It is important that

government creates an environment that will allow for easy distribution for already existing

distributors, but also create an environment that encourages individuals, especially those that

are unemployed, to enter into this sector as the need for distributors grows. The importance of

distribution and transportation services as a part of overall trade (but e-commerce especially)

has been made clear by the COVID-19 pandemic. As many countries moved away from in-store

purchases to online purchases with door to door deliveries, the linkage between e-commerce

and transportation, and in a broader sense supply chain, cannot be disputed.

The African Continental Free Trade Area (AfCFTA) listed financial services, communication,

transport, tourism, and business services as the five priority services which should be focused

on during trade in services negotiations. This is important to note, as financial, communication

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and business services can easily be traded digitally while financial and transport services are

essential to digital trade. Thus, the link between trade in services strategy and a digital trade

strategy is crucial. A digital trade strategy needs to be anchored in broader trade policy and

regulatory framework to ensure its effectiveness.

GATS list four “modes of service delivery”: (1) cross-border services trade, (2) consumption

abroad, (3) commercial presence and (4) movement of natural persons. Of these four modes

only modes 1, cross-border services trade, and 2, consumption abroad, do not rely on the buyer

and service provider to be in some form of physical proximity. With the coronavirus outbreak,

the movement of people has been restricted to an exceptional extent across the world, which

puts enormous pressure on modes 3 and 4 of trade in services12. Sectors such as education

and tourism will be severely affected as their capacity to operate without the movement of

people is considerably limited. Services such as insurance, financial services, telecoms and

other computer-related services are likely to suffer a considerably smaller blow due to their

ability to operate well in a work-from-home environment. These services are expected to show

more resilience to the social distancing effects that are expected to remain long after the

pandemic has passed13.

In an attempt to offset some of the effects of the pandemic, some industries have moved

towards a more “online” way of delivering services. Some libraries are now allowing members to

make use of electronic copies of books, museums are creating virtual online tours, and zoos are

allowing people to watch animals via online streaming. India is now delivering nearly 75% of its

IT services, which was previously delivered on-site, online along with management and

consulting services14. Companies that are willing and able to move towards a more digitalised

approach are rewarded with supply chain resilience. While education has suffered greatly due

to schools and universities not being able to operate properly under social distancing measures,

some schools and universities have moved towards online learning, with homework being

distributed via email or e-platforms and classes being conducted via Zoom15. The effectiveness

of this, however, is severely hampered by the lack of access to the internet and smart devices,

especially in developing and least-developed countries16.

12 Anirudh Shingal. Services trade and COVID-19. Voxeu. 2020. https://voxeu.org/article/services-trade-and-covid-19.13 Anirudh Shingal. Services trade and COVID-19. Voxeu. 2020. https://voxeu.org/article/services-trade-and-covid-19.14 Anirudh Shingal. Services trade and COVID-19. Voxeu. 2020. https://voxeu.org/article/services-trade-and-covid-19.15 WTO. Trade in services in the context of COVID-19. 2020. https://www.wto.org/english/tratop_e/covid19_e/services_report_e.pdf. 16 WTO. Trade in services in the context of COVID-19. 2020. https://www.wto.org/english/tratop_e/covid19_e/services_report_e.pdf.

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Digital trade policyDigital trade is no longer an option for trade, it has become an integral part of trade, thus it is of

the utmost importance that governments proactively monitor, and facilitate the process and

ensure that their trade policies reflect this reality. The WCO advises that a system should be in

place that allows for only the minimum intervention. A real onus, therefore, lies on a policy which

feverishly promotes innovation and openness, while at the same time does not unnecessarily

inhibit the technological advances from gathering momentum.

E-commerce and digital trade rely on a variety of different services and sectors such as internet

access, financial payment systems, physical infrastructure, customs, delivery and distribution

systems, etc. South Africa faces a variety of barriers to digital trade such as limited internet

access, data costs, issues with governance and trust in government institutions, lack of skills

and knowledge and poor infrastructure.

In determining a Digital Trade Policy, it is recommended that the incentive programmes on offer

by the DTIC be reviewed to ensure they are aligned. The incentives currently on offer by the

DTIC include (1) Global Business Services Incentive, (2) Critical Infrastructure Programme, (3)

National Industrial Participation Programme, and (4) Support Programme for Industrial

Innovation.

Before discussing the key aspects for consideration on the digital trade strategy, it is necessary

to stress the importance of inter-governmental or inter-departmental cooperation and

coordination. The COVID-19 crisis has highlighted the importance of alignment in government

departments, as well as the consequences of misalignment. Thus, the DTIC must include,

among others, the Department of Science and Innovation, the Department of Communication

and Digital Technologies, the Department of Basic Education and the Department of Higher

Education and Training.

Some key aspects to consider for a digital trade policy or strategy:

Infrastructure and ICT infrastructureOne of the main barriers to digital trade, and trade in general, is a lack of proper and good

quality infrastructure. This is especially true in South Africa, as is the case in many developing

countries. Developing countries that were early adopters of digital trade policies invested heavily

in infrastructure (both in terms of physical and ICT) and internet access. Improving infrastructure

will not only reduce the cost and time of moving goods domestically but will also improve cross-

border e-commerce, especially in trade with neighbour countries.

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Furthermore, the necessity of reliable energy supplies, good quality ICT infrastructure and

affordable internet has been further accentuated by the COVID-19 pandemic as students move

towards online classes and employees moved from working in an office to working from home17.

Bottlenecks must be prevented by avoiding complex export procedures and documentation. The

preferential trade system (or authorised economic operator) for customs will potentially go a

long way in facilitating the movement of goods through customs procedures, which is why the

escalation of this programme is essential.

To further the discussion above, distribution services and subsequent distribution channels will

play an increasingly important role in e-commerce, as the volumes of goods being both

imported and exported grows, since these goods need to be transported to and from customs

points or ports. It is important to ensure that domestic infrastructure is continually improved, to

be able to handle the increased quantities of trucks and vehicles that will be active on the roads,

as pick-ups and drop-offs increase. As the flow of goods increases within the region (be it the

South African Development Community (SADC) or the Southern African Customs Union

(SACU)), our domestic infrastructure must enable the process, but it is also important that South

Africa’s trading partners’ infrastructure is capable of handling the increased trading volumes.

With these increased trading volumes, the need for harmonised and simplified procedures is

also amplified.

“The last mile” problem refers to the challenges and extreme costs faced in moving traded

goods across the final distance, delivering it to the end-user. Some studies have estimated that

the final leg of the transportation process can make up approximately 28-29% of the total cost of

trade18. In South Africa, a portion of the last mile challenge can be attributed to the South

African Postal Office (SAPO). The short fallings of the SAPO are no secret, which is why it is

important to ensure that this does not spill over into international online purchases.

Customs officials must be trained, and nomenclature is clarified, as this causes the need for re-

clarification at border posts which can cause delays. Customs has the opportunity to make use

of new technologies to streamline the entire customs procedure. Along with the preferential

trader system, customs, with a bit of investment, could develop a blockchain for customs

documents. A blockchain is, in layman’s terms, a collection of blocks of information/data, stored

in a database (chain) that is protected by the highest level of encryption. A specific form or piece

of information can be assigned a serial number of sorts which allows a person with that code 17 WTO. Trade in services in the context of COVID-19. 2020. https://www.wto.org/english/tratop_e/covid19_e/services_report_e.pdf.18 Hull, S. 2018. The Last Mile Challenge. https://www.allynintl.com/uploads/documents/The_Last_Mile_Challenge.pdf.

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quick and easy access to the information. Moving towards digitalised customs procedures,

where forms are submitted online, stored in a blockchain and accessed by customs officials will

allow for a much faster and more efficient import and export experience. Furthermore, this type

of technology will bolster the security measures currently in place. For example, if a user on the

system does anything out of the ordinary or suspicious, they are immediately frozen out of the

system and can only be reloaded by designated administrators. A blockchain also creates a trail

that can easily be audited, which reduces corruption and ensures the integrity of the documents

submitted and processed19.

A digital single window system will streamline customs procedures by allowing traders to upload

the documentation necessary for clearance onto an e-platform from where it can be distributed

to the parties involved electronically. This will not only reduce the risk of hard copies of

documents being lost but will also reduce the need to submit the same documentation to a

variety of different stakeholders. In addition to these benefits, reducing the physical interaction

between traders and customs officials will be especially beneficial as social distancing will

continue to restrict operations for the foreseeable future20. The implementation of a Single

Window System can be done with the use of blockchain, as discussed in the previous

paragraph, to reduce the cost of implementation and simplify the process.

Developing a reliable and affordable ICT infrastructure as well as ICT services is crucial to

increasing internet access. A reliable power supply plays an important role in developing digital

trade and especially in ICT infrastructure: with no power, there is limited to no internet access,

which means that digital trade suffers in the process. Furthermore, the cost of data is important

to facilitate this access. Minister Ebrahim Patel stated in his budget speech in July 2019 that he

will be working closely with the Minister of Communications to ensure that data costs are

brought, and kept, down.

It is also important that internet access is expanded especially to rural areas to allow

entrepreneurs and Micro, Small & Medium Enterprises (MSMEs) to gain access to the online

market. Thus, investing in ICT infrastructure should be a top priority for the digital trade policy.

The policy adopted by Brazil, which invested heavily in boosting internet connectivity by

focusing solely on widening the reach of fixed broadband was an inefficient undertaking as a

large majority of the population in developing countries gain internet access through mobiles.

19 WCO. Unveiling the Potential of Blockchain for Customs 2018. http://www.wcoomd.org/-/media/wco/public/global/pdf/topics/research/research-paper-series/45_yotaro_okazaki_unveiling_the_potential_of_blockchain_for_customs.pdf?la=en.20 WTO. Trade in services in the context of COVID-19. 2020. https://www.wto.org/english/tratop_e/covid19_e/services_report_e.pdf.

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Thus, it is important that the government has an approach that promotes the expansion of fixed

broadband while also promoting the expansion of the use of mobiles for internet access21. A

dual based approach, when executed correctly, could increase overall internet access at a

much greater and efficient rate. Internet access in rural areas can be increased through mobile

networks as less infrastructure is needed than for fixed broadband for example.

Tech hubs are organisations with a physical address that provides technological entrepreneurs

office spaces and resources as well as proximity to similar or complementary entrepreneurs that

allows for networking. South Africa is the country with the second most tech hubs in Africa (see

Figure 3). These tech hubs provide easy internet access to MSMEs and create a productive and

supportive environment for establishing and growing a business. The majority of these tech

hubs are in Cape Town, Gauteng and Durban. Establishing tech hubs in smaller areas will

reach a larger group of entrepreneurs while increasing the reach of fixed broadband. Creating

incentives to encourage mobile operators and internet providers to establish similar hubs in

smaller communities will not only broaden the reach of internet connection but will also assist in

the development of additional ICT infrastructure in these areas. This can be done through

government subsidies, tax rebates or even through attracting Foreign Direct Investment.

21 GEG Africa. Bridging the Digital Divide and Supporting Increased Digital Trade: Scoping Study. 2018. http://www.gegafrica.org/item/782-bridging-the-digital-divide-and-supporting-increased-digital-trade-scoping-study.

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Figure 3 – Number of tech hubs per African country

Source: https://briterbridges.com/618-active-tech-hubs

The cost of data in South Africa is some of the highest in Africa and scores 148 out of 228

countries on mobile data prices. Studies have found that the cost of data, in addition to being

very expensive, excludes the poor to a greater extent than it does the rich. The reason for this is

data bundles, larger bundles are cheaper, however, the poor of South Africa can by no means

afford to buy a data bundle large enough to save them money22. To make matters worse, the

quality of data in South Africa remains relatively poor, especially considering the price. Lowering

the cost of data will go a long way in including the less fortunate people to partake in the digital

economy.

Financial institutionsFor e-commerce transactions, buyers usually have the option to pay for the product or service

upon arrival or to make an EFT payment when placing the order. South Africa’s banking

institutions are considered very “sound”, ranking 29th on the Soundness of banks in the Global

22 Business Insider. 2020. SA has some of Africa’s most expensive data, a new report says – but it is better for the richer. https://www.businessinsider.co.za/how-sas-data-prices-compare-with-the-rest-of-the-world-2020-5

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Competitiveness index in 201923, despite this, South Africans remain sceptical of making EFTs

and other online payments24 25. This stems from a lack of knowledge and understanding of how

it works paired with encouragement from corrupt (or inadequately trained) government officials

to use cash26. Therefore, it is important that the government ramps up the fight against

corruption.

To aid the fight against corruption, implementing blockchains in customs will go a long way to

combating corruption within the realms of trade. It is also important that the South African

Reserve Bank (SARB) remains an independent institution, as it is responsible for the governing

of banking institutions within the country, thus its integrity is of great importance. Most banking

institutions in South Africa have mobile banking apps, which are relatively well functioning and

effective. The problem in South Africa lies rather in the percentage of the population that not

only has access to mobiles for online banking (35% of South Africans have a smartphone27), but

also the percentage of the population that does not have bank accounts (68% of South Africans

have access to some form of bank account28). The majority of people in rural areas are not able

to open bank accounts as they do not have access to a banking branch or the funds to keep an

account open29.

In addition to the above, online transactions often require a visa card or credit card, which most

South Africans do not have, further preventing them from taking part in the digital economy.

These people must obtain ways to make these payments, for them to be able to partake in the

digital economy. A temporary solution is, for example, Takealot that accepts cash on delivery.

However, we should strive towards a society where everyone at least has a bank account.

TymeBank, South Africa’s first fully digital bank, is a step towards a more permanent solution. It

23 WEF. The Global Competitiveness Report. 2019. http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf.24 Kgaogelo Letsebe. Most online shoppers prefer to pay cash. 2018. https://www.itweb.co.za/content/GxwQDq1ARz2qlPVo.25 SAIIA. 2020. The Digital Economy and E-commerce in Africa – Drivers of the African Free Trade Area? https://saiia.org.za/research/the-digital-economy-and-e-commerce-in-africa-drivers-for-the-african-free-trade-area/26 PASA, BankservAfrica & The Banking Association South Africa. Modernised Real-time Electronic Retail Payments: A Case for Change for South Africa. 2019. http://www.pasa.org.za/docs/default-source/default-document-library/modernisation/modernised-real-time-electronic-payments_-a-case-for-change-for-south-africa_.pdf?sfvrsn=2.27 Statista. Smartphone users in South Africa. 2018. https://www.statista.com/statistics/488376/forecast-of-smartphone-users-in-south-africa/.28 Isabelle Coetzee. 32% of South Africans do not have a bank account – here’s why. 2018. https://www.justmoney.co.za/news/2018/06/21/32-of-south-africans-do-not-have-a-bank-account-here-s-why/.29 Nitha Ramnath (University of Pretoria). Factors affecting the adaptation of mobile banking among rural South Africans. 2018. https://repository.up.ac.za/bitstream/handle/2263/69979/Ramnath_Factors_2019.pdf?sequence=1&isAllowed=y.

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offers all its services online, with no physical branches. TymeBank charges no banking fees

while charging no, or low, fees for every day or other banking transactions30.

Legal and regulatory frameworkIt is important to first understand what e-commerce, digital trade and digital data are before

implementing any laws and regulations. The government needs to ensure that all relevant

policy-makers and stakeholders agree on the definition of each of the key terms. Awareness

programmes are an excellent starting point in educating stakeholders and government officials

on what digital trade encompasses. Some areas of concern in terms of legal and regulatory

frameworks include competition laws, intellectual property protection (IPP) and the trade of a

person’s personal digital data31.

The South African government must have an adequately skilled team to deal with matters on

IPP, especially in terms of legal actions against the infringement of a person’s intellectual

property right. In revising the IPP laws, consideration should be given to what the “norms” of the

African Union are, to ensure alignment with the African Union, which will not only allow for

guidance but future harmonisation of the continent’s regulatory approaches.

As the digital environment is constantly evolving, it is important to have a set of clear rules in

place to regulate the use of technology and data. Some concepts that did not seem of

importance a few years ago but are becoming a real concern include autonomous driving cars

and who will be to blame should they cause damage in any way or to what extent an AI entity is

a legal person. This brings to light the need to update and adjust the Consumer Protection Act.

The government currently does have a cybersecurity team who are tasked with assisting

companies which have experienced cyber security attacks. Unfortunately, information on the

functioning of the cyber-security team is lacking. The website of the team contains limited

information — with certain links currently not working. This team can play a pivotal role in

regulations and online security. This team of experts can be used to develop software that not

only detects cyber inconsistencies but also prevents attacks against government institutions and

municipalities for example. The aforementioned threat is becoming a growing concern as

municipalities across the country have in recent years been subject to cyber-attacks. Having a

strong and competent cyber-unit will generate trust and a feeling of security for internet users

30 TymeBank. 2020. https://www.tymebank.co.za/.31 Paul Baker. E-commerce and Digital Trade. 2017. https://read.thecommonwealth-ilibrary.org/commonwealth/trade/e-commerce-and-digital-trade_9781848599628-en#page3.

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across the country. Nonetheless, the government must not use the premise of cybersecurity to

gain access to any personal or confidential information without due cause.

The lack of skills and expertise in terms of cyber-security is a global problem, which means that

government must encourage skilling experts in cyber-security at a rapid pace. Some members

of the private sector have suggested allowing and encouraging private sector members to

establish their cyber-security teams and systems, taking the burden off the government.

Unfortunately, finding, employing, and training cyber-security experts will not only be time-

consuming, but very costly, meaning that MSMEs will not be able to establish their teams,

leaving the already vulnerable, even more so.

In terms of an individual’s digital data, it is widely agreed that the collection and trading of

individuals’ personal digital data is a concern growing at the same pace as the technology that

captures it. There is however no clear advice or suggestions on how to manage this growing

risk. In terms of employee data kept by companies, the Protection of Personal Information

(POPI) Act has come a long way in ensuring that all South Africans’ personal information is

protected. The POPI Act requires companies to ask permission of both employees and

customers to store their personal data. Customers have the option to request that the company

delete their data from the system, they then have the right to request proof that their information

has in fact been deleted. A company is allowed to store personal information of employees on a

secure database, they are however not allowed to share this information under any

circumstances unless it pertains to a matter of national security. The Act came into effect on 1

July 2020, and any companies found not to be complaint receives a R1 million fine or 10% of

the company’s annual turnover.

In terms of personal data collected by online retailers and service providers such as search

engines and social media platforms, it is important to educate the users. Users or subscribers

give their consent for their personal information to be collected and stored, thus, it is important

that these users better understand the consent they give.

The African Union Convention on Cyber Security and Personal Data Protection was drafted in

2011, aiming to create a “credible framework for cybersecurity in Africa through organization of

electronic transactions, protection of personal data, promotion of cybersecurity, e-governance

and combating cybercrime”. The convention was adopted in mid-2014, however, only 5 of the

55 African Union (AU) members have ratified it, while an additional 14 countries have signed it32.

32 CCDCOE. African Union. 2019. https://ccdcoe.org/organisations/au/.

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It is worth noting that the Convention suggests that a public-private partnership is crucial, along

with intense education and training in cyber security33

Due to the recent COVID-19 lockdown, a large portion of businesses, and especially MSMEs,

moved towards e-commerce as a means of generating an income. The lack of regulations and

safeguards, however, was evident for both businesses and consumers as fraudulent online

sellers proceeded to sell and distribute fake or unsafe sanitisers and disinfectants and faulty

masks at astronomically high rates34. This further exclaims the point made earlier, that the

Consumer Protection Act should be updated to include some of the risks that have become very

real within the digital trade environment.

In a global working paper series, Brookings made some suggestions on “using trade policy to

improve cybersecurity”35. These recommendations are based on the idea that although digital

trade increases the risks related to cybersecurity, trade and cybersecurity policies can work in

unison to strengthen security and grow digital trade:

Access to data: The use of complex analytics and machine learning becomes

increasingly important as cyber threats become more sophisticated. Forcing data access

to be restricted and localised drastically increases the risk and cost of a data breach.

Having a decentralised storage system for data (such as a blockchain) will have a positive

impact on cybersecurity.

Information sharing: Sharing real-time information on vulnerabilities and threats helps to

promote awareness and help targets adapt and formulate responses is an important

aspect of cyber security. As sharing this level of information is not something that many

companies will be willing to do, the compromise is to share information on past attacks

and responses in a “best practices” format.

Cybersecurity standards: Having cybersecurity standards allows for a common

approach to addressing risks based on best practices. The International Organisation for

Standardisation (ISO) along with the International Electrotechnical Commission has

developed such a set of standards. They note that standards are at their most effective

when they are used as a framework for managing risks rather than being a prescribed

33 African Union. African Union Convention on Cyber Security and Personal Data Protection. 2011. https://au.int/sites/default/files/treaties/29560-treaty-0048_-_african_union_convention_on_cyber_security_and_personal_data_protection_e.pdf.34 WTO. Trade in services in the context of COVID-19. 2020. https://www.wto.org/english/tratop_e/covid19_e/services_report_e.pdf.35 Joshua Meltzer. Cybersecurity, digital trade and data flows: Re-thinking a role for international trade rules. 2019. https://www.brookings.edu/research/cybersecurity-digital-trade-and-data-flows-re-thinking-role-for-international-trade-rules/.

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specific approach to a specific situation. It is important that governments and businesses

tailor these standards to their needs and risk profiles.

Certification of compliance with cybersecurity standards: Having a cybersecurity

certificate will promote trust between businesses and government. Developing a

cybersecurity certificate scheme in a region such as SACU or SADC will also encourage a

harmonised system while encouraging digital trade with neighbouring countries.

A risk-based approach to cybersecurity: The Organisation for Economic Co-operation

and Development (OECD) states that cybersecurity should “aim to reduce the risk to an

acceptable level relative to the economic and social benefits expected from those

activities while taking into account the legitimate interest of others”. Security measures

should be appropriate and proportionate to manage the risks identified by a specific

business or government. A risk assessment should be employed to inform decision

making, estimating the risk reduction and the cost thereof.

Skills development and educationIn his 2019 State of the Nation Address president Ramaposa indicated that he will make work of

including technology-related skills to students starting in their early school years36. This is a

necessary start to creating a technologically skilled workforce but is not enough. To start

generating local technology that will be able to hold its own in the global market, the country is

in dire need of skilled programmers and developers at this very moment. The current

shortcomings can be highlighted by the fact that South Africa globally ranks 89 th in terms of ICT

adoption, the World Economic Forum’s (WEF’s) 3rd pillar of global competitiveness37.

Consequently, we must generate these new technologies in our current working force to take

advantage of the booming digital economy. It is important that both the private sector and

government actively support and enable the current workforce to develop the necessary skills to

start developing local applications and websites that can compete in the global market. Although

some VISA reforms can be made to more easily import skills that speak to the need over the

short-term, this does not solve the overall issue, but simply provides a quick fix. The overall

xenophobic concerns within the South African economy (although mainly focused around low-

skilled jobs), should be considered, especially as it is fuelled by the incredibly high levels of

domestic unemployment.

36 President Cyril Ramaphosa. 2019 Sate of the Nation Address. 2019. https://www.wcpp.gov.za/sites/default/files/SONA%202019.pdf. 37 WEF. The Global Competitiveness Report. 2019. http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf.

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Jumia, an online e-platform in Africa, similar to Alibaba and Amazon, has developed Jumia

University, a platform that educates users on how to effectively use the platform. Besides, they

offer courses that educate local MSMEs and entrepreneurs on how to effectively participate in

e-commerce and the digital economy sustainably. The South African government must educate

entrepreneurs and MSMEs on ways that they can participate in e-commerce. Jumia, for

example, allows local producers to sell their goods internationally and then assists them in the

process. This model can be used in South Africa, where an e-platform is created specifically

connecting MSMEs to international markets, with the addition of advising them on how to

manage their production when they get large orders, how to effectively market and price their

products, how to source their materials, and any other matters that could further empower them.

The demand for such online platforms and good quality affordable internet access has

increased dramatically as the coronavirus pandemic has drastically restricted the mobility of

people. ICT infrastructure has recently become crucial not only to skills development but to

basic education for all age groups38.

In the long run, however, the importance of growing a generation that is technologically

educated and skilled should not be understated. Incorporating a more technology-based

approach into the schooling system will ensure that the technological advances made now are

carried through and further developed in the future. This will ensure that the country continues

going forward and pushing the boundaries39. For this to be possible, it is important that the

Ministers of Basic Education and Higher Education and Training buys into the idea. Some of the

skills that need to be developed, both in school and at a tertiary level includes programming,

App design, website building, e-commerce skills, logistics, analytics, cyber-security,

entrepreneurship, and basic tools such as developing a business plan. It has also been

suggested by some members of the private sector, that programming courses be made

available to all students, and not excluding students that took, or are taking, Mathematical

Literacy in high school. This will allow the pool of skills in technology to grow at a much more

rapid pace while creating a larger variety of opportunities for these students.

To alleviate some of the strain this may cause on the educational system, and to ensure

accuracy and relevancy of skills being taught, the government could consider dividing the

responsibility with the private sector. With the government taking responsibility for education in

38 WTO. Trade in services in the context of COVID-19. 2020. https://www.wto.org/english/tratop_e/covid19_e/services_report_e.pdf.39 Paul Baker. E-commerce and Digital Trade. 2017. https://read.thecommonwealth-ilibrary.org/commonwealth/trade/e-commerce-and-digital-trade_9781848599628-en#page3.

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all things digital at a school level. The private sector is then responsible for assisting universities

in developing and refining the skills that the private sector has identified as lacking in the

working pool. Encouraging the private sector to participate in university-level will not only allow

universities to train students in fields that are high in demand, but it also ensures that the

information given and skills taught are relevant to the work environment, and remains current

and up to date.

Foreign direct investment (FDI) has played a significant role in the development of ICT sectors

in some African countries, especially for market seeking purposes since Africa has a large and

potentially un-tapped population not yet doing business on a digital platform. For example,

Microsoft noticed that Nigeria’s fast-growing software development community and

subsequently decided to invest $100 million in building a software development centre. Future

FDI projects include planning to open a second centre in Nairobi, Kenya. Similarly, tech giant

Google noted a peak interest in AI in Ghana and opened an Artificial Intelligence Centre in

Accra. This is the second Artificial Intelligence centre in Africa, the first being developed by

Atlantic AI Labs in Cotonou, Benin. These are just some of the many examples of foreign tech

giants and FDI enabling not only skills development and job creation but also access to

technologies and funding, which South Africa is in great need of.

Government e-procurementCreating a platform where the government requests tenders for projects online will encourage

local companies to start using the internet as a business tool. If implemented correctly it will also

allow for the tender process to be more transparent and curb corruption40. This can further be

attributed to the premature de-industrialisation dynamic observed in South Africa which is

mirrored by a set of challenges in the government’s policy framework. The fragmentation of

government has affected the coordination and implementation of policies across various

sectors, to the detriment of industrial development.

E-procurement subsequently has the prospect of linking several development policy plans,

whilst at the same time empowering MSMEs to partake in the digital economy. Digitalisation,

therefore, represents a major opportunity to promote the adoption of supply chain tools (such as

Enterprise Resource Planning and Manufacturing Execution Systems) for better supply chain

integration41. A chief driver of this adoption will be supporting MSMEs (especially 2nd and 3rd tier

companies) in accessing affordable digital technology licenses or creating alternative models to 40 Paul Baker. E-commerce and Digital Trade. 2017. https://read.thecommonwealth-ilibrary.org/commonwealth/trade/e-commerce-and-digital-trade_9781848599628-en#page3.41 Justin Bames, et al. Towards a Digital Industrial Policy for South Africa: A Review of the Issues

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reduce the licencing burden. The creation of a “Catalogue of Digital SMME Suppliers” via an

open and competitive digital market platform (as mentioned above) to match specific technology

and production services demand and supply along and across sectoral value chains could be of

huge value to MSMEs. In creating this platform, the government can go a long way in de-risking

MSME investments in new technologies and products using combined technology services and

hybrid financing models (such as matching grants and pre-commercial procurement) could

support the inclusion of these firms within South Africa’s industrial value chains42.

Taxation in digital tradeWhen taxing e-commerce, there are several available approaches, with the two most obvious

methods being either to impose a VAT to consumers or to impose an import tax. VAT is raised

by the supplier when rendered by local suppliers whereas the recipient is required to account for

the VAT when such goods or services are acquired from non-resident suppliers to the extent

that such services are not acquired in the generation of taxable income. Taxing consumers that

are already struggling to partake in the economy.

The imported services mechanism is intended to protect local suppliers (e.g. BUSA members)

from the unfair pricing advantage that foreign supplier to SA clients would otherwise enjoy. The

mechanism is effective when the recipients of such services are large corporates but not for

supplies to consumers (so-called B2C supplies). To address this, Regulations were published in

2014 which required foreign suppliers of electronic services that are typically consumed by

individuals (such as Netflix, eBooks, Microsoft Office, music streaming and a variety of similar

applications and digital goods) to register for VAT and charge VAT on their supplies instead of

relying on the recipient to account for imported services VAT. The scope of these regulations

was expanded in 2018 to incorporate a much wider range of electronic services. While these

regulations can be difficult to interpret and cause an unwelcome administrative burden for

affected suppliers, the initiative does, in fact, protect local business and spread the tax burden.

Another option is to exempt business to business (so-called B2B) transactions from VAT as

those are already taxed through import tax (VAT on Imported Services), whilst still taxing B2C

transactions (as set out above), where the final consumer in SA is not a VAT vendor. This is the

approach followed in most EU countries and globally.

Industrial Development Think Tank. 2019. https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/5d355997ae8bf40001ee2906/1563777435535/DPIP_Final.pdf.42 Justin Bames, et al. Towards a Digital Industrial Policy for South Africa: A Review of the IssuesIndustrial Development Think Tank. 2019. https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/5d355997ae8bf40001ee2906/1563777435535/DPIP_Final.pdf.

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Another option on taxation to be considered is to offer both domestic and foreign e-commerce-

based companies tax rebates by providing the opportunity to rather use the money they would

pay in tax to invest in infrastructure. This option and subsequent subsidies granted would

however first need to comply with the WTO’s rules on tax rebates. This is similar to how the

United States approached Amazon, instead of paying taxes Amazon uses that money to invest

in developing infrastructure within the country. Another avenue of investments that they focus

on is R&D, which is one of the reasons they can continuously develop new technologies. If

companies are allowed to invest their tax money in R&D this will allow them to develop new and

innovative technologies at a much higher rate. Brazil, for example, used a similar tactic to attract

foreign investors to invest in R&D in their technological research.

In December 2019, WTO members agreed to maintain the moratorium on customs duties on

electronic transmissions until the 12th Ministerial conference, which has been postponed due to

the COVID-19 outbreak. The WTO and the United States made it abundantly clear that they

oppose the idea of implementing custom duties in e-commerce and digital trade or “electronic

transmissions” as they are described in the WTO moratorium. Although South Africa is not a

party to this agreement, it is important to remain in good standing with the United States and the

WTO. A possible solution could be to impose temporary customs duties, allowing new industries

to grow and develop in a protected environment. The temporary nature of the duties will prevent

them from becoming inefficient (as is often the case with protected industries), while potentially

maintaining relations with the United States and WTO. It will also ensure that they prepare

themselves for when they need to compete without an advantage in the future while ensuring

compliance with the WTO and expectations of the USA.

There are some concerns regarding South Africa not committing to the moratorium. The first is

the matter of remaining in good standing with critical trade members. Imposing duties on

electronic transmissions will put a strain on South Africa’s trading relationships with China, the

EU and especially the United States, which might impose duties of their own as a form of

retaliation. The second is related to the matter of collecting the duties, there are concerns that

the bulk of the load will be carried by MSMEs, and, that the cost of the collection will exceed the

revenue collected. Thirdly, when considering imposing duties on electronic transmissions, the

South African government should take into account the aim of the AfCFTA, which is to remove

90% of duties and tariffs within the continent, meaning that by the time the duties have been

fully imposed, they will need to be removed again. Finally, implementing these duties on

electronic transmissions relating to e-learning, for example, will not only leave a bad taste in the

consumer’s mouth but will harm education.

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In June 2020, the Parliamentary Budget Office released a tax brief: “Digital Economy and

Taxation Policies”43. The two main reasons are cited as governments concern that digitalization

leads to high unemployment and the fact that tax revenue has been declining and they believe

that digitalization is to blame. On the first point, many arguments have been made on

digitalization, stating that it would increase unemployment, decrease unemployment or

reallocate employment, such as was the case in the other three industrial revolutions44. But no

consensus has been made to either side. Digitalization through Applications such as Uber, for

example, is blamed for taking work away from taxi drivers while creating a new stream of

income for unemployed individuals with limited skill sets and qualifications (provided they have a

roadworthy vehicle). Similarly, Airbnb is accused of taking business away from users that are

not digitalized, while creating a platform for people with an empty room in their homes or a flat

on their premises to reach willing clients, generating an additional income for these people,

while creating employment as many of these people use domestic workers to clean the lodgings

and in some cases cook meals. The argument for digitalization and employment states that

although jobs may be lost in manufacturing, for example, a wide range of jobs are created in

different sectors (as was the case in each of the other three industrial revolutions). With more

jobs being generated in the IT and digital sectors. The re-skilling of workers and the up-skilling

of unskilled workers holds its challenges and solutions.

The tax brief concluded that South Africa could consider a unilateral approach to taxing specific

income from digital economic activities. However, the government may require additional human

and institutional technological capacity to develop and implement unilateral taxation effectively

on the digital economy. There would also be a need to consider implications for international

cooperation and the role of international agreements that are based on international tax rules. It

was further noted that the current draft of the OECD Inclusive Framework recognises the need

for unitary taxation (in addition to principles of ensuring international cooperation and

predictability of an international tax system). The concern was however raised that the Inclusive

Framework’s current form makes it implausible for developing countries such as South Africa to

implement it without a higher compliance cost. The brief stated that further delays, in reaching

consensus about the Inclusive Framework means a continued loss of potential additional tax

income.

43 BusinessTech. 2020. New proposal for South Africa to tax digital services like Netflix and Spotify (PDF at the end of the article). https://businesstech.co.za/news/finance/406151/new-proposal-for-south-africa-to-tax-digital-services-like-netflix-and-spotify/44 Richard Baldwin. Globotics Upheaval. 2019.

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The digitalization of the economy alone cannot be blamed for the lack of revenue generated by

tax. Studies have shown that the lack of revenue can as much be blamed on the lack of

spending power individuals have, high unemployment rates, a lower than inflation increase in

salaries45 46.

The OECD estimates that imposing duties on electronic transmissions would generate a less

than meaningful increase in total government revenue of between 0.08% and 0.23% of total

revenue for developed countries. This is because only a small portion of trade can be digitalised

(approximately 1%)47. The study estimates that South Africa would lose over 25 times more in

economic growth from imposing duties than it would gain in revenue collection48 49.

As the use of technology increases, companies of all sizes will become more reliant on

technology and digital services such as digital marketing, electronic payments, tracking

shipments, communication, accounting, computer storage tools, etc. Imposing duties on

electronic transmissions could very likely, discourage overall trade and hamper

competitiveness, undermining growth, rather than encouraging it50. This also creates concerns

about potential double taxation51. Furthermore, digital transactions harm corruption, because

digital transactions are easily documented and transparent, thus keeping these transactions

duty-free plays towards the government’s goal of reducing corruption.

The COVID-19 pandemic has put incredible pressure not only on businesses, but especially on

consumers, with salaries being reduced, jobs being lost, and price-hikes for basic goods, which

has harmed consumer welfare. Imposing duties on electronic transmissions will put further

pressure on consumer welfare considering that digitally delivered products are considerably

more cost-effective at the moment (due to the lack of transportation cost).

45 BBVA OpenMind. Work in the age of data. 2020. https://www.brookings.edu/wp-content/uploads/2020/02/BBVA-OpenMind-Zia-Qureshi-Inequality-in-the-digital-era.pdf.46 IMF. IMF Fiscal Monitor: Tackling inequality. 2017. https://www.imf.org/en/Publications/FM/Issues/2017/10/05/fiscal-monitor-october-2017.47 Global Services Coalition. Current WTO Debate on the E-Commerce Moratorium: Scope and Impact. 2020. https://www.thecityuk.com/news/current-wto-debate-on-the-e-commerce-moratorium-scope-and-impact/.48 Global Services Coalition. Current WTO Debate on the E-Commerce Moratorium: Scope and Impact. 2020. https://www.thecityuk.com/news/current-wto-debate-on-the-e-commerce-moratorium-scope-and-impact/.49 Hosuk Lee-Makiyama. The Economic Losses from Ending the WTO Moratorium on Electronic Transmissions. 2019. https://ecipe.org/publications/moratorium/.50 Global Services Coalition. Current WTO Debate on the E-Commerce Moratorium: Scope and Impact. 2020. https://www.thecityuk.com/news/current-wto-debate-on-the-e-commerce-moratorium-scope-and-impact/.51 Marilia Maciel. Understanding the benefits to developing countries resulting from the moratorium on duties on electronic transmission. 2019. https://dig.watch/resources/understanding-benefits-developing-countries-resulting-moratorium-duties-electronic.

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Some concerns have been voiced regarding the implementation of such duties. It would be a

complex and time-consuming process if it is done fairly, as it would require the identification of

the “origin” of the data transfer. This will be difficult considering the dynamic nature of data flow.

Data being transferred is divided into separate packages from separate locations and is only

assembled into a “full final product” at the destination52. In this case, the bulk of the burden will

be carried by small and medium enterprises in terms of examining the different potential points

of origin for the service or product being provided, as they have fewer resources to devote to

such activities53.

SARS can also consider using blockchain technology to create an obligation for vendors to

issue a tax invoice transparently to ensure one version between supplier and customer, and if

they are both vendors, SARS has access to the tax invoice in real-time too. It may reduce the

risk of fraudulent tax invoices for obtaining illicit VAT refunds.

The Global Services Coalition (GSC) describes the moratorium on electronic transmissions as

“an especially valuable mechanism for expanding the benefits of e-commerce and cross-border

trade to developed and developing countries alike”54.

Encourage exportsTo take full advantage of digital trade, it is important to be able to export not only goods and

services but also digital products that are created domestically. In a country which has recently

overturned a decade long trade deficit into a surplus, the encouragement of export promotion

through avenues other than the traditional, tangible ones will resonate with existing policies.

To gain momentum with the export promotion of also the digital economy, some incentives can

be used to encourage local producers and developers to export their goods, such as subsidies.

It is common for developing countries to impose a variety of import tariffs to protect new

industries and make them more competitive. In the case of technologies however this is not

ideal, e-commerce can be improved by allowing them to use already existing systems to their

benefit. This will speed up the process of development and allow for more innovation as they

have access to a wider variety of software and technologies.

52 Global Services Coalition. Current WTO Debate on the E-Commerce Moratorium: Scope and Impact. 2020. https://www.thecityuk.com/news/current-wto-debate-on-the-e-commerce-moratorium-scope-and-impact/.53 Marilia Maciel. Understanding the benefits to developing countries resulting from the moratorium on duties on electronic transmission. 2019. https://dig.watch/resources/understanding-benefits-developing-countries-resulting-moratorium-duties-electronic.54 Global Services Coalition. Current WTO Debate on the E-Commerce Moratorium: Scope and Impact. 2020. https://www.thecityuk.com/news/current-wto-debate-on-the-e-commerce-moratorium-scope-and-impact/.

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When exporting through e-commerce and exporting digital products it is important to identify

sectors with high potential, where people are skilled and resources are easily accessible and

giving particular attention to these sectors, as they are more likely to succeed. Investing time

and resources into exporting higher-value goods will also ensure for higher revenue55. 3D

printing, for example, can be used to develop and grow South Africa’s manufacturing sector.

MSMEsTech start-up companies play an integral role in both e-commerce and the digital economy.

Many of these start-ups develop applications and software that can be traded internationally.

These start-ups must have the opportunity to develop, promote and sell their products, as in

many cases they are the innovators, the ones that break the mould, so to speak. As previously

mentioned, tech hubs are an ideal way to encourage and enable these start-ups and allow them

to develop their ideas. These hubs can be subsidised by the government or other incentives can

be implemented to prompt mobile operators and internet services to create more of these.

It is also important to promote and enable MSMEs to take part in e-commerce. They need to be

educated in digital technologies, computer literacy and e-commerce to be able to take full

advantage thereof. The government can develop special programmes specifically aimed at

developing MSMEs. MSMEs that have established some level of operation, can make use of

the Global Business Services Incentive offered by the DTIC, to employ educated young

professionals (with a government subsidy), to further improve their operations56.

In addition to educating them in the digital economy, the domestic environment must encourage

and enables the establishment and growth of MSMEs. Red tape preventing them from

establishing themselves in the domestic market or partaking in e-commerce should be cut, and

a sort of fall-net (such as lower cost export insurance or debt relief) should be in place to

support them should their exporting ventures fail.

During the COVID-19 pandemic, many MSMEs were forced to close or restrict their operations

due to stringent lockdown regulations. Many of these MSMEs used the pandemic as an

55 Paul Baker. E-commerce and Digital Trade. 2017. https://read.thecommonwealth-ilibrary.org/commonwealth/trade/e-commerce-and-digital-trade_9781848599628-en#page3.56 South African Government. 2019. Minister Rob Davies on Global Business Services incentive creating employment opportunities. https://www.gov.za/speeches/global-business-services-gbs-incentive-will-create-employment-opportunities-youth-7-jan?gclid=CjwKCAjwps75BRAcEiwAEiACMVx0d4SSNtTvnQ9aI5auy2u7Yog_kFAcJOq6DREEOoWf3_aWrKx-_xoCM7oQAvD_BwE.

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opportunity to move to e-commerce, as opposed to walk-ins, for their source of sales, using

platforms such a Takealot and social media to market and sell their goods.

Regional digital trade policySome of the external barriers to e-commerce include a lack of harmonisation between different

regions, regulatory differences between countries, inadequate mechanisms for settling cross-

border disputes, security issues, restrictions on cross-border data flows, and inadequate

transport and logistics networks for transporting goods online57.

When making policy decisions and developing strategies for digital trade, it is important to

discuss these decisions at least on a SACU level. Having agreement between SACU members

will allow for a harmonised system, which will implement especially customs changes

considerably more efficient. The implementation of a blockchain for customs would be

exceptionally efficient should it be implemented between SACU members as this will speed up

overall trade between the countries while encouraging e-commerce trade within the region.

Having a harmonised system will be of especially big advantage when the AfCFTA comes into

full force and negotiations on an e-commerce strategy and policy begin, as they have made

clear will be on a future agenda.

In 2012, SADC released the Regional Infrastructure Development Master Plan, with a chapter

focusing on ICT. The Master Plan divides ICT development into four pillars:

1. Infrastructure

2. Capacity building and content

3. E-services and other application

4. Research, innovation and industry development.

The committee responsible for ICT development proposed four key projects to develop ICT

within the region:

Project title Participating country

1. DTT migration support to SADC member

states

Selected SADC member states

2. SADC regional information infrastructure

phase II

All SADC member states

3. National and regional internet exchange

points (N/RIXP)

All SADC member states

57 Paul Baker. E-commerce and Digital Trade. 2017. https://read.thecommonwealth-ilibrary.org/commonwealth/trade/e-commerce-and-digital-trade_9781848599628-en#page3.

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4. SADC regional and national integrated

broadband infrastructure

All SADC member states

The AfCFTA will be the first African trade agreement that will incorporate e-commerce (which

may be on the negotiating agenda in 2021) and digital trade, although not specifically described

as such, in the agreement. The AfCFTA draft of establishment makes note of information

technology and indicates that each state party should use ICT to the best possible extent to

improve trade and logistics for intra-Africa trade. The Article (Article 17 under Annex 4) states

that import and export documentation that needs to be completed must be available on an

online platform and importers or exporters should be able to submit their documentation

electronically. In terms of digital trade, the Article states that an electronic system should be

established that will allow for the exchange of data and trade information. State parties will be

required to collaborate in order to ensure that the electronic systems are mutually compatible,

which will in turn aid the intergovernmental exchange of said trade data. The agreement also

states that the second phase of negotiations between state parties will include two important

topics, intellectual property rights and competition policies, both key aspects to take note of

when discussing digital trade. This is a large step in the right direction as it creates a platform

that in future will assist in dealing with complex issues, such as trade in personal data.

ConclusionThis industry position paper contained an objective and consolidated view from the Private

Sector (BUSA) concerning digital trade. The COVID-19 outbreak has highlighted the importance

of digital trade policies. As outlined throughout this position paper, there are a plethora of

strategies that can be adopted and implemented in ensuring that South Africa can partake in e-

commerce and the greater digital economy. It is therefore important to be familiar with the

concepts of e-commerce and digital trade and understand their functioning to develop accurate

strategies to grow in these aspects.

As a start, some of the main aspects that South Africa should focus on is developing the

infrastructure and ICT infrastructure to increase internet connectivity. This has become a

necessity as we enter the fourth industrial revolution. Furthermore, a sound legal and regulatory

framework which deals with new issues such as the trade of personal digital data needs to be

developed since the will play an integral role in fostering a trust-based relationship between the

population, government and the internet.

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In further creating a conducive space to move into the future, education in technology should be

initiated at an early stage. Nonetheless, for the short term, it remains important to use the

resources currently at hand to catch up with countries such as China and the United States.

Export strategies should be focused on high-value goods that are easily developed domestically

with resources and knowledge within our borders.

When developing a digital trade strategy, communication and cooperation with other SACU or

even SADC members will allow for much easier and smoother digital integration in the future. A

strong digital trade strategy will be one developed and implemented by the government, the

private and the public sector.

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