By Abhishek Mishra
Electronic commerce (e-commerce) as a share of a country’s total retail sales is fast becoming bigger in emerging markets such as India, South Africa, Brazil, Turkey, Mexico etc as opposed to developed economies. Over the next decade, e-commerce growth in the African continent and Southeast Asia is expected to outpace that in the developed world. This is because of the combination of greater internet access and rising disposable incomes equates to strong growth potential for e-commerce across the developing world. Retailers have been able to reach customers across geographies and markets in a variety of ways and in the process have changed the experience for both buyers and sellers.
E-Commerce share of total retail sales in select countries
|Expected Figure (%) by 2019
In the African continent, especially in sub-Saharan Africa, boom in mobile phone usage have helped to facilitate increased financial inclusion, which in turn has helped to spread e-commerce across Africa. In many African countries, the problems posed by limited physical infrastructure, and cost of setting up branches and ATMs, are overcome by mobile banking which enables unbanked Africans to make secured transactions using their cell-phones. Supplemented by a decrease in cost of smartphones and establishment of broadband, 3G and 4G networks, transactions and trading through mobile phones is becoming an established means of trading, thereby opening space for growth of e-commerce.
McKinsey, a global management consulting firm, offers a new and insightful way to estimate the importance of ecommerce – known as iGDP, which measures the percentage that e-commerce contributes a country’s total GDP. Below is a list of select African countries with significant iGDP scores.
|Select initiatives to boost e-commerce
|African Silicon Savannah city to boost African tech businesses (14.5 bn project)
|Focus on IT, Agriculture, Real Estate and Hospitability
|Ecommerce hub of Africa, focus on IT and technology hubs
|Jjiguene Tech hub, designed by women for women. IT giant Microsoft has recognised potential of this initiative
|Casablanca Finance city, Casablanca Technopark
|Various IT hubs along Western cape province, including city of Stellenbosch- known as Silicon Valley of South Africa
|IT city to be built near Accra (5.2 bn project)
African local e-commerce and digital platforms
Along with e-commerce, digitisation has revolutionised the retail payments system and the payments infrastructure. It is transforming African economies in four major ways: retail payments system, financial inclusion, sustainable business models, and revenue administration.
One major African success story is the ‘M-Pesa’, launched in Kenya in 2007. The service is now available to more than 30 million people spread across 10 African countries. Another initiative is Ghana’s national identity card, known as ‘Ghana Card’ which is self-sustaining, with revenue-modules and statutory fees funded by the government for the first year. After the project becomes viable, it is expected to accrue minimum revenue of one billion dollars to the Ghanaian government by next fifteen years. Unlike India’s ‘Aadhaar’ card, the Ghana Card is used as a national identity and confers citizenship on holders.
Moreover, Nigeria-based Jumia group, founded in 2012 by Rocket Internet, employs over 3,000 people and is Africa’s best-funded ecommerce startup. It was able to raise $150 million in 2014 alone and has created a logistics infrastructure with more than 500 motorbikes and trucks that deliver to customers in Nigeria’s biggest cities.
In the last few years, India has also successfully launched unique digital initiatives aimed at digital transformation, since having a digital identity is the very basis of functioning in a digital economy. India has the world’s largest digital identification programme – ‘Aadhaar’, literally meaning foundation, and has also launched the ‘Digital India’ programme which has brought internet connectivity to number of gram panchayats in rural India by laying optical fibers across the country.
African countries, especially in sub-Saharan Africa, are mostly unable to reap benefits offered by digitalisation, due to a lack of skills among the workforce. India’s 2015 National Skill Development Policy aims to provide an overall framework for skills-related activities within the country and link them with skills demand centers and align them with common standards. India’s own experience suggests that Africa needs to develop a targeted approach towards skills development. If these digital Indian initiatives are implemented properly in Africa, their economies could benefit and help young Africans to become more employable.
India’s draft e-commerce policy
India’s draft e-commerce policy makes a strong case for championing ‘Indian’ online enterprise and may have major implications for foreign-owned e-commerce majors operating in India such as Amazon, Alibaba, and Walmart. The draft proposes a single legislation to address all aspects of digital economy and a single regulator for issues related to FDI implementation and consumer protection. The draft policy bars group companies of ecommerce players from “directly or indirectly influencing” sales prices. The policy also suggests that Indian-owned and Indian-controlled online marketplaces be allowed to hold inventory as long as products are produced domestically. This relaxation on marketplace e-commerce firms is not available for entities controlled by foreign investments. As for Indian founders with minority stakes, the draft pushes for differential voting rights, giving more control to the founders. Imports and exports of digital products will now have to be reported in the goods and service tax (GST) returns as well as in the Reserve Bank of India’s Foreign Exchange Transactions Electronic Reporting Systems (FETERS).
India’s e-commerce draft also coincided with the African Union (AU) E-Commerce Conference which was held from 23-25 July in Nairobi, Kenya. The conference aimed to chart a roadmap aimed towards developing an African e-commerce strategy in consultation with relevant policy organs of AU, and to develop Assessing Regional Integration in Africa (ARIA) IX report which is to be prepared by United Nations Economic Commission of Africa (UNECA). The report seeks to consider the case for e-commerce and digital trade as a topic for the Phase II negotiations in the African Continental Free Trade Area (AfCFTA).
Taking the fight over e-commerce at the WTO
India and Africa has a long history of working together by coordinating their views and efforts in institutions of global governance in order to achieve greater autonomy. The most recent manifestation of this Indo-African synergy played out in the World Trade Organisation (WTO).
India and South Africa on 12 July made a joint proposal at the WTO which said, “the realities prevailing in the 1998, when WTO members agreed for the first time to the temporary moratorium on customs duties on electronic transmissions, have changed significantly during the subsequent two decades.”
These transmissions initially covered only ‘digitised products’ such as e-books, music and a variety of services. The joint report further stated that, “these changes necessitate a re-examination of the implications of the temporary moratorium, particularly from the development perspective, on the fiscal side.”
Their main contention is that the present moratorium on customs duties on electronic transmissions can lead to loss of competitiveness among developing countries, since they have higher tariffs on physical products, while the same product in digital form attracts zero duty. Moreover, with the advent of artificial intelligence and 3-D printing technology, products which are now delivered through offline mode can easily be transferred electronically, which makes customs duties on products irrelevant.
During the Buenos Aires 11th Ministerial of WTO last year, 71 countries including the US, China and Japan, in a joint statement, said they would initiate exploratory work towards future WTO negotiations on trade-related aspects of electronic commerce.
India and South Africa believes that there is no clarity on the scope of the e-commerce moratorium and has warned that attempts by developed countries to frame rules on e-commerce outside the WTO framework will undermine the consensus principle at the multilateral body, since there already exists a mandate for similar discussions to take place within the WTO. The draft policy is prepared by a task force headed by commerce secretary Rita Teotia.
The joint India-South Africa report takes due note of attempts by the developed world to make commitments more comprehensive and stringent through negotiations on regional trade agreements and multilateral agreements. If these attempts are successful, governments, particularly in the developing countries, may be left with less flexibility to take measures for nurturing the domestic digital economy and for encouraging domestic innovation.
Therefore, both Indian and South African government’s need to take a measured approach and remain fully aware of the need to preserve flexibility and create a level-playing field in order to formulate and implement policies in the future.