The AfCFTA Digital Trade Protocol to Unleash Service Sector Development

When we think of free trade, most people imagine goods such as cereals, clothes, or cars crossing borders. However, trade in services like tourism, banking, health care, education, business services, among others, is very important in today’s economy. In Cameroon, a parent could purchase goods and have them delivered through online marketplaces like Jumia and Kaymu. The African Continental Free Trade Area (AfCFTA) Protocol on Digital Trade represents a significant step forward for Africa’s economic integration and digital transformation.

The protocol on digital trade creates a more harmonized framework to promote Africa’s digitalization and the development of digital-related industries and trade in digital products. Promoting a transparent, secure, and trusted digital trade ecosystem is a major objective. The AfCFTA strives to create a more harmonized framework to promote Africa’s digitalization and the development of digital-related industries and trade in digital products. Promoting a transparent, secure, and trusted digital trade ecosystem is a major objective. The agreement has several protocols that are the building blocks of the agreement. One of the eight protocols is the protocol on digital trade. This is particularly important for Cameroon for several reasons;

1. The number of businesses selling online is rising: In 2016, Cameroonian companies made 14.4% of their turnover through orders received via the Internet, the National Statistics Institute (INS) revealed.
2. The digital economy contributes 5% to Cameroon’s GDP. It is important to accelerate the development of the sector to ensure that Cameroonian businesses and consumers can fully enjoy the benefits

The AfCFTA Digital Trade Protocol includes eight annexes that provide detailed frameworks for implementation:

• Rules of Origin: Establishes criteria to determine the origin of African-owned enterprises, digital platforms, and content, ensuring only qualifying African digital products receive preferential treatment under the protocol.
• Digital Identities: Focuses on interoperability, mutual recognition, and protection of digital ID systems for natural and juridical persons across State Parties, without creating a unified continental digital ID3.
• Cross-Border Digital Payments: Promotes interoperability of digital payment and settlement systems, transparency in regulations, fair competition, cybersecurity, and consumer protection in cross-border digital payments.
• Cross-Border Data Transfers: Allows electronic transfer of data for digital trade, subject to legitimate public policy exceptions, data protection, consent, and certification mechanisms.
• Disclosure of Source Code: Sets criteria for legitimate and legal public interest reasons for requesting source code disclosure, balancing transparency and protection of proprietary information.
• Cybersecurity and Online Safety: Addresses online safety, security, and consumer protection measures to foster trust in digital trade.
• Emerging and Advanced Technologies: Provides a framework for the adoption and regulation of new technologies to support innovation and digital transformation.
• Financial Technology (Fintech): Covers access to digital payment systems by fintech firms, promoting innovation, fair competition, and regulatory clarity.

If you are not a trade expert or analyst, why do you care?

1. The DTP harmonizes the Rules for Digital Trade Across the Continent: Cameroon launched its import substitution strategy in 2021 and is increasingly focused on exporting across the continent. Cameroon’s tech sector is fairly developed but underfinanced, with a range of start-ups in the fintech and tech sectors such as Petty Cash SaS and Agrix-Tech. Our start-ups will be better able to operate across the continent as these protocols and annexes create favorable conditions for businesses to understand how to trade across the continent. However, the DTP alone is not enough as businesses must leverage tools like the Africa Trade Collaboatory (ATO) to assess what laws and norms govern trade in those jurisdictions.
2. Accelerate Digital Trade: Each country has a separate set of rules and norms governing issues such as data & privacy, digital payments, etc. The DTP ensures that countries can work towards harmonising these rules to ensure effective digital trade. However, businesses will only benefit from the DTP if governments and policymakers begin aligning regulations and policies to reduce the cost of compliance and speed up the process of permits to trade across borders.
3. Consumer Protection: In order to have a well-functioning digital ecosystem, businesses must think about consumer rights and ensure that these are harmonised to prevent fragmentation. Consumer data should be stored, processed, and used in a way that reflects sovereignty and safety online.

While there are definite benefits to the DTP, implementing this will involve the participation of all stakeholders. For example, policymakers must invest in digital infrastructure to reduce internet costs, accelerate digitization and financial inclusion, while providing a supportive backdrop for businesses to effectively leverage synergies provided by the DTP. The annexes place specific emphasis on technological neutrality, which should underpin the design and implementation of policies in Cameroon.

In January 2024, the internet penetration rate was 43.9%, with 12.73 million internet users. The penetration rate of smartphones in Cameroon increased from 25% in 2016 to nearly 40% in 2020, a 15% increase over 4 years, according to the National Telecommunications Observatory. This creates a unique opportunity for e-commerce businesses that make 16% of their sales from online customers. The DTP is not enough to accelerate the rates of industrialisation based on E-commerce, but smart policies rather than overregulation will accelerate digitization, create jobs, and generate value for businesses over the long run.

• Policymakers should conduct a stocktake of current legislation and its suitability for intra-African trade. A step-by-step implementation plan that involves all stakeholders is vital to ensure that Cameroonians fully benefit from the DTP.
• Cameroon should gazette related laws to ensure that businesses across the continent are aware of the laws that govern digital activities in Cameroon. Information asymmetry is a major problem for most businesses across the continent, and there should be intentional efforts to mitigate against that.
• Finally, regional economic communities must accelerate efforts to improve digital trade by building relevant infrastructure, reducing trade costs, and digitizing customs. In the CEMAC region, for example, there is a common project designed to improve internet access across the sub-region. Policymakers could go further and set quantitative targets, i.e, installing 1000km of fiber optic every year.

Conclusion

The DTP provides a framework to ensure that African countries can slowly converge on issues such as fintech, cross-border data transfer, and cybersecurity & online safety. Policymakers should focus on ensuring that it is easy for Cameronian businesses to operate across the continent while reducing the trade barriers locally to encourage seamless intra-regional trade. The Pan-Africa Payment and Settlement Systems (PAPPS) should be integrated into national banking sectors to support intra-egional trade and ensure that Cameroonian businesses can benefit from the DTP.

Authors:

Henri Kouam, Founder & Executive Director

Dr. Egbe Fride, Research Fellow

Dr. Annie Nkeng, Research Fellow