The AfCFTA Digital Protocol

Introduction

State parties of the African Continental Free Trade Area (AfCFTA) adopted the AfCFTA Digital Trade Protocol (AfCFTA DTP) in February 2024. This protocol is the digital trade chapter of the AfCFTA Agreement and constitutes an integral part of it. While the AfCFTA DTP has been adopted, negotiations on its eight annexes on Rules of Origin, Cross-Border Digital Payments, Cross-Border Data Transfers, Criteria for Determining the Legitimate Public Reasons for Disclosure of Source Code, Digital Identities, Financial Technology, Emerging and Advanced Technologies, and Online Safety and Security are ongoing. The AfCFTA DTP will enter into force once the ratification process is completed, and state parties will have a further 5 years to align their national laws to the protocol.

As one-third of the world's population and workers will be African by 2075, investing in bridging the digital gap-especially by training youth and women-could also set up the continent as the world's next major exporter of digital services.

The digital economy holds great promise for economic development in Africa. In 2020, the International Finance Corporation and Google estimated that Africa's digital economy could reach USD 180 billion by 2025, accounting for 5.2% of the continent's GDP. By 2050, the projected potential contribution could reach USD 712 billion, or 8.5% of GDP. Moreover, if African internet penetration rates could be increased to those of the Global North, the digital economy could add 140 million jobs and USD 2,200 billion to Africa's GDP. As one-third of the world's population and workers will be African by 2075, investing in bridging the digital gap -especially by training youth and women-could also set up the continent as the world's next major exporter of digital services.

Further to an effective and reliable physical infrastructure, a good regulatory environment is critically important to achieve the promise of significant digital dividends in Africa. The AfCFTA DPT seeks to foster such an enabling regulatory environment.

What Is in the AfCFTA DTP?

The AfCFTA DTP is an ambitious and comprehensive framework designed to facilitate digital trade across Africa. Beyond the preamble, the agreement has 52 articles, divided into 11 parts, addressing different aspects of digital trade and administrative issues:

• Part I: General provisions that address definitions, objectives, scope of application, and the right to regulate;
• Part II: Market access and treatment of digital products includes provisions on an annex on rules of origin, customs duties, and non-discrimination of digital products;
• Part III: Facilitating digital trade with electronic trust services, electronic authentication, paperless trading, logistics and last-mile delivery, electronic contracts, electronic invoicing, digital identities, digital payments, domestic electronic transactions framework, electronic transferable records, digital infrastructure, and interoperability and mutual recognition;
• Part IV: Data governance encompasses cross-border data transfers, protection of personal data, location of computing facilities (data localization), and data innovation;
• Part V: Business and consumer trust addresses source code, cybersecurity, internet access, online consumer protection, unsolicited commercial electronic communications (spam), and online safety and security;
• Part VI: Digital trade inclusion, including digital inclusion, micro, small and medium-sized enterprises (MSMEs), digital innovation and entrepreneurship, and digital skills development;
• Part VII: Emerging technologies and innovation includes emerging and advanced technologies, financial technology, and information and communication technology;
• Part VIII: Institutional arrangements provides for a committee on digital trade;
• Part IX: Transparency, with provisions on publication of information, open government information, notification, and non-disclosure of confidential information;
• Part X: Technical assistance, capacity building, and cooperation addresses technical assistance and capacity building and areas of cooperation;
• Part XI: Final provisions, including clarifying the relationship between the AfCFTA DTP and other AfCFTA protocols; dispute settlement; annexes; entry into force; application; implementation, and monitoring and evaluation; review; amendment; and authentic texts.

The AfCFTA DTP bears similarities to the most advanced digital trade agreements (DTAs). It follows the model of comprehensive DTAs that was established by the 2018 Comprehensive and Progressive Tran-Pacific Partnership Agreement (CPTTP). As a single undertaking, the AfCFTA DTP does not adopt the modular approach used in the Digital Economy Partnership Agreement (DEPA) among Chile, New Zealand, Singapore, and South Korea. Nevertheless, the DEPA's influence is apparent as different topics are arranged in specific parts, making it well organized and easily navigable. Although comprehensive, it does not cover as much ground as the DEPA or the United Kingdom-Singapore Digital Economy Agreement (UK-Singapore DEA), which are the most comprehensive DTAs thus far. In contrast to the high-income parties in those agreements, the state parties of AfCFTA DTP comprise 33 least developed countries (LDCs). It is, therefore, unsurprising that agreements like the DEPA are not the lodestar for African countries in digital trade matters.

Expanding Digital Trade in Africa: Key provisions

The rules of the protocol would apply to a broad range of digital trade measures as it covers "measures adopted or maintained by a State Party affecting digital trade." However, it expressly excludes the application to government procurement and government information (except as provided in Article 39).

The protocol contains extensive provisions for digital trade facilitation. These provisions include digitalizing trade processes and documentation for facilitating trade. The COVID-19 pandemic forced many African countries to upgrade their customs procedures to enable digital payments and the remote processing of documents and certifications. However, many still lack the regulatory infrastructure to permit the e-versions of trade documentation to facilitate paperless trading. The protocol aims to fill this gap by requiring parties to update their regulatory infrastructure on various electronic transaction frameworks, including trust services, authentication, digital identities, and invoicing. Provisions focusing on logistics and last-mile delivery are also emphasized through requirements to enhance the regulatory environment and improve cooperation.

The full implementation of such digital trade facilitation provisions is expected to significantly improve trading conditions in Africa. The continent still has the highest average import dwell times, with custom procedural delays for most countries averaging more than 8 days. Beyond making trade more efficient, full implementation can deliver other gains, as highlighted in a study on the Asia-Pacific region published in 2018. The United Nations Economic and Social Commission for Asia and the Pacific estimated that the full implementation of digital trade facilitation measures in that region would reduce trade costs by 26.2% or save USD 1,200 billion in international transaction costs.

The protocol includes a range of market access provisions, including rules of origin (ROO), customs duties, and non-discrimination of digital products. The inclusion of an article on ROOs (currently bracketed) is interesting. ROOs are common in free trade agreements but are less so in DTAs because of the difficulty of determining the origin of digital products, including data. Nevertheless, the ROO provision indicates that an annex on ROOs will be developed, and it will establish the rules to determine the origin for African-owned firms, African digital platforms, and African content. In addition, the annex will define the scope of digital products (the range of digital products) that are to be covered by the protocol, while "taking into account the objective to develop an AfCFTA Digital Market, trade in African products, promotion of African firms and use of African digital platforms." Closely related to this provision is the bracketed provision on customs duties, by which a party agrees not to impose customs duties on digital products transmitted electronically originating from other state parties. This provision is inspired by the World Trade Organization's (WTO's) now-controversial Moratorium on Customs Duties on Electronic Transmission, which has been commonly adopted into DTAs. The annex on ROO will determine the exact contours (scope and origin criteria) on which the prohibition would apply.

The AfCFTA DTP contains data governance-related obligations (including cross-border data flows, data localization) and a provision on source code. These provisions emphasize the free flow of data and prevent state parties from requiring access to source code as a market access condition. However, they also clarify that exceptions can be applied for legitimate public policy and national security. Adoption of these provisions has faced some criticism, especially after the United States, one of the biggest proponents of free data flow provisions globally, retracted its positions on these issues within the WTO's e-commerce plurilateral negotiating context, citing a need to maintain policy space. Some argue the rules are not fit for purpose in an African DTA because they risk allowing foreign big tech companies to continue their market dominance in Africa and prevent the much-needed technology transfer that will benefit the fledgling African digital economy.

A welcome feature of the protocol is an emphasis on establishing regulatory frameworks that focus on improving trust in digital transactions.

A welcome feature of the protocol is an emphasis on establishing regulatory frameworks that focus on improving trust in digital transactions. State parties must, for example, adopt data protection, consumer protection, and cybersecurity laws, which are necessary to ensure trust in digital transactions. UN Trade and Development reports that only 33 of 54 African countries (61%) have data protection laws, and 10 countries have no data protection regulations. Moreover, only 39 (72%) have cybersecurity laws, with 12 having none. Furthermore, only 28 African countries (52%) have consumer protection laws that apply to online transactions-15 of them have none. The lack of comprehensive trust regulation for the digital economy is a challenge on a continent that regularly experiences data breaches and has some of the highest cybercrime and cybersecurity incidents in the world.

Innovative features of the AfCFTA DTP include extensive provisions on digital inclusion that expressly mention bridging the digital divide for, among other things, micro-, small and medium-sized enterprises, promoting digital entrepreneurship, innovation, and skills development. The agreement also institutionalizes technical assistance and capacity building and sets out an extensive list of areas for collaboration. These provisions are not typically seen in DTAs in this manner (although there are country-specific special and differential treatment [SDT] provisions in agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership Agreement). However, the development provisions in the WTO Joint Statement Initiative on E-Commerce are more extensive. They provide for technical support and capacity building, longer implementation times and a more flexible implementation regime, and a longer peace clause for LDCs. In this regard, the nine African countries that are parties to the Joint Statement Initiative on E-Commerce (Benin, Burkina Faso, Cabo Verde, Cameroon, Côte d'Ivoire, Gambia, Kenya, Mauritius, and Nigeria) will ostensibly benefit from the technical assistance under that agreement, which will also help them implement their AfCFTA obligations.

A noteworthy exclusion from the AfCFTA DTP is a general exceptions clause and a national security clause, which are typically included in DTAs, even if they form part of the framework agreement. However, the agreement includes exceptions in specific provisions that incorporate the general exceptions and national security language found in Article XX of the General Agreement on Tariffs and Trade 1994 (GATT 1994), Article XIV of the General Agreement on Trade in Services (GATS) (general exceptions) and Article XXI of GATT 1994/ Article XIV bis of the GATS (national security exception). The agreement also incorporates a right-to-regulate provision, which allows state parties to regulate in their territories and to "safeguard public welfare, promote sustainable development, protect essential security interests and pursue legitimate public policy objectives."

Next Steps, Expectations, and Key Challenges

As mentioned, African countries are still negotiating eight annexes to the AfCFTA DTP that will establish a blueprint for achieving some of the agreement's goals. The content of the annexes is unknown. It is also unclear when the texts will be adopted.

Notwithstanding African countries' ambitions to create a single digital market, the continent still faces significant challenges that could derail its goals. First, the proof of the pudding will be in its implementation. The barriers to implementing the AfCFTA DTP will be high due to Africa-idiosyncratic challenges such as infrastructure gaps, regulatory fragmentation, and relatively low capacity. Many African countries still face major digital infrastructure deficits, including limited internet access, high internet costs, and unreliable broadband networks. Second, harmonizing digital regulations among diverse states with varying levels of development and regulatory frameworks will not be easy. The AfCFTA DTP is another ingredient in Africa's spaghetti bowl of subregional agreements, including commitments by state parties in other AfCFTA instruments such as the Trade in Services Protocol. Therefore, commitments in other forums could affect the full implementation of the AfCFTA DTP. Finally, extensive resources are needed to support skills development and capacity building to enable state parties to reap the benefits of digital trade. This ranges from developing in-country digital skills to supporting regulatory efforts and building expertise and collaboration structures in cybersecurity and data protection.

A substantial amount of political will, commitment, solidarity, and resources must be invested in Africa's digital economy project.

It goes without saying that a substantial amount of political will, commitment, solidarity, and resources must be invested in Africa's digital economy project. Failure to do this could undermine the will and commitments expressed by the state parties in the AfCFTA DTP and its future annexes and relegate these agreements to the growing stack of documents that purport to advance sustainable and meaningful development in Africa.

Driving Africa's Digital Future: The promise of the AfCFTA DTP

The AfCFTA DTP represents a bold and comprehensive effort to integrate digital trade into Africa's regional economic framework. Its focus on e-trade facilitation, as well as deeper integration issues, including data protection, cybersecurity, and infrastructure development, reflects a commitment to addressing the continent's challenges head-on.

While there are significant hurdles to overcome, including infrastructure gaps and regulatory harmonization, the AfCFTA DTP promises to transform Africa's digital economy and foster greater economic integration. As state parties conclude their negotiations and work toward implementation, the success of the AfCFTA DTP will depend on effective cooperation, investment in regulatory and physical infrastructure, and a commitment to upholding state parties' obligations.

Kholofelo Kugler is a South African attorney who specializes in international trade law, digital trade regulation, and artificial intelligence regulation and compliance.

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