Thursday, April 07, 2022 / 10:01 AM / OpED by Siyanda Makhubo / Header Image Credit: Blogspot Hub 

The current nature of international relations, marked by a surge in diverse (economic, political, and socio-cultural) crises, has demanded the mobilization of the collective capacities of state and non-state actors (enterprises and individuals) to find durable solutions that would help to improve the living standards of Africans. 

In line with Agenda 2063 of the African Union, to build the "Africa we want," by promoting intra-regional connectivity between capital cities by creating a single unified market; a continental conglomerate of states and industries will bring about a considerable shift in poverty alleviation and an influx in human movement via tourism. This system will work for women, thus promoting gender equality and women empowerment. The AfCFTA is Africa's blueprint and master plan for transforming Africa into the global powerhouse of the future. But what does that mean for Africans and businesses, especially e-commerce like Jumia?. 

Before this initiative and to date, Africa counted over fourteen economic blocs with eight recognized regional communities by the African Union. These include but are not limited to: the East African Community (EAC), Economic Community of West African States (ECOWAS), and; the Southern African Development Community (SADC), to name a few. 

Many countries think that the AfCFTA will mean less safety for their country, borders and markets. However, the existence of these regional economic blocs may be seen by commentators as a hindrance to the development process of the African continent in its entirety on a continental level. With these regional blocs, it is extremely difficult for sellers or enterprises of the East African Community (EAC) like Kenya to easily trade with nations belonging to ECOWAS, such as Nigeria. In reality, these regional blocs have different trading laws and agreements, using different currencies with varying levels of development and GNPs. The priority of these economic blocs is to ensure continuous trade among its members and promote diplomatic ties and security. Nevertheless, this "security search" hinders the potential economic growth of the continent.

A perfect example is the case of e-commerce services. Under normal circumstances, e-commerce has delivery capacities of 24hrs to 3 business days in national territories where they operate, depending on their operation sites and the land surface of the given country. This means that one can expect their goods in a relatively short period for a much lower price than someone found in a neighbouring country and, worst, found in a different regional economic community. 

Some challenges

Suppose Jumia, the leading e-commerce platform, operates in Kenya and an online customer from Nigeria wishes to make transactions from their platform. They will generally receive their purchase after a relatively long period and with expensive constraints or maybe never (if there is no air connection) than if they were in Kenya. This difference exists due to economic blockages put in place by regional economic communities. They include custom duties, tax, bureaucracy, and a few others. Since the producer cannot incur the cost of customs duties, these costs are pushed down to the final consumer. In nations where VAT (value-added tax) exists, consumers can see themselves purchasing a good for 1.7 times its original price. This is especially true for the seventeen African States using the OHADA (Organization for the Harmonization of Business Law in Africa) accounting system. This generally has devastating effects on consumers who spend more in economies where they earn much less and companies who find themselves shutting down due to lots of bureaucracy to follow and the high cost of existence in some regional blocs. 

In partnership with the African Union, the Africa Regional Integration Index (ARII) has a composite index that assesses how countries and regional economic communities progress towards their integration agendas based on sixteen indicators, grouped into five dimensions. The ARII also measures the state of regional integration of the continent with finality to make Africa more connected for businesses and persons. 

The five dimensions are the free movement of people, infrastructure integration; macroeconomic integration; productive integration, and trade integration. They are all pivotal for the success of e-commerce in Africa and development in general. Free movement means people will move faster and more efficiently, thus promoting tourism and interculturalism. Infrastructure integration means more route connectivity between countries (roads, railways and ports) and less custom duties and bureaucracy. Macroeconomic integration considers the stabilization of economies, currencies and international conventions guiding trade laws. Productive integration supposes quality and quantity always to equalize demand and supply concerning each country's desires. Lastly, trade integration means eliminating taxes, embargoes, and the eventual increase in government subsidies to adapt to international trends and requirements. 

Looking Ahead

Experts agree that regional integration expands markets and trade, enhances cooperation, mitigates risk, and fosters socio-cultural collaboration and regional stability. Regional integration can maximize the benefits of globalization while countering its adverse effects and stimulating development in least-developed countries by improving productive capacity and encouraging investments in those pieces of infrastructure that hold the most economic potential. This also means an opportunity for e-commerce to leverage profit margins and improve supply chain management on the continent. It is also an opportunity to foster African industries, making African produce more available and accessible to all. This continental agreement, coupled with the continent's internet penetration, will exponentially propel e-commerce as more Africans begin to cherish online shopping and home delivery services. According to the UN International Telecommunication Union's (ITU) study 'Connecting Humanity,' this is a representative market of over 700 million persons connected to the internet. A joint African market will also make Africa the largest free continental free trade area globally, with an investment of about US$97bn of internet infrastructure. 

The case made is that Africa will be a thriving market for e-commerce and e-commerce companies that will have to make available the necessary infrastructure for business. 

Historically, working to establish a common sub-regional market zone was necessary for encountering people located in the same regions. It was also crucial for the reinvention of social cohesion traditionally observed in cultural cohabitation, local or traditional rediscovery and peaceful coexistence in sub-regional parts of the continent. It is of pivotal necessity that states accelerate the implementation of the AfCFTA for a sustainable Africa that is peaceful, economically viable, and competitive in the international arena.

E-Commerce as a solution to integration

The argument is that the AfCFTA offers the solution for an integrated African market through trade through economic regions and countries. This inter-trading through such platforms fosters countries and economic regions to have common regulatory frameworks, policies and laws which will speak to a coherent African market. It is also true that digitalization and the AfCFTA will offer new and existing SMEs the opportunity to expand nationally and throughout the continent beyond existing digital divides because of existing laws and regulations. Therefore, legislators in each country have a responsibility to align with the AfCFTA to bridge these digital divides. 

Siyanda Makhubo is the Group Public Relations and Communications Manager for Jumia since December  2021.