• Authored By: Philemon Okillong
27 Apr 2023

As at April 2023, 54 African Union states had signed the African Continental Free Trade Area (AfCFTA) agreement. At least 46 of these are already state parties.  The AfCTA is one of the flagship projects of Agenda 2063: The Africa We Want.

It is an ambitious trade agreement, encompassing digital trade and investment protection, amongst other areas. It seeks to lift 30 million people out of extreme poverty and generate $450bn in trade by 2035, according to AU.

The arrangement offers to deepen economic integration by establishing a single market for nearly 1.3 billion people across the African continent.

The World Bank[i] argues that the AfCFTA has the potential to increase the real income of African economies by 9% heighten intra-African exports by more than 81% and lift nearly 50 million people out of extreme poverty.

However, the successful implementation of the AfCFTA is heavily reliant on the role of technology and innovation in promoting intra-African trade and reducing barriers among the state parties.

Notably, the AfCFTA Protocol[ii] on digital trade recognizes e-commerce and innovation as critical drivers for enhancing the competitiveness of African businesses in the regional and global markets. The African Union[iii] suggests that the digital trade protocol seeks to provide AfCFTA state parties with an opportunity to reach a mutual position on digital trade and foster the harmonization of their digital economy policies.

According to the United Nations Conference on Trade and Development (UNCTAD)[iv], the establishment of e-commerce platforms and digital trade processes can foster intra-regional trade by facilitating cross-border payments, streamlining customs procedures, and empowering small and medium-sized enterprises (SMEs) to identify and access new markets.

Furthermore, the UN Economic Commission for Africa (UNECA)[v] suggests that technology adoption and innovation play a critical role in promoting intra-African trade by lowering transaction costs and offering new opportunities for job creation and entrepreneurship. However, the usage of e-commerce and digital trade in African economies remains low. In particular, the Global E-commerce (2020) Report[vi] reveals that Africa has the lowest share of the population (30 per cent) actively engaged in digital trade, in comparison to 50 per cent and 45 per cent in Asia and South America.

Like many other African countries, Uganda has recognized the potential of technology and innovation in enhancing trade and economic growth. Several strategies have been undertaken to develop and leverage the country’s digital economy to maximize the benefits of deepening integration.

The AfCFTA is set to boost intra-Africa trade. Photo/courtesy

For instance, the government of Uganda has integrated technology and innovation as an integral component of its planning and policy frameworks. In particular, the Third National Development Plan[vii] through the Digital Transformation Programme and the Innovation, Technology Development and Transfer Programme seeks to increase penetration and use of appropriate technology for social and economic development. In addition, the government adopted the Digital Uganda Vision as a pathway to promote sustainable development and poverty eradication through digital innovation.

However, despite all these efforts, Uganda continues to experience several technologically related challenges that significantly deter its effective participation in Intra-African and global trade. These include inadequate trade-related ICT infrastructure, low levels of digital literacy, and limited access to affordable and reliable broadband internet.

The Uganda Communication Commission (UCC) stresses that the cost of internet access in Uganda remains comparatively higher than in other AfCFTA state parties. More succinctly, the cost of accessing one gigabyte of internet stands at nearly $2.67 in comparison to $2.41, $2.18, and $2.18 in Kenya, Rwanda, and Tanzania respectively.

To exploit the market opportunity offered by the AfCFTA, Uganda needs to boost its digital economy and trade-related technologies. The government should prioritize the development of trade-enhancing digital infrastructure, promote digital literacy, improve access to financing for innovative projects, and create an enabling environment for innovative SMEs.

Furthermore, there is a need to increase cohesion and collaboration between the government, academia, and the private sector to drive innovation and improve Uganda’s digital economy.

By leveraging technology and innovation, Uganda can enhance productivity, reduce transaction costs, and improve its intra-African market connectivity.

References

[i] Free Trade Deal Boosts Africa’s Economic Development. World Bank (2022). Accessed through the link:

https://www.worldbank.org/en/topic/trade/publication/free-trade-deal-boosts-africa-economic-development

[ii] AfCFTA protocol on E-commerce: https://www.tralac.org/documents/resources/cfta/3176-au-assembly-decision-on-the-afcfta-february-2020/file.html

[iii] AU – African Union, AfDB – African Development Bank and UNCTAD (2019) ‘Next steps for the African Continental Free Trade Area: assessing regional integration in Africa’ (https://www.tralac.org/documents/resources/africa/2898-assessing-regional-integration-in-africa-ix-uneca-auc-afdb-unctad-july-2019/file.html).

[iv] UNCTAD – UN Conference on Trade and Development (2021). Accessed Link (https://unctadstat.unctad.org/EN/).

[v] The UN Economic Commission for Africa. Document Retrieved from the link: https://archive.uneca.org/sites/default/files/PublicationFiles/aria9_report_en_4sept_fin.pdf

[vi] RetailX, Asendia and Linnworks (2021) Global 2020 E-commerce Report. Link: https://www.asendia.com/hubfs/E-commerce%20Reports%202020/Global_E-commerce_Report_2020_RetailX.pdf.

[vii] Third National Development Plan. Retrieved from http://www.npa.go.ug/wp-content/uploads/2020/08/NDPIII-Finale_Compressed.pdf

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