Digital Africa: Leveling Up through Governance and Trade

By Judd Devermont, Director, Africa Program & Marielle Harris, Research Associate, Af

SUB-SAHARAN AFRICA is sprinting toward digitization and has the potential to reach new heights as long as it addresses shortfalls in physical and human capital, as well as weaknesses and gaps in digital governance and regional trade agreements. While all four elements are critical, there has been less focus on digital governance and trade. This is a serious oversight.

Sub-Saharan Africa is unlikely to “level up” its digital game unless governments develop and update their national digitization strategies, ensure regional interoperability of these strategies, and work with foreign partners to add digital provisions to their trade agreements. As global digitization and trade become increasingly connected and interoperable, the lack of national digital strategies and dearth of digital provisions in trade frameworks threaten to slow sub-Saharan Africa’s digital transformation. African governments have fallen short on three key issues—intellectual property (IP) protection, data protection, and cybersecurity— which will impede regional competitiveness and have critical implications for security and trade in the region. Connectivity Like Never Before . . .

Sub-Saharan Africa is undergoing a digital transformation. From students learning to code and drones delivering medical supplies to the increased usage of mobile payment platforms, daily life is being redefi ned by digital technologies. According to the International Monetary Fund, internet penetration in sub-Saharan Africa has grown tenfold since the early 2000s, compared with a mere threefold increase in the rest of the world. The number of tech hubs on the continent has grown by 50 percent over the past several years, now numbering more than 600. And the region was home to nearly half of the world’s mobile money accounts in 2018 and will see the fastest growth in mobile money technology through 2025, according to the Brookings Institution. Three of the most digitally advanced countries in the region—Kenya, Nigeria, and South Africa—boast impressive internet penetration and are expected to be the top three markets for smartphone connections in 2025, according to the GSM Association (GSMA). • Kenya. Home to a dynamic, growing digital ecosystem, Kenya is a regional leader in information and communications technology (ICT) innovation. The percentage of mobile internet penetration nearly doubled between 2014 and 2019, according to GSMA. In fact, mobile phone subscriptions surpassed the total population by 12 percent in 2019. Kenya has also led the continent in fi nancial inclusion; telecoms giant Safaricom is the main force behind Kenya’s M-Pesa money transfer technology, which grew the percentage of

Kenyan adults with access to at least basic fi nancial services from 26 to 83 percent in approximately 15 years. • Nigeria. The region’s most populous country is an ICT powerhouse. The sector contributes almost 14 percent to the country’s GDP, and the government has invested in highspeed internet via fi ve underwater cables with international links, reducing bandwidth prices and enhancing network capacity. GSMA estimates that Nigeria will be home to the highest number of smartphone connections in 2025 with 154 million connections—more than the combined number of connections estimated for South Africa and Kenya. Nigerians are also the top cryptocurrency traders on the continent, although often maligned as avenues for corruption. Nigeria generated more than $400 million worth of cryptocurrency trade in 2020, ranking third place after the United States and

Russia. • South Africa. Boasting a vibrant digital

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entrepreneurship ecosystem, South Africa is home to a variety of tech startups tackling challenges in the health, transport, and education sectors. The country accounts for 49 percent (a plurality) of the region’s cellular internet of things (IoT) connections and is the only sub-Saharan

African state to have launched commercial 5G services. South Africa has seen great advancements in fi ber optic networks, leading bandwidth prices to drop signifi cantly. Most of this advancement has occurred in urban areas, however, leading to a signifi cant digital divide.

. . . But Still Not Ready for Prime-Time

This boom in digitization is unlikely to fulfi ll its potential until major blind spots are confronted head-on. These limitations stem from countries’ lack of or outdated national digital strategies and frameworks as well as lean or absent digital clauses in the multiple trade agreements to which African countries are signatories. These shortcomings could seriously hinder sustainable, secure digital growth and trade, and serve as a signifi cant stumbling block to private sector competitiveness. If regional governments want their digital ecosystems to reach cruising altitude, they must develop robust digital governance frameworks and strengthen digital provisions regulating trade and investment with external partners.

NATIONAL DIGITAL STRATEGIES

A national digital strategy is a policy framework that strengthens governance on a host of digital issues such as IP protection, data security, ICT infrastructure, and human capacity development. Not only do national digital strategies generate digital norms for e-government services and private companies operating in the country, but they also help create open and predictable regulatory environments that attract trade and investment in national digital economies. Digital strategies go hand-in-hand with digital legislation—including on key issues like data protection and cybercrime— without which it is impossible for governments to facilitate secure, sustainable digital growth. According to the Organization for Economic Cooperation Development (OECD), as of 2021, only 28 African countries have comprehensive personal data protection legislation in place, while just 11 countries have adopted substantive laws on cybercrime. The lack of digital strategies and relevant legislation results in severe security gaps that leave countries vulnerable to the misuse and abuse of digital platforms and data.

TRADE AGREEMENTS

African governments are signatories to a variety of multilateral trade agreements that outline norms and regulations around issues such as technical barriers to trade (TBTs), tariff s, and other trade restrictions. As digital technologies and platforms play a greater role in everyday life—from purchasing groceries and fi lling a gas tank to accessing health clinics—it is critical for these agreements to ensure protection of individual, private, and government data and property rights. Many of these trade agreements, however, skimp on details when it comes to digital issues like IP protection, digital privacy, and cybersecurity. CSIS reviewed six key trade agreements on the continent—the African Continental Free Trade Area (AfCFTA) Agreement, UK-Ghana Interim Trade Partnership Agreement, UK-Kenya Economic Partnership Agreement,

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European Union-East African Community (EUEAC) Economic Partnership Agreement, the Cotonou Agreement, and the U.S.-Kenya Free Trade Agreement (FTA) Negotiation Principles— and found that only half include vague or general provisions around IP protection, while none include clauses on data protection or cybersecurity.

The Consequences of Inaction

Unless regional governments step up— developing and updating their national digital strategies and incorporating digital-specifi c clauses into their trade agreements—they will miss an opportunity to fully benefi t from the unfolding digital transformation. Moreover, countries are likely to become more vulnerable to cyberattacks and may face a decrease in trade and investment from external partners. • Defi cient digital transformation. Without IP protection, data protection, and cybersecurity standards in their regulatory environments and trade agreements, sub-Saharan African countries risk stunting their digital growth. A failure to implement these provisions could translate to reduced innovation and diffi culty scaling digital solutions. For example, a Nigerian startup providing 3D printing technology to local hospitals will likely hit a wall as it struggles to navigate Nigeria’s inadequate digital legal and trade frameworks. This creates a cyclical eff ect: as tech startups fail to scale, regional governments will be less inclined to invest in their ICT sectors, which is bad news for lowering data prices, developing human capacity, and increasing competitiveness. • Exposed to cyberattacks. Without adequate cybersecurity measures in place, regional governments are at an increased risk of cyberattacks. According to the Africa Center for

Strategic Studies (ACSS), African governments face a rapidly evolving mix of digital threats— critical infrastructure sabotage, organized crime, and combat innovation—from a mix of actors, including nation-states and lone-wolf actors. Ninety-six percent of cybersecurity incidents on the continent go unreported or

unresolved, and that will remain true as long as governments are slow to formulate and pass foundational cybersecurity strategies and trade rules. • Anemic trade and investment. U.S. trade with sub-Saharan Africa is already dismally low (in the past two years, U.S. trade with the region has represented less than 1 percent of all U.S. trade in goods), and this trend is on track to worsen if African governments fail to implement necessary reforms. If regional governments do not have IP protection in place, for example, foreign fi rms will not trust their patents, trademarks, and copyrights to be enforced.

International companies will be more likely to choose to trade with and invest in countries that have up-to-date digital regulatory environments as well as digital-fi rst trade standards.

Taking It to the Next Level

African governments can still get digitization right. By developing, updating, and committing to national digital strategies and legislation, working with the African Union to ensure regulatory harmonization, and prioritizing digital clauses in upcoming trade deals such as the AfCFTA Phase II negotiations, the region can harness its digital momentum to mitigate economic inequality, expand education access, increase trade and investment, and spur innovation. Trade-friendly regulatory environments will also see considerable growth in workforce development opportunities.

Update or Develop National ICT Strategies. As digital tools, services, and infrastructure become increasingly ubiquitous, it is critical for regional governments to shape sustainable digitization through a national plan, set of policies, or blueprint. And while numerous countries may have digital blueprints in place, it is the quality of and commitment to these strategies that counts. Regional governments should look to Kenya as a model, which has some of the most advanced digital legal frameworks on the continent, including its ICT Masterplan (2014) and Digital Economy Blueprint (2019). The Kenyan government is a regular convener of digital symposiums and, according to the International Trade Administration, has “invested heavily” in its ICT sector. In addition

to national strategies, countries should pass laws related to IP protection, data privacy, and cybersecurity. Regional governments should take notes from Uganda which passed the Data Protection and Privacy Act in 2019, becoming the fi rst African country to recognize data privacy as a human right. In addition, regional governments could prioritize training of legislators and judges who are often responsible for applying regional and international standards and regulations.

Engage the African Union. The African Union is a powerful convener on a host of issues, including digitization, with the capacity to strengthen coordination, align policies and sector regulation, and scale investment and dedication of resources for sustainable digitization. Building off its Digital Transformation Strategy for Africa (2020-2030)— which seeks to harmonize regulatory environments and guarantee investment and fi nancing in the