By Stephen Mmodzi and Chimpele Kelvin Tsamwa
It’s funny how we have shifted almost every aspect of our lives online: dating, shopping, news, attending weddings/ funerals, gossiping, you name. It won’t be too surprised if we shall be able to download food over the internet soon.
“Can I please have a double cheeseburger, one Kombeza yogurt, and a bottle of water?”
You confirm your order, pay, click download, and in a matter of seconds voila! Your taste buds are tingling.
It might sound far-fetched but imagine how shocked someone who died a few decades ago would be if they woke up to find that people can video call each other on mobile phones, 3D print guns in their garage, remote manage mining equipment, perform medical operations, and take part in virtual tourism. Or better yet, a robot can now write an entire article and make perfect sense. Mind-blowing huh?
Technological breakthroughs have also made doing business easier for both local and international markets. Digitalization has pushed down the cost of trading and connecting consumers and businesses across the globe thereby shortening global supply chain systems.
So, what is digital trade?
Digital trade is not a new phenomenon, we have been doing digital transactions for a while. There is no universal definition of digital trade but we like to simply define it as “the buying of goods and services over the internet, and the transfer of money and data to enable such transactions”.
It has more to do with just the buying and selling of goods/ services over the internet – it also encompasses cross-border data and information transmission. So, before you dismiss it as something that doesn’t concern you – the fact that you use WhatsApp or, err Signal, download apps, stream church services, Netflix and chill – as it counts on user view per exposure that adds to trade figures, means you are part and parcel of this revolution.
When you flirt on Facebook with that woman in Brazil, download videos from YouTube, or follow your role model on LinkedIn, your information travels from servers located in one country to laptops or smartphones in another country. So even though money sometimes never changes hands in these transactions, you participate in trade by moving data across borders.
Global digital trade
According to the World Trade Organization (WTO) in 2016, the growth of digitized physical products has grown tremendously such that now digital trade far much outpaces sales in physical products. This has also been seen in how investment in intangible assets now outstrips by far figures to physical assets.
In 2019, the value of the digital economy was between 4.5-15% of the Global Economy according to the United Nations Conference on Trade and Development (UNCTAD). And this was pre-covid-19 pandemic levels – before lockdowns and other travel restrictions which completely changed the consumption, use plus experiences of the digital economy.
Let’s put it into perspective: Zoom’s (the videotelephony and online chat platform) valuation presently is much more than the world’s 5 biggest airlines combined! That is KLM Royal Dutch Airlines, Delta Airlines, International Airlines Group, Lufthansa, and American Airlines.
A name has been coined recently: FAANG, implying Facebook, Amazon, Apple, Netflix, and Google, who have become the most valuable brand names in the world. The same applies to the rise of blockchain products i.e. Cryptocurrencies like the famous bitcoin value. However, it’s impossible for someone to physically hold any of the above-mentioned products.
We have become dependent on these digital products so much that a mere blip of a second in service interruption causes losses in tens of millions of US dollars including loss of lives. Of these recent growths, it is very unlikely to find companies from developing countries, including Malawi.
Some countries already have realized the potential in this and the value of digital trade such that they have made relevant policies to benefit from the growth, i.e. in revenue collection, education, enabling clauses, etc. The perfect example is Estonia, a tiny European country that has an impressive digital economy.
Estonia embraced a digital economy such that 99% of all dealings with the government are digitally done, thereby improving efficiency, governance, transparency, innovation, improved markets, banking taxation, investment, etc. Most countries are now shifting or enabling environments towards digital and knowledge led economies to stay competitive and adapt to the new changing realities.
Why is digital trade important to Malawi?
Digital trade is an increasingly way for Malawi to trade with the rest of the world and opens up great opportunities for Malawian consumers and businesses. It gives Malawian businesses access to a global market and the chance to further grow our economy.
There are so many areas that do not need huge capital investments. Some, if not most, just require an internet-connected phone to start.
To attract more foreign direct investment (FDI), these days of more transparency companies would like to be seen investing in sustainable projects as these tend to have a high return on investment. As such data has become a very important component, which countries use to FDI, which if properly housed and harnessed can attract investment that can easily be scaled to other fields.
A UNCTAD assessment found that digital trade has the potential to move Malawi closer to achieving its development goals but the sector needs to be structured and organized. “Clear policy directions and higher visibility of the digital economy should be prioritized in the national development agenda,” the assessment says.
Barriers to digital trade
As with all forms of trade, digital trade has got its own set of challenges. The following are some of the most significant issues that local business face as far as digital trade is concerned:
· Online payment issues
· Lack of trust in online issues
· Unreliable internet connections
· Low technology adaptation by firms
· High internet/ data costs
· Low levels of internet penetration
· Weak IT skills across the population
Where art thou, Malawi?
The UNCTAD assessment mentioned earlier also said that to accelerate progress, Malawi must beat other hurdles such as red tape, costly and time-consuming procedures that slow e-commerce uptake. More than 80% of surveyed businesses cited an unsupportive regulatory environment as a barrier to digital trade in the country.
Financial institutions in Malawi provide meager and relatively costly credit to Micro, Small, and Medium Enterprises (MSMEs), and the products and services they provide are not aligned to e-commerce business models, the assessment notes.
One of the first (major) steps to take would be by developing a stand-alone policy and strategy on the digital trade development agenda.
Those of you who have been working from home the past year are obviously aware of how important digital services are to productivity and the economy. For starters, you can work from home largely because of digital services, video conferencing with colleagues, buying of household items online; we have been given a glimpse of the future, one which students can virtually learn from home, doctors can remotely diagnose patients and engineers can design and share files to 3D print personal protective equipment. As time goes, the unavoidable switch toward digital services will be speeded.
As the Covid-19 pandemic continues to restrict the physical movement of goods and people, digital trade continues to play a critical role in keeping trade going – electronically. Digital trade is now more important than ever and as a country, we need to make sure we are not left behind.
About the authors:
Stephen Mmodzi is Lead Expert Coordinator for United Nations Least Developed Countries, Geneva and Europe Chapter, and co-founder of wergomarket.com and vendor247.shop
Chimpele Tsamwa is the Master of Lightbulb Moments at Green Thingz and author of African Dropshipper.
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