Integrating Consumer Protection Concerns into the AfCFTA E-Commerce Protocol

By

Brendan Chukwuebuka Ugwu[1]

Abstract

E-commerce platforms are becoming more widespread in African countries. As of 2020, the number of digital buyers in Africa experienced an increase to 281 million. Major e-commerce platforms in Africa include takealot.com in South Africa, Jumia in Nigeria, and Masoko in Kenya. E-commerce platforms create both opportunities and challenges for African consumers. By using e-commerce platforms, consumers benefit from more choices as well as lower transaction costs and faster delivery of goods and services to remote locations. Consumer e-commerce platforms also present a lot of challenges to consumers, such as delivery and logistics challenges, digital payment failures, refund policies, and consumers’ lack of knowledge about cancellation rights for online transactions. Consumer protection, in particular, involves safeguarding measures taken to ensure that the buyers of goods and services, and the public, are treated fairly and their rights are protected in market transactions both online and offline. On the 10th of February 2020, the Heads of State and Government of the African Union decided to mandate negotiations for an e-commerce protocol to the African Continental Free Trade Area (AfCFTA). This article therefore examines consumer concerns in e-commerce platforms as well as international e-commerce consumer protection principles and the need for integration of consumer protection provisions in the AfCFTA E-Commerce Protocol.

Introduction

The world is increasingly going digital.[2] The global e-commerce market is expected to total $4.89 trillion in 2021[3]. That figure is estimated to grow over the next few years, showing that borderless ecommerce is becoming a profitable option for online retailers[4] Among Internet users, the kind of activities that people engage in varies considerably. While more than 80 per cent of Internet users in some European countries shop online, in many LDCs the corresponding share is below 10 per cent (UNCTAD, 2021c)[5]. Switzerland replaced the Netherlands at the top of UNCTAD’s Business-to-Consumer E-commerce Index 2020, which ranks 152 countries on their readiness to engage in online commerce.[6]

The 10 developing countries with the highest scores are all from Asia and classified as high-income or upper-middle-income economies.[7] Africa’s retail industry struggled significantly during 2020[8]. However, the pandemic has also been a catalyst for online sales, pushing many shoppers on the continent to buy online more than ever and shoppers in less remote areas to buy online for the first time.[9]

Various digital payments are becoming more widespread in African countries.[10] This is certainly a key aspect for e-commerce.  As of 2020, the number of digital buyers in Africa experienced an increase to 281 million[11]. The number of e-commerce users in the continent is estimated to grow significantly, reaching over 334 million in 2021[12]. By 2025, they could be roughly 520 million, almost doubling the number in 2019[13].  .

Major E-Commerce Platforms in Africa

Trading in the digital economy occurs primarily in the form of e-commerce, which has been more narrowly defined by the OECD to refer to placing and receiving orders over computer networks, using multiple formats and devices, including the web and electronic data interchange and the use of personal computers, laptops, tablets and mobile phones of varying levels of sophistication[14].

E-commerce channels are varied, including proprietary websites and applications (mobile or web), as well as marketplaces which aggregate consumers and producers[15]. It also occurs through social media platforms, such as Facebook, WhatsApp and Instagram, as well as other country and industry specific platforms that traders use as channels for engagement with markets[16].

Visa’s white paper, entitled E-trade advancements across Sub Saharan Africa (SSA), showed that the top contributors to e-Commerce in the region over the last three years, in order of contribution, were South Africa, Nigeria and Kenya.[17]

South Africa with the current population of 60,264,771 based on projections of the latest United Nations data[18] is the 37th largest market for e-Commerce with a revenue of US$4 billion in 2020, placing it ahead of Portugal and behind Nigeria.[19] The biggest player in the South African e-Commerce Market is takealot.com[20]. The store had a revenue of US$451 million in 2020[21]. It is followed by superbalist.com with US$69 million revenue and woolworths.co.za with US$51 million revenue[22]. Altogether, the top three stores account for 15% of online revenue in in South Africa[23]

Nigeria is the most populous country in Africa, the second biggest economy, the third largest military power and the biggest oil producer (10th oil producer in the world).[24]The current population of Nigeria is 213,029,716 based on projections of the latest United Nations data[25]. The UN estimates the July 1, 2021 population at 211,400,708[26].

The top ecommerce sites in Nigeria are Jumia, Konga and Kara.com.ng[27]. Other top retail sites include Dealdey, Kaymu, DressMeOutlet, Wakanow, Traclist, Mall for Africa and OLX[28]The most popular marketplace in terms of visitor numbers is by far Jumia[29]. Jumia is based in Lagos and operates in 14 African countries[30]. Other popular online marketplaces in Nigeria are Jiji, Konga, and Cheki. Konga.com, for instance, recorded some 30 million web visitors in 2019, which consisted mostly of a very young audience[31]

Kenya with a current population of 55,362,101 based on projections of the latest United Nations data[32]  contributes significantly to Africa e-commerce. Kenya ranked number 88th in fastest growing e-commerce economies worldwide according to the 2020 UNCTAD B2C Commerce Index, and ranked 4th Sub Saharan Africa (behind Mauritius, South Africa, Nigeria)[33]. Kenya’s e-commerce market is expected to reach $1.7 billion in 2021[34]. The growth of e-commerce is highlighted by the number and size of new players in the market. Kenya’s largest Telco, Safaricom launched “Masoko,” an e-commerce platform, joining other dominant players in the market such as NYSE listed Jumia, Jiji, Glovo as well as U.S-affiliated Copia which provides e-commerce solutions for low-income consumers.[35]

Consumers Concerns in E-Commerce Platforms.

E-commerce platforms creates both opportunities and challenges to African consumers.

By using e-commerce platforms, consumers benefit from more choices and convenience in accessing and comparing more products from a wider range of companies, as well as lower transaction costs and faster delivery of goods and services to remote locations.

However, E-Commerce platforms also present a lot of challenges to consumers. Lack of guarantee of a product’s quality; product sizes vary from brand to brand, and since a consumer cannot try out the products before buying them, selecting the size online is always a gamble; delivery and logistics challenges[36]; the issue of delay in delivery of consumer goods. While all e-commerce sites have order tracking systems for their customers, these are not always accurate[37]. Digital payment failures, a faltering internet connection or a technical glitch often results in the payable amount being debited from a customer’s account without being credited to the selling party[38]. And retrieving this amount is anything but a quick process; one has to inform the site and then wait around 7-10 days before the amount is refunded to their bank accounts.[39] In most instances of online retail, the use of customers’ private details is inconsistent with the objective for which it is obtained; online customers have no rights in relation to the collection, transfer, and storage of their personal information; satisfactory opportunities to agree to or opt out of data collection are not provided.

Under the perspective of consumer protection in e-commerce transactions, the primary consumer concerns include:[40] (1) Consumer’s exposure to unfair marketing practices: a) insufficient information disclosure, for example, refund policies, cancellation terms, warranty information. b) Contract terms, for example, their enforceability c) Merchandise and delivery practices, for example, failure to perform and lateness d) Payment, for example, recovering fraudulent charges if credit card information falls into criminal hands, e) Transaction confirmation and cancellation policies, for example, consumer’s lack of knowledge on cancellation rights for online transactions, including for mistakenly made purchases. f) Fraud and deception, for example, lack means to authenticate merchandise purchased online. (2) Unsafe product. (3) Confidentiality of any information which consumers provide. (4) Identity of seller. (5) Effective grievance system and legal remedies, if anything goes wrong. (6) Protection from the ill effects of high competitive markets which may include selling of same product at different prices. (7) Goods delivered should correspond to the description, quality and quantity for which consumer has effected paid for. (8) Delivery of goods at the correct place and the correct time. (9) Insecure payment methods. (10) Loss of personal privacy (Violation of data privacy). (11) Risk and misuse of personal information.  (12) Other concerns include computer fraud, hacking, virus, interception and alteration of financial data, and misuse of personal information. The above discussion shows that e-commerce is intimidating the risk of the violation of consumers’ basic rights in the conduct of e-commerce transactions[41] adequate consumer protection regulations should be put in place to address the above concerns of consumers.

Integrating Consumer Protection Provisions in AfCFTA E-Commerce Protocol.

On the 10^th of February 2020, the Heads of State and Government of the African Union decided to mandate negotiations for an e-commerce protocol to the African Continental Free Trade Area (AfCFTA)[42]. Originally scheduled to form a “Phase III” of the negotiations, the e-commerce protocol was subsequently fast-tracked almost a year later, on 5 January 2021, in a decision that endorsed December 2021 as the deadline for their conclusion[43].

The negotiations for an e-commerce protocol to the AfCFTA present a unique opportunity for African countries to collectively establish common positions on e-commerce, harmonise digital economy regulations and leverage the benefits of e-commerce[44] Negotiators considering e-commerce in the AfCFTA have two dimensions to consider: (1) how broadly they would like to address e-commerce; and (2) how deeply they would like to address e-commerce issues.[45]  Typically, there are four main categories used to organise issues related to e-commerce in trade agreements[46]: (1)Market access: Customs duties, digital products, non-discrimination for electronic and digital products, cross-border flows, (2)Rules and regulations: Consumer protection, protection of personal information, electronic supply of information, domestic electronic transaction framework(3)Facilitation: Paperless trade administration, cooperation, transparency, electronic authentication , (4) Enabling Issue: Technology infrastructure and related matters.

Consumer protection, in particular, has emerged as an important obstacle to cross-border e-commerce in Africa: 60% of small firms in Banga et al.’s (2021) survey of 31 African businesses ranked low online trust as a primary obstacle constraining local e-commerce[47]. Interviews with African firms reveal that low online trust among consumers is stemming from concerns around privacy of their data, cybercrime and lack of dispute resolution mechanisms[48]. As per UNCTAD’s Global Cyberlaw Tracker, in 2020, only 25 out of 54 African countries have online consumer protection legislation in action, and only 23 African countries have competition laws in place as well as competition authorities to enforce those laws[49].

 Consumer protection refers to the ‘act of safeguarding the interests of the consumer in matters relating to the supply of goods and services’.[50]   It involves safeguarding measures taken to ensure that the buyers of goods and services, and the public are treated fairly and their rights are protected in market transactions both online and offline. The goal of the law in consumer protection is to prevent harm or injury to, and provide redress for the consumer where he or she suffers harm or injury in his or her relationship with the producer or supplier of goods and services.[51]

Internationally, most of the nations including USA[52] , EU[53] and Canada[54] have strong consumer protection regulation in the sphere of e-commerce transactions specifically under some unique identified principles.[55] Consumers should not be afforded any less protection in electronic commerce than in other forms of commerce. The E-Commerce protocol of AfCFTA should be designed in such a way that it accommodates consumer protection provisions. At global platform, countries are acting in accordance with “Eight internationally recognized consumer protection principles[56]” for ensuring consumer protection at e-commerce portal. These principles include:

1.      The right to safety: this requires that consumers are to be safeguarded against goods or services that are defective or risk prone;

2.      The right to information: this implies that consumers are to be informed adequately with respect to the accurate price, as well as the quality, or quantity of goods or services

3.      The right to choose: this implies that consumers are to be provided with a wide variety of goods or services to choose from;

4.      The right to be heard: this entitles consumers to make complaints and receive a response from the suppliers of goods or services;

5.      The right to seek redress: this implies that consumers are entitled to seek redress for their complaints in complaint resolution forums;

6.      The right to consumer education: this requires that consumers are to be educated about their rights, as well as the products or services they wish to purchase; and,

7.      The right to a healthy environment: this implies that people have the right to live and work in an environment which is neither threatening nor dangerous and which permits a life of dignity and well-being; and

8.      The right to representation: this is the right to express consumer interests in the making and execution of government policies[57].

Recognizing the growing relevance of ecommerce in the future, African countries and regional groups are currently developing plans and policies that are relevant to or directly address consumer concerns about e-commerce platforms. To enhance consumer protection, the additional complexities of e-commerce necessitate the development of a new continuous regulatory architecture for e-commerce considering the above OECD principles of consumer protection.

Recommendations

The rapid growth of cross border e-commerce in Africa has created the need for vibrant and effective continental regulatory mechanisms, which would strengthen the legal infrastructure that is crucial to the success of e-commerce in Africa. The AfCFTA protocol on e-commerce provides an important opportunity for a coordinated continental approach towards addressing consumer concerns on e-commerce platforms in Africa. It is important that negotiators of the E-commerce protocol should reflect the eight OECD revised principles of consumer protection in formulating the AfCFTA E-commerce protocol. The eight principles include:

1. Consumers should be provided with clear and sufficient information to make an informed choice about whether and how to make a purchase.

2. ‘Vendors’ should take reasonable steps to ensure that the consumer’s agreement to contract is fully informed and intentional.

3. Vendors and ‘intermediaries’ should respect the privacy principles set out in the Personal Information Protection and Electronic Documents International’s Model Code for the Protection of Personal Information (These principles are: a) Accountability; b) Identifying Purposes Consent; c) Limiting Collection; d) Limiting Use; e) Disclosure and Retention; f) Accuracy; g) Safeguards; h) Openness; i) Individual Access; j) Challenging Compliance)

4. Vendors and intermediaries should take reasonable steps to ensure that ‘transactions’ in which they are involved are secure. Consumers should act prudently when undertaking transactions.

5. Consumers should have access to fair, timely, effective and affordable means for resolving problems with any transaction.

6. Consumers should be protected from unreasonable liability for payments in transactions.

7. Vendors should not transmit commercial e-mail without the consent of consumers, or unless a vendor has an existing relationship with a consumer.
8. Consumer Awareness: Government, business and consumer groups should promote consumer awareness about the safe use of electronic commerce.

Furthermore, consumer rights therefore need to be strengthened and AfCFTA state parties should support the development of e-commerce through investing in digital policy capacities, e-readiness infrastructure, research agendas for academics and technical assistance.

Conclusion

In the context of this policy paper, it is well noted that e-commerce provides significant benefits to African consumers in the conduct of their commercial transactions. However, it also poses a threat to consumer protection. Poor response to consumer concerns in commerce platforms and a lack of a continental regulatory framework that protects consumers in cross-border transactions may reduce consumers’ interest in and willingness to perform e-commerce transactions, posing a threat to e-commerce growth in Africa. The AfCFTA protocol on e-commerce affords the opportunity to combat the problems of consumer protection in e-commerce transactions, at the continental level, by formulating a continental e-commerce policy that offers adequate protection to African consumers in line with the OECD’s eight principles of consumer protection in electronic commerce.