What lies ahead for digital regulations in Africa

Over the past decade, technological advances and the gradual emergence and focus on building digital economies, have necessitated an ongoing review of how the ICT sector is regulated.

However, at the same time lawmakers have had to be cognizant of the hazy line dividing market players roles, the technologies they use, as well as how these services are supporting new business models and causing major shifts in the way citizens access different services and purchase goods.

The COVID-19 pandemic served as a proving ground and lent great impetus to the introduction, innovation and use of digital technologies.

In as much as these technologies hold great promise to unlock numerous benefits for both individuals and businesses, increased uptake comes with numerous risks which are an additional aspect that must be borne in mind by policy makers and regulations.

However, existing regulations are neither able to keep up with ongoing digital transformation nor envisage the full extent of risks that exist. As such, new regulations may be required, and which cut across sectors and regulatory bodies, and which are adaptive enough to factor in changes as well as cognizant of the inherent emerging risks.

Presently most governments are caught in a quandary in which staying abreast of the ever-changing technological landscape presents a major challenge while concurrently trying to determine how to develop and regulate the sector without stifling innovation or negatively affecting investment, and all the while bearing in mind the inherent risks that come with regulations or no regulations.

While regulators discuss how to treat digitalization, some sectors have already embraced it to a high degree like retail, communications, finance and entertainment, while others — like education and healthcare — are yet to fully undergo digital transformation, and when they do, it may come with a host of different considerations with which regulators will have to grapple.

There are key technologies that underpin the growth of digital economies, help bridge existing digital divides, afford businesses the opportunity to adopt new business models, and avail new ways for citizens to access and consume services — including government services.

These include the Internet of Things (IoT), cloud computing, artificial intelligence (AI), robotics, virtual and augmented reality, mobility, security and data analytics.

These all play a very integral role in enabling digital economies but, by their very nature, are inherently challenging and are among the areas that regulators have been looking at closely as they consider whether to create legislation to govern their use, or simply to issue technical standards or guidelines, in order to manage the interests of individual and business consumers while still discharging their mandate to develop the sector.

The taxation dilemma

A review of ICT regulations in Africa would be incomplete without touching on how some governments perceive the ICT sector in Africa as a key contributor to revenues, and therefore possess certain political and economic motivation which underpin various pronouncements or at least having an influence on how the ICT sector is regulated.

Across Africa, historically the ICT sector has been among the bigger contributors to revenue. Various governments still see the sector as a milking cow and on which even more taxes and levies are being imposed.

The more recent and common ones include levies of mobile payments and digital services taxes — imposed on online businesses as well as individuals seeking to conduct businesses on social media platforms.

The introduction of these levies emanates from elsewhere outside ICT sector regulation and are sometimes at odds with the objectives of sector regulators. For many consumers, these taxes hinder uptake and result in some digital exclusion especially where digital services are relevant in sectors like education.

Over the last couple of years, some governments have sought to levy taxes via service providers, in a bid to raise revenues, and cognizant that certain over-the-top (OTT) players — like Netflix, Meta and Google — are making revenue without an in-country presence.

Various governments in Africa still see the ICT sector as a cash cow, using digital taxes and levies to grow government coffers. (Source: Image by Freepik).

Aside from such taxes, some countries have imposed Value Added Tax (VAT) on such services which have increased costs and in turn affected uptake. Among the African countries that have implemented digital services taxes include Nigeria, Tunisia, Zimbabwe, Uganda, Kenya, Tanzania and Sierra Leone.

It should also be noted that some existing regulations and frameworks will continue to have bearing on digital technologies, but which may need to be revised from time to time, and these include data protection, digital identities, and digital payments.

Regulatory outlook

In this environment, it goes without saying that regulations should feature requisite agility that is accommodating of ongoing technological shifts, evolving business models and changes in consumer behaviors.

Regulations should also avoid trying to define any end games but have as an overarching feature the ambition of driving growth in the sector, nurturing innovation and fostering competition.

Regulatory approaches should also not encumber businesses with increased compliance costs.

In some instances, ex ante regulations and guidelines are adopted where there are overarching concerns that affect citizens' rights. For example, the use of AI and how it affects personal data, privacy, human rights, or digital payment systems and how they can result in fraud and identity theft among other things.

Given the fluid nature of the sector, and against a backdrop of discussions on whether to regulate (to protect human rights, individual privacy, among other concerns) or not to regulate (in order to nurture greater innovation and allow competition), there have also been discussions about regulatory sandboxes in which certain services are allowed to evolve but under the scrutiny of the regulator, and without contravening any existing laws.

Challenges for regulators

Some of the core challenges regulators face when looking at digital regulations include:

The speed at which changes are happening in the tech space. On the pace of technology change, it is becoming more widely accepted that regulators consider a "wait and see" stance and avoid premature regulations which will invariably require to be amended frequently. In some instances, there have been discussions around considering ex post regulations or guidelines when enough time has elapsed to allow regulators to understand the true nature or characteristics of what is being regulated.

There are sometimes rather hazy lines between different types of regulations e.g., with online payments and attendant issues like fraud, cyber security, data protection — which draw in financial and ICT regulators — and understanding where mandates may overlap.

Geographic boundaries also present a challenge for regulators especially for OTT players like who generate revenues without any in country presence. The only extent to which governments have addressed this is by subjecting such services to a digital services tax which in most cases is informed by the need to fill budget gaps. However, in terms of actual regulations that protect consumer and business data, this is another area that merits a closer look.

Aside from actual ICT players, some businesses have adopted new business models that allow them to distribute their processes across different country boundaries e.g., in manufacturing. This would present a challenge to authorities in assessing where costs and profits accrue.

Enforcement of regulations in cyberspace and the capacity to ensure market players comply with regulations like those concerned with data protection and intellectual property, is another challenge and it is partly rooted in the issue of skills and capacity building.

Government and institutional interventions

The International Telecommunications Union (ITU), being cognizant of the need to evolve ICT regulations, has developed a Digital Regulations Toolkit — in collaboration with the World Bank — and regularly host forums in which various stakeholders (regulators, policy makers, vendors, service providers and equipment providers) come together to discuss future regulations.

This is crucial in terms of undertaking holistic discussions that accommodate broad points of view, but which also serve to harmonize the approach to digital regulations.

The African Union Commission (AUC), while holding discussions on Africa's digital transformation future, has agreed that there is need for greater collaboration among different government departments, regulators and agencies, as well as the need to harmonize policies and regulations across borders, such that regulators are all reading from the same page.

Regional Economic Communities (RECs) as well as Regional Regulatory Authorities (RRAs) are also important platforms through which even more nuanced discussions around reforming and or harmonizing regional policies and regulations can be held.

Through these RECs, countries can avoid siloed approaches to digital policies and regulations to collectively enable regulatory environments that attract investment, foster innovation and more so those that are agile enough to absorb future technological changes or shifts.

Private sector and civil society participation at national and regional levels, through government-led consultative processes, can help derive robust information exchanges that accommodate all stakeholders' views and have the development of digital economies and consumers as a center focus.

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*Top image source: Image by fabrikasimf on Freepik.

— Francis Hook, Africa ICT Analyst, special to Connecting Africa