Responding to the rising digital economy

Responding to the rising digital economy

In an earlier factlet, I mentioned that e-commerce is reshaping the retail sector. I thought I’d expand on that idea, and digging around, I found several interesting articles referring to Dr Nimrod Zalk, industrial development advisor to the South African Department of Trade & Industry (DTI).

Dr Zalk is paying serious attention to the unprecedented growth in digital information – and its potential consequences for South Africa and other African countries. As he rightly puts it, if Africa wants to open the door to the potential benefits and mitigate the negative consequences of rising digitization, then African countries need to urgently begin to develop appropriate responses.

Here are some of the responses needed:

Firstly, countries need to achieve a policy capacity starting with agreement between a critical mass of countries pursuing a common goal of developing responses to digitization that are tailored to Africa’s conditions.

Secondly, as data develops into the “primary resource” of increasingly digitalized economies, there will need to be adequate national jurisdiction with regard to issues of data ownership, privacy, cyber security, and other related elements.

Thirdly, taxation systems will need to accommodate the ascent of e-business and digital platforms. What will such a regime look like? How will it cope with issues such as cross border e-commerce, transfer pricing and the trend towards profit shifting to low taxation jurisdictions?

Fourthly, policy must be capable of addressing issues of market dominance, competition and market access. How will policy manage the already noticeable impact of the global network effect that invites users to the quick growing, largest platforms at the cost of the smaller players?

Lastly, African countries need to develop digital service capacity to ensure key drivers such as  high speed,  affordable broadband, linking between digital platforms and domestically produced goods and services, the provision of relevant financing instruments,  and of course, adapting education to develop the necessary skills for the new digital reality of the 4th industrial revolution.

So there we have it:

Policy capacity, adequate jurisdiction, relevant tax regimes, preemption of potential anti-competitive practices, and development of digital service capacity. Five excellent building blocks – and a viable starting point for success.

The question could be: How would policy balance governance, control, and economic good health in the new, possibly disruptive commercial reality we like to call “The Fourth Industrial Revolution”

We would love to hear your opinions.

By Kevin Abraham

[Ref: African Review 11 Sept 2018 – …policy response to the digital economy. Acknowledgement: Dr Nimrod Zalk]

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