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THE ROLE OF E-COMMERCE IN COMBATING POVERTY AND UNEMPLOYMENT IN AFRICAN

COUNTRIES

B.B Ibidapo-Obe1

babatojo@gmail.com

Associate Editor, Intellectual Property Institute Nigeria

Abstract

Technology has always been the harbinger of development and progress. The western nations, since
‘industrialisation’, have seen their economies and standard of living rise due to technological
advancement. A vast majority of African nations are faced with deficiencies in their Information and
Communications (ICT) sectors. The challenges which have been faced by these nations have led to
views by some, that the deficiency with respect to technological development is the bane of
unemployment and poverty in a majority of African societies.

This paper will focus on e-commerce as a viable route to dealing with unemployment and poverty in
African countries. It will focus on the legal structure which has to be in place for e-commerce to
thrive in any developing nation. The paper will discuss important issues like data protection, distance
selling contracts, cyber security, and e-payment legislations as part of the essential framework for E-
commerce to thrive.

The paper shall also examine the challenges which are faced by African countries in the race for
technological development. Issues such as civil unrest and conflict, corruption, and lack of technical
know-how will be discussed.

The paper will finally analyse the role which the African Union can play in the development of E-
commerce in African countries, and will conclude with suggested action points which the African
Union can adopt to put the continent on the road to technological development.
Introduction
The world over, commerce has changed dramatically in the last few decades. The invention of the
internet has brought with it a higher level of commerce. The internet has introduced a faster, more
efficient and cost effective way of doing business. It is now possible for a person in Kenya to buy
goods from a company in Dubai, to be delivered to a person in Hawaii. This is but a mere illustration
of the numerous advantages which the internet and e-commerce in particular has brought to the
world.

Poverty and unemployment in Africa

Poverty and unemployment are perennial problems in African countries. In Africa, one in two of
people in Sub Saharan Africa survive on less than one dollar per day2. Africa has the fastest-growing
and most youthful population in the world. Over 20 percent of Africa's population is between the
ages of 15 to 24 and, since over 40 percent of Africa's population is under 15 years of age, that
number is expected to grow significantly in the coming years. According to the International Labour
Office, youth make up as much as 36 percent of the total working-age population and three in five of
Africa's unemployed are youth3.

The main employers of labour in African countries are the civil service/government and large
commercial operations like banks. This writer in this paper will be suggesting that the solution to the
problem of unemployment and poverty is: create new job opportunities outside of these channels
through entrepreneurship and innovation. Entrepreneurship and innovation is synonymous with e-
commerce, and it is suggested that the solution to unemployment and poverty lies in e-commerce.

What is E-Commerce

Electronic commerce (e-commerce), like all concepts is the subject of varied definition, most times
the definition applicable would depend on the context in which it is used. E-commerce has been
defined as ‘sharing business information, maintaining business relationships and conducting
business transactions by means of telecommunications networks’4. This definition is however a very
broad definition, and will not be applied in the context of this article.

A basic definition of e-commerce is ‘the buying and selling of products, services, and information via
computer networks including the internet’5. For the purpose of this article, we will be adopting the
definition put forward by Paul Todd6, ‘any transaction involving goods or services where digital
electronic communication performs an essential function.’7

Round the world, e-commerce has been embraced not only as a relevant addition to everyday
business transactions, but in some instances it has taken up a position of extreme importance. We
are daily inundated with stories of fantastic new businesses which have sprung up and changed the
way we go about our daily lives. Examples include: Google which is an organization built around the
company's hugely popular search engine. Google's other enterprises include Internet analytics, cloud
computing, advertising technologies, and Web app, browser and operating system development.
Google was started back in 1996 by Sergey Brin and Larry Page, two graduate students at Stanford
University; Facebook which is a social networking website used by about 854 million active users
website. Facebook was founded in 2004 by Mark Zuckerberg with his college roommates and fellow
students Eduardo Saverin, Dustin Moskovitz and Chris Hughes.

The above are just a couple of examples of ICT (information and communications technology)
companies that have literally changed our world. Unfortunately, Africa is being left behind in the
race for using the internet and e-commerce to create global businesses and to create wealth. In fact,
it gives me absolutely no pleasure to state that we in Africa have not only been left behind, but like a
struggling athlete in a race, we have been overtaken several times over.

Based on statistics for 2011 in the International Trade Union (ITU)’s ICT Index, which compares
development in ICT in 154 countries the world over, an overwhelming majority of African countries
are to be found in the bottom bracket. The index combines 11 indicators into a single measure that
can be used as a benchmarking tool. The indicators taken into consideration include households with
access to a computer, number of Internet users etc.

However, the story of the African ICT involvement is not one of only doom and gloom. In the mobile
telephony market, African firms have seen an exponential growth in business, with some companies
becoming major players across the continent. With respect to start-up ICT companies, a few
individuals are starting to tap into the resource that is ICT, and creating unique business models and
making successes out of it, for example; there is a company in Nigeria which streams Nigerian
movies online for worldwide consumption. An article in the Sunday Times on February 26 2011 (The
Lions of Africa), extolled the potential for investment opportunities in African countries especially in
the ICT sector.

This bright spot however when looked across board is a very depressing and disheartening statistic,
and the point of this paper will be to suggest ways by which we as a continent can successfully drag
ourselves off the back foot in ICT development and haul ourselves into the vanguard, or at least give
us a fighting chance in the 21st century technology race. In fact, the Economic Commission for Africa,
through its African Information Society Initiative, has identified e-commerce as one of the four key
areas in Africa to exploit ICTs to best advance social and economic development.

The expression used to describe this gulf in ICT development between African countries and the rest
of the world is the so-called digital divide. The Digital Divide is a social issue referring to the differing
amount of information between those who have access to the Internet and other ICT facilities, and
those who do not have access. It should be noted that digital divide issues transcend mere access,
but other issues like quality, price etc. A report on the effects of the Digital Divide carried out by
students of the University of Hull suggests that the digital divide puts countries from less developed
countries at a competitive and economic disadvantage to developed countries, and that if the digital
divide persists, it would mean that individuals from these countries might be unable to compete on
an international level8.
Required Legal Structure

This chapter is aimed at identifying the optimal legislative and regulatory standards required for e-
commerce to thrive in a country, and which must be put in place by any African country serious
about pushing for the promotion of e-commerce.

Data Protection

Data protection should be the foundation and bedrock for any e-commerce system. In any e-
commerce transaction, data would of necessity need to be exchanged, for example the
consumer/customer might be asked to provide information about his/her name, gender, age, sex etc,
or maybe their bank details and other financial information.

The concern under data protection relates to how this information is handled when it is provided.
Data protection laws seek to ensure that when such information is provided by the consumer, it is
only used for the purpose of that transaction, and is not mismanaged in any way.

The information offered up by the consumer can be prone to abuse on a number of levels; the
information can be used by the data controller9 to send unsolicited mails and correspondence to the
consumer which can be sometimes highly annoying and embarrassing10.

Data Protection laws set strict standards of Data Protection policy which must be adhered to by the
data controller. This is to ensure that the consumer is not open to unsolicited marketing by the party
he has offered up his information to or any other third party; apart from information which is
provided by the consumer while completing a transaction, other Data Protection issues may arise in
less innocuous circumstances; for instance, the use of cookies11. Some cookies may be inserted on
the pages of an e-commerce website which allow the website to access information on the
consumer’s computer while he or she is accessing the website; this is done so that even after the
consumer leaves the website he may still see offers from the company running that website, while
viewing other websites.

Data Protection laws therefore exist to forestall these sorts of situations, and in some instances, only
allow them with the consent of the consumer12.

The Organisation for Economic Development (OECD) has put forward some principles which are
pertinent to note at this point. The Privacy Principles are part of the OECD Guidelines on the
Protection of Privacy and Transborder Flows of Personal Data, which was adopted on 23
September 1980, the principles are encapsulated in Part 2 of the Guidelines. The principles are as
follows;

- Collection Limitation Principle: There should be limits to


the collection of personal data and any such data should be
obtained by lawful and fair means and, where appropriate,
with the knowledge or consent of the data subject.
- Data Quality Principle: Personal data should be relevant to
the purposes for which they are to be used and, to the
extent necessary for those purposes, should be accurate,
complete and kept up-to-date.
- Purpose Specification Principle: The purposes for which
personal data are collected should be specified not later
than at the time of data collection and the subsequent use
limited to the fulfilment of those purposes or such others as
are not incompatible with those purposes and as are
specified on each occasion of change of purpose.
- Use Limitation Principle: Personal data should not be
disclosed, made available or otherwise used for purposes
other than those specified in accordance with Paragraph 9
(purpose specification principle) except:
a) with the consent of the data subject; or
b) by the authority of law.
- Security Safeguards Principle: Personal data should be
protected by reasonable security safeguards against such
risks as loss or unauthorised access, destruction, use,
modification or disclosure of data.
- Openness Principle: There should be a general policy of
openness about developments, practices and policies with
respect to personal data. Means should be readily available
of establishing the existence and nature of personal data,
and the main purposes of their use, as well as the identity
and usual residence of the data controller.
- Individual Participation Principle: An individual should have
the right:
a) to obtain from a data controller, or otherwise,
confirmation of whether or not the data controller has data
relating to him;
b) to have communicated to him, data relating to him
within a reasonable time; at a charge, if any, that is not
excessive; in a reasonable manner; and in a form that is
readily intelligible to him;
c) to be given reasons if a request made under
subparagraphs(a) and (b) is denied, and to be able to
challenge such denial; and
d) to challenge data relating to him and, if the challenge is
successful to have the data erased, rectified, completed or
amended.

- Accountability Principle: A data controller should be


accountable for complying with measures which give effect
to the principles stated above.13

Generally, the OECD principles set the world wide standard for privacy and data protection, and legal
systems which seek to facilitate the creation of an enabling environment for e-commerce to thrive
must ensure that these minimum principles are adhered to in the creation of any Data Protection
and Privacy Laws. Also, e-commerce businesses seeking to operate within these jurisdictions must
endeavour to comply with these principles to foster consumer confidence and satisfaction with the
system.

The relevance of data protection to our discussion is that it creates the necessary security and
privacy foundation for the entire e-commerce framework. It is on this foundation that a safe and
secure e-commerce structure can be constructed.

Distance Selling Contracts

The nature of an e-commerce transaction is generally long distance; as a result there are two
inherent considerations, consumer satisfaction and fraud prevention.

The peculiar nature of e-commerce transactions means that most times, the consumer is contracting
with an electronic representation of the seller online (the website), the consumer is at a marked
disadvantage because he/she might not be able to verify the identity of the seller. Therefore, it is
imperative that the consumer be able to get some basic information and contact details of the seller.

Any legislation on this should seek to pierce the veil of electronic personification by requiring that a
minimum level of information must be provided on websites. In this regard we can use Article 4 of
the UK Consumer Protection (Distance Selling) Regulations 200014 as an illustration. It provides;

‘[I]n good time prior to the conclusion of any distance


contract, the consumer shall be provided with the following
information:

(a)provide to the consumer the following information—

(i)the identity of the supplier and, where the contract


requires payment in advance, the supplier’s address;

(ii)a description of the main characteristics of the goods or


services;

(iii)the price of the goods or services including all taxes;

(iv)delivery costs where appropriate;

(v)the arrangements for payment, delivery or performance;

(vi)the existence of a right of cancellation except in the


cases referred to in regulation 13;

(vii)the cost of using the means of distance communication


where it is calculated other than at the basic rate;

(viii)the period for which the offer or the price remains valid;
and
(ix)where appropriate, the minimum duration of the
contract, in the case of contracts for the supply of goods or
services to be performed permanently or recurrently’15

The effect of this is that the consumer is able to adequately identify the seller and to a certain level,
investigate the authenticity of the business

Cyber-security

Opening an e-business or e-commerce enterprise, although different from a physical brick and
mortar store, is still open to a myriad of challenges and attacks. In the online world hacking is a
common and extremely negative hazard for businesses. A business website being successfully
hacked is akin to an office premises being set ablaze by arsonists. Although the recovery time for
rebuilding a website may be considerably shorter than rebuilding premises razed by fire, the effect
on both businesses are the same, and may even be potentially worse for the online business. So, just
as there are areas in criminal legislation for crimes like arson, threats to online business and e-
commerce should not only be legislated against, but vigorously enforced. Potential threats apart
from hacking include phishing16, spamming17, cyber squatting18 and fraud.

E-Payment Solutions

E-commerce transactions have brought phenomenal speed of making payments. An individual can
pay for goods to another person thousands of miles away, with literally the click of a mouse or the
tap on a pad. This is something which was largely unimaginable decades ago, but with this amazing
speed has come a great peril. Just as one can pay for goods with a click..you can also lose have your
money fraudulently taken with a click.

Fraud in e-commerce transactions is a great risk. In fraud cases, apart from the obvious illegality of
the action and its consequences in criminal law. The issue also is what happens to the hapless
consumer who has been defrauded.

Fraud can be perpetrated on individuals in a myriad of ways, but with respect to online transactions
they are mostly perpetrated when the fraudster gets control of an unsuspecting individual’s bank
card details, once those details are obtained the fraudster may make unauthorised transactions out
of the individual’s account to his detriment.

There are instances when these ‘breaches of security’ are caused by the negligence of the seller, or
sometimes the negligence of the consumer, be that as it may, the law needs to put in place certain
safeguards to ensure that the consumer is allowed some measure of restitution.

An illustration of this can be found in the European Union Distance Selling Directive (DSD)19 which
applies generally to distance sales. It provides that;

Member states shall ensure that appropriate measures exist


to allow a consumer:

- to request cancellation of a payment where fraudulent use


has been made of his payment card in connection with
distance contractss covered by this Directive,
- in the event of fraudulent use, to be recredited with the
sums paid or have them returned.20

Therefore, what this provision creates is a secure safety net, the consumer may cancel fraudulent
transactions upon being aware of them, and if the sums have already been advanced, then it can be
re-credited to the owner of the card.
Challenges faced by African Countries

Kizza, in his research article21, opined that ‘Africa had a late start in the race to acquire the
information communication technologies (ICTs). This last place in the race, compared to other
continents, has had tremendous implications in the development plans for the continent. For Africa,
the race has been difficult from a late start to an insurmountable litany of problems that include;
difficult in equipment acquisition, lack of capacity, limited research and development resources, and
lack of investments in ICTs’.

There are many challenges faced by African countries with respect to ICT development, J.M Mativo
analysed the problems being faced in Kenya, and he cites availability of electricity, retention of
technologically literate staff in technical colleges, lack of ICT practitioners and educators, and
inadequacy of educational facilities and equipment as the most important challenges22. The major
challenges preventing the roll-out of e-commerce in African countries is generally one of
infrastructure and education.

Infrastructure

To successfully roll out e-commerce on a large scale in African countries, the infrastructure must first
exist. However, this is not the case in most of African countries. Firstly, most countries do not view it
as a priority, and the budget spent on ICT infrastructure development is very minute and in fact non-
existent in some countries. Add to that the issues of corruption in some countries, such that where
the ICT is actually budgeted for, the funds might not get utilised properly due to mismanaging of the
funds and in some instances embezzlement.

Apart from financing issues, to build successful ICT infrastructure requires laying cables, constructing
masts etc on the ground. Unfortunately, some parts of Africa are still prone to civil unrest and
conflict, however it should be noted that incidences of civil unrest and conflict have drastically
reduced in recent years. ICT infrastructure cannot be properly rolled out in areas with severe
security issues and violence.

Yahya, while examining some of the problems facing efficient use of information technology in
developing countries, suggested factors such as the high costs of imported systems (both hardware
and software), the lack of sufficiently trained personnel and deficiencies in the industrial
infrastructure23.

The biggest threat to development in the sector is the state of insecurity and strife in some countries
in Africa. Governments concerned must face up to their responsibility squarely and work to bring
about peace within their countries and with their neighbours. Peace is a sine qua non requirement
for development of every kind.24
Education

An author while trying to provide a partial explanation about the reasons that account for a limited
pool of ICT practitioners in Africa has opined that there is a “lack of scientific capacity due to the
limited number of trained scientists and researchers in the continent.” The writer suggests that this
lack of ICT capacity is one of the most difficult challenges which is faced by African countries.25

As has been seen in some of the examples given above26, a large majority of successful ICT start up
companies started with relatively young people striking out on their own to start businesses. In that
case, if we in Africa want to emulate or even surpass this, we need to incorporate practical ICT
education in our education syllabus at a very early age for students. This is a tall order, but I make
bold to say: not insurmountable, for our education system.

Most African nations are still struggling to meet Millennium Development Goals with respect to
education27. We should however encourage the interaction of children with computers at a very
early stage in life. This writer believes that the reason why most successful ICT companies were set
up by young people is plain and simple, young people are more inquisitive and innovative than older
people28. As such, they are more likely to create these companies. However in order to adequately
teach and nurture this talent, there must be adequate support. It’s been argued that “One major
limitation for change in ICT and education is that many of those involved in helping people to learn
in both formal and non-formal contexts have little or no skills in the appropriate use of new
technologies. This is particularly so in poorer countries, and most notably in Africa”29
The Role of the African Union in encouraging the development of E-
Commerce in Africa
The African Union (AU) has an important role to play in kick-starting the African ICT revolution, and
therefore creating an enabling environment for e-commerce.

Firstly the AU can directly liaise with other international agencies like the ITU and use the data and
statistics these agencies collect and provide, to decide the areas of Africa most in need of assistance.
The AU can then take it upon itself to encourage the development of ICT in these areas, either by
giving policy advice or by providing financial support for countries in dire straits. In this regard, the
AU’s Department of Human Resources, Science and Technology has a big role to play.

The African Union can then proceed to play an advisory role and engage these countries, work hand
in hand with them to build up their ICT capabilities.

Conclusion

Imagine this:

 A house wife in Sudan with no job taps into her skills in bead making, she sells to friends and
family, then decides to take it to the next level, sets up a website and puts up pictures of the
beads. Orders start flowing from round the world, soon she can’t keep up with making the
beads alone, and she hires a staff of 10 people to help her out, thereby creating jobs for 10
other people. Just like that, 12 jobs have been created out of one woman’s hobby...a job for
the house wife, 10 jobs for her staff, and one for the website designer and administrator.

 A young boy from Tunisia who loves travelling but is always faced with the problem of
communicating with people he meets on his travels, so he develops an application which
allows him to translate words into all African languages, thereby allowing him to have
conversations with people from different ethnicities on his travels. He commercialises the
application, sells it to millions of other Africans...and just like that he has created a unique
communication tool which is useful to not only leisure travellers, but also business travellers.

 A civil servant in Nigeria, frustrated by the high level of mismanagement in government


decides to resign and develops a website that tracks government spending, compares it to
the budget to make sure it’s in line with it, and provides this information to millions of
citizens real time and free of charge. So, just with a click of a mouse, ordinary Nigerians can
track government spending and reduce embezzlement and corruption.

The potential benefits of E-Commerce have no boundaries. E-Commerce might be just the thing that
will kick start the African revival. The beauty about ICT and E-Commerce is that it runs on a
commodity which all of us can tap into...innovation and creativity. It is not a natural resource like
crude oil, gold or diamonds. It is not a cash crop like cassava, groundnuts, or cocoa.
An individual can literally stay in their bed with a computer and a dream...and change the world.

Africa needs this...Africans need this now.

1
Babatunde Ibidapo-Obe LLB(Lagos), LLM Computer and Communications Law(London)
2 http://www.food4africa.org/index.asp?pgid=42 accessed on February12 2012
3 http://www.prb.org/Articles/2009/youthunemployment.aspx accessed on February12 2012
4
V.Zwass, ‘Structure and macro-level impacts of electronic commerce: from technological infrastructure to electronic marketplaces’,
http://www.mhhe.com/business/mis/zwass/ecpaper.html accessed on February12 2012
5 www.whatis.com/ecommerce accessed on February12 2012
6 Todd, P E-Commerce Law, 2005, Oxon: Cavendish Publishing
7 p.1 supra
8 http://www.dividedbytechnology.co.uk/impacts.html accessed on February12 2012
9 This is a person who (either alone or jointly or in common with other persons) determines the purposes for which and the manner in

which any personal data are, or are to be, processed.


10
An illustration would be an individual who constantly gets junk mail from pornography sites on his/her work email address.
11
Cookies are messages that web servers pass to your web browser when you visit Internet sites. Your browser stores each message in a
small file, calledcookie.txt. When you request another page from the server, your browser sends the cookie back to the server. These files
typically contain information about your visit to the web page, as well as any information you've volunteered, such as your name and
interests. (source: https://kb.iu.edu/data/agwm.html ) accessed on February12 2012
12
Browsers offer users the ability to control the cookie settings, to view the cookies to be allowed, and how long the cookies will be stored
for.
13
Part 2 OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data
14 2000 No. 2334.
15
s.7
16
Phishing is the criminal and fraudulent process of attempting to acquire sensitive information such as usernames, passwords and credit
card details, by masquerading as a trustworthy entity in an electronic communication through e-mails or instant messaging either in form
of an email from what appears from your bank asking a user to change his or her password or reveal his or her identity so that such
information can later be used to defraud the user.
17
Spamming is an abuse of electronic messaging systems to indiscriminately send unsolicited bulk messages to individuals and corporate
organisations.

18
registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone
else. The cybersquatter then offers to sell the domain to the person or company who owns a trademark contained within the name at an
inflated price.
19 Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance

contracts OJ L 144, 4.6.1997, p. 19–27


20 Article 8 Distance Selling Directive
21 Kizza, Joseph. M. Building the African ICT Infrastructure for Development: The Role of the African University- Part I. International Journal

of Computing and ICT Research, Vol. 3, No. 1, pp. 7-9. http://www.ijcir.org/volume3-number1/article1.pdf. accessed on March 27 2012
22 Mativo, J. M. (2005). The Challenges of Teaching Technology in a Developing Nation. TechDirections. December, pp. 22 – 25.

http://www.techdirections.com (accessed on February 1 2012)


23 Yahya A.H. (1993). On the Problems of Information Technology Management in Developing Nations; Proceedings of The Conference of

the ACM Special Interest Group on Computer Personnel Research ACM SIGCPR 93; St. Louis, Missouri, U.S.A. April 1--3, 1993.
24 http://www.itu.int/ITU-D/afr/events/arusha-ITU-NEPAD/Documents/doc7(elotu-english).pdf (accessed on February 1 2012)
25 Opoku-Mensah, A. (2008). The role of science and technology in the knowledge economy: the role of the African private sector support

for investment in ICT R & D. UN Economic Commission for Africa (UNECA). http://www.uneca.org/istd/resources/istd-resource-
2008120002-en.asp (accessed on February 1 2012)
26 Facebook and Google
27 Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling

28 http://dilbert.com/blog/entry/best_work/ ; http://creativityandinnovation.blogspot.com/2009/04/are-children-more-creative-than-
adults.html (accessed on February 1 2012)
29 Wagner, D.A., Day, B., James, T., Kozma, R.B., Miller, J. & Unwin, T. (2005). Monitoring and Evaluation of ICT in Education Projects. A

Handbook for Developing Countries. Washington DC: Information for Development Program (InfoDev).
http://www.infodev.org/files/2942_file_M_E_ICT_Education_draft_WSIS_optimized.pdf (accessed on February 1 2012)