Inter trade in the digital era: Where does Malawi stand?

Inter trade in the digital era: Where does Malawi stand?

Post was last updated: February 22, 2021

GAINING MOMENTUM—E-commerce

By Stephen Mmodzi and Chimpele Kelvin Tsamwa:

It is funny how we have shifted almost every aspect of our lives online: Dating, shopping, news, attending weddings or funerals, gossiping, you name it.

Technological breakthroughs have also made doing business easier for both local and international markets.

Digitalisation 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 but also encompasses cross-border data and information transmission.

Global digital trade

According to the World Trade Organisation (WTO), the growth of digitised 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 of physical assets.

In 2019, the value of the digital economy was between 4.5 and 15 percent of the Global Economy according to the United Nations Conference on Trade and Development (UNCTAD). And this was pre-covid pandemic levels—before lockdowns and other travel restrictions which completely changed the consumption, use plus experiences of the digital economy.

Let us put it in to perspective: Zoom’s (the video telephony and online chat platform) valuation presently is much more than the world’s five biggest airlines combined! That is KLM Royal Dutch Airlines, Delta Airlines, International Airlines Group, Lufthansa and American Airlines.

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 United States 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 realised the potential in this and the value of digital trade such that they have made relevant policies to benefit from the growth, like in revenue collection, education, enabling clauses, etc.

Why is digital trade important to Malawi?

Digital trade is a good 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.

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 organised. “Clear policy directions and higher visibility of the digital economy should be prioritised 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 businesses 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 and 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 percent 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 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 we need to make sure we are not left behind.

About the authors:

Stephen is Lead Expert Coordinator for United Nations Least Developed Countries, Geneva and Europe Chapter, and co-founder of wergomarket.com

Chimpele is the Master of Lightbulb Moments at Green Thingz and author of African Dropshipper.

A vibrant writer who gives a great insight on hot topics and issues

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