Digital development in Africa — The role of trade policy

Digital goods like computers, electronics, software, and machinery are critical for productivity and economic growth.

High trade tariffs on these products contribute to limited access and higher prices. Our recent research finds that African countries face higher tariffs and tend to 
import relatively low-quality digital goods compared to other regions, especially in low-income nations.

Currently, digital goods make up a smaller share of imports in Africa (13%) than in the rest of the world (21%). Most of these goods come from outside the continent — 35% from China, 27% from the EU, 7% from the US, and only 3% from within Africa. South Africa, Egypt, Nigeria, Morocco, and Tunisia account for 70% of the region's digital goods import (Figure 1).

Despite relying heavily on imports, African countries impose tariffs on imported digital goods that are about three times higher than other regions. 

These duties have stayed relatively high over the past decade, even as they fell elsewhere. 

The burden is greatest for Africa's poorest countries like the Central Africa Republic and Cameroon, with digital tariffs of around 15%, but also for economies with large populations like Nigeria, with digital tariffs of around 10%, while richer Mauritius and South Africa charge just 0.07% and 1.35%.

Our analysis, which adjusts for quality differences, reveals that Africa sources digital goods at similar quality-adjusted prices to higher-income countries. 

However, the high tariffs (among other factors that make them more expensive in the domestic market) mean that African firms and consumers face inflated final prices, especially in low-income countries. Other studies using item-level price data confirm that digital goods cost more in Africa than in the US on average.

Could the landmark African Continental Free Trade Area (AfCFTA) agreement help by slashing these tariffs? Unlikely, according to our estimates. 

Digital goods tariffs would fall by just 0.13 percentage points if the pact is fully implemented, and imports would rise a meager 0.3%. 

The minimal impact stems from the paltry share of digital goods sourced within Africa and lack of reduced duties on external imports. 

Some countries like Zimbabwe, Zambia and Mozambique with high initial tariffs and more intra-African trade would see larger effects, but the overall continental impact is modest.

In contrast, if African countries unilaterally eliminated all tariffs on digital goods, imports would soar by 8% according to our estimates. 

This shows the power of broader liberalization, rather than limiting tariff cuts only to intra-African trade. The gains would be greatest for smaller economies like Congo, Comoros and Benin where duties are currently high (see Figure 2).

Tariffs by country are an import-weighted average by product. Considered exporting country members of the AfCFTA only. Africa average is a simple average of these country-level tariffs. Authors’ calculations based on UNCTAD and COMTRADE

In conclusion, boosting digital development in Africa will require more than just the AfCFTA in its current form. 

Cutting tariffs on high-tech imports from all countries, not just African partners, could significantly reduce costs and expand access to the digital goods needed to fuel productivity growth and innovation, as well as to link African economies into global value chains. 

Currently, only 6 African countries have signed the World Trade Organization (WTO) Information Technology Agreement, which concentrates a large share of global trade on digital goods among its members. 

As Africa looks to build a vibrant digital economy, the continent should rethink trade policies that make this vital technology more expensive for those who need it most. Opening digital doors to the world could help unlock a brighter future for the continent. 

This is not just a regional issue but a global one, as the digital transformation of Africa holds the potential to contribute significantly to the global economy.