Ending duty-free access to SA’s digital output will cause huge harm

If you are an SA producer of digital content and services, your exports and imports, which currently enjoy duty-free access, could face duties after March 2026. 

Since 1998, through the Electronic Transmissions Moratorium, 164 countries of the World Trade Organisation (WTO) have prohibited customs duties or tariffs on digitally transmitted products and services. However, this 27-year-old duty-free benefit for SA companies, digital entrepreneurs and consumers will end at the WTO 14th ministerial conference, due to lack of consensus on its scope (bits and bytes versus content of transmission) and overall common value for doing business.  

In these times of coercive trade, global volatility and IMF projections placing SA’s annual growth rate at just 1%, will the termination of the moratorium bring us relief or distress? Studies that clarify the moratorium’s workings in the SA economy illustrate:

• How business operating costs and profits benefit from the moratorium;
• That 74% of small, medium and micro enterprises (SMMEs) have no capacity to comply with customs requirements that could result from termination, exposing 82% from the creative sector, agriculture, gaming, online education, ICT, software and business process outsourcing (BPO) to growth and competitiveness losses;
• That cross-border digital transmission enables digital imports that support SMME activities; and
• That SA stands to lose 25 times more in GDP than tariff revenue gains, showing that depressing domestic digital output through escalating duties could result in reduced tax collection.  

Mobile money growth

If these studies demonstrate that the moratorium is business development-friendly, should it be terminated or strengthened? With no convincing evidence that the moratorium is injurious, instead we find that Africa handled $1.1-trillion in mobile money transactions (2024), dominating 74% of all mobile money transactions globally. Mobile money growth, a beneficiary of the moratorium, is doing the most for realising financial inclusion and boosting savings.

Africa is the most expensive region for remittances, at 8.4% of the transferred amount. In 2024, remittance inflows into Africa totalled about $92.2bn, and the termination of the moratorium could jeopardise 5.2% of Africa’s total GDP.

Africa doesn’t just dominate mobile money, it leads. Escalating duties will not reduce the cost of remittances or support efforts to formalise remittances.  

African agritech services are improving accessibility to affordable services, enhancing precision farming through subscription-based models, including the use of cost-effective satellite imagery and mobile applications. Customs duties on electronic transmission will escalate costs and limit accessibility to a wider range of farmers, including smallholders.

SA has 321 agritech start-ups, 12 of which are reported to have secured series A+ funding to enable expansion into new markets. Will they succeed in an unpredictable global trade environment with escalating customs duties on electronic transmissions?  

SA’s BPO services sector generated $101m in export revenue in 2024 and contributes to more than 100,000 jobs, the majority held in the Western Cape and KwaZulu-Natal by women, 70% of the workforce. The moratorium facilitates offshoring business processes by reducing the cost of accessing and exporting digital inputs and services. 

How will SA accelerate attraction of global operators and companies to shift offshoring operations to SA if the global operating environment for offshoring faces escalating duties? Can SA compete with locations such as the Philippines, Kenya, India, Ghana and Rwanda if duties trigger a reassessment of outsourcing strategies to SA? 

“E-kasinomics” acknowledges major transformations in SA townships, emerging owners and suppliers of digitally enabled services in logistics/transportation, retail, food, personal services and accommodation. Informal retailing is now a distribution point for essential financial services such as payments and remittances. About 90% of SA SMMEs have adopted digital payments to enable faster, more secure transactions, reducing operational costs to expand market reach (Mastercard’s SME Confidence Index).

Micro-retailers in townships and rural areas are unlocking new revenue streams beyond bread and bubble-gum, adopting fintech to offer value-added services that allow them to earn commission on transactions. Social commerce has empowered ordinary South Africans with little capital and digital know-how. Accessibility to social media platforms have lowered financial and technical barriers to participate in e-commerce.

Neither tariff protection nor comprehensive digital infrastructure was a prerequisite for e-kasi digital adoption. The AI start-up Timbuk2 empowers township residents to collect data showcasing local businesses and be paid for it. How will its model expand to other markets with duties on bits and bytes?   

These achievements are independent of the 234-year-old theory of tariff protection. SMMEs from developing countries are exporting six times more through using e-commerce, as access to digital tools and services facilitates competitiveness and faster trade readiness.  

Discontinuance of the moratorium penalises digital empowerment and productivity, increasing costs for digital mobility and freedom. Our fiscal landscape is already struggling with a shrinking tax base — is constraining digital output that could trigger deeper depressed tax collection sensible? 

Stabilising continuation of the moratorium, and retaining the cost-reducing and doing-business benefits with improvements, can contribute positively to digital trade corridors and digital public infrastructure, accelerating our digital services exports.  

In a world without the moratorium, it becomes costly and disabling for jobless Sibahle, a 21-year-old ICT graduate in KwaZulu-Natal to partner with her Nigerian classmate Obinna, in the US, to co-develop a rural tourism mobile app. It is an app that could empower Sibahle’s  66-year-old grandmother, earning R190 a month selling earrings at Jozini taxi rank, to launch tourism-related Zulu cultural earring-making classes.

A German tourist, who watched the streamed Shaka Ilembe on a business trip to Zambia, uses the app to book the holiday activity for €40. Sibahle’s grandmother goes on to hire three pensioners, to make beaded cultural ware, which she sells internationally on Facebook Marketplace and to a German tourist who buys to resell on a German social media platform retailing cross-border to customers in Lithuania, Belgium and Austria.

After 18 months Obinna secures additional funding for marketing and digital literacy activities of the app with villages in KwaZulu-Natal and Cross-River State in Nigeria. Twenty-eight months later a major tourist booking platform in the US partners with Obinna and Sibahle’s mobile app to promote rural tourism by connecting US travellers with local businesses and cultural services.  

This will not be achievable under a global trade regime that ends the moratorium, opening up negative policy space for the weaponisation of tariffs against the exportability of local digital content and digitally enabled services. The moratorium’s strength in enabling economic emancipation, while not perfect, is valuable and worthy of retention for building and sustaining digitally resilient businesses and jobs, especially for the “survivalists” in our economy.    

• Dr Pillay is an international trade-in-services specialist.

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