As global measures to combat Covid-19 force the paper-heavy world of trade into a new digitised reality, the Africa and Middle East (AME) region is better prepared than many. But as exporters and banks alike struggle to keep trade moving, a conducive regulatory framework will be needed to set the region – and its trading partners – in good stead for the digital future.


The importance of Africa and the Middle East (AME) to global trade is undeniable. From the ancient spice route linking East to West, to the incense route over which frankincense was taken from the Arabian peninsula to Roman emperor Nero, and the Trans-Saharan trade route stretching from Egypt to Mali and beyond, the region has for centuries been at the centre of the trade that has shaped history.

Today, as a very different sort of history is being made, AME’s trade flows are at risk as lockdown measures to mitigate the Covid-19 outbreak jeopardise the manual signing and review of the documents needed to keep goods moving. Demand for digital solutions in trade – up until now relatively low – has risen as exporters and banks alike seek to find a new way of working in this new normal, which many believe may continue even after the pandemic has subsided.

“We have all now come to realise that this might be the new way of working,” says Syed Khurrum Zaeem, head of trade and transaction banking for the Middle East and North Africa (Mena) at Standard Chartered. “Banks and clients alike are working from home. As we look to the future post-Covid-19, the only way to ensure resilience will be through digitisation.”


Digital natives

According to the World Bank, AME has one of the highest youth population shares in the world, giving it a generational advantage when it comes to technology. Having grown up in societies where digital devices are commonplace therefore, business leaders in the region are particularly open to the potential for digital technology to connect them to the rest of the world.

Its governments, too, are alive to the possibilities that digitisation brings. Ranking fifth in the world for technology adoption according to Cisco’s 2019 Digital Readiness Index, the United Arab Emirates (UAE) has forged ahead. In Dubai, the aim is for all government transactions, where possible, to be digital by the end of next year. Meanwhile, Saudi Arabia has pledged to become one of the world’s top-20 digitally innovative nations, positioning digital transformation as one of the four pillars of its Vision 2030 programme. And this progress is not limited to the Gulf states: Egypt has unveiled a digital transformation strategy which will see, among other initiatives, a digital trade platform set up to facilitate export and import activity, while Kenya’s government’s commitment to its information communications and technology (ICT) policy has seen the emergence of a world-class tech hub known as the Silicon Savannah.

“There is a great drive from the governments in the region to put the infrastructure in place for people to go digital,” says Zaeem.

“One example is the Kenya Revenue Authority,” says Patrick Makau, head of trade for Kenya and East Africa at Standard Chartered. “It has enabled the digital issuance of customs bonds – and is going through a phased approach to make this process completely digital through the integrated customs management system, a process that involves several stakeholders. This shows that it is not only banks or their clients that are looking into this; government authorities are also onboard.”


Flight to digital

Makau speaks of a “flight to digital” that has been fast-tracked by the difficulties thrown up during the so-called great lockdown. “Companies that are not there yet are quickly seeking to move to digital platforms, while those who are there already are recognising the benefits of their earlier decisions.”

This receptiveness to new technologies has already seen several corporates in the region digitise at least some of their trade processes, which has prepared them well for the current situation. Meanwhile, for those corporates yet to have got on board with digitisation, the Covid-19 pandemic has served as a catalyst for them to take up new solutions in order to facilitate trade.

Charles Abobare, principal trade products manager for Nigeria at Standard Chartered, highlights this new trend. “With the emergence of the Covid-19 situation, everybody has come to the realisation that they have to go digital. Companies can now clearly see the cost savings. They want to be able to initiate transactions on digital channels. Many clients that we have been engaging with in the past to migrate to electronic platforms are now calling to ask how they can join.”

“We have seen a significant uptake in one supply chain programme we have for a large retailer in the last month. That is really a testament of how powerful it is. It is automated. It is end-to-end. It is done seamlessly,” adds Zaeem.


An overnight transformation

With both domestic consumption and international trade volumes slashed overnight by Covid-19-related restrictions, finding urgent solutions to immediate problems has become of existential importance to traders across Africa and the Middle East.

“One day we were operating as normal and the next day it was the new normal,” says Makau. “We found ourselves in a scenario and had to adapt to it. It’s important that the channels we have support trade in these situations, because the underlying trade still needs to go on.”

Corporates that don’t yet have digital processes in place have sought workarounds, and according to Zaeem, quick fixes have had to be found to avoid disrupting trade. “As a bank, to cater to the current situation, we have allowed flexible signatures and delivery methods to take care of immediate needs. We are also accepting transactions – reviewed on a case-by-case basis – via email with digital signatures, with callbacks and other procedures put into place,” he adds.


A call for regulatory support

However, bilateral efforts between banks and exporters can only go so far in keeping the wheels of trade turning. A conducive regulatory framework is also needed, and this is where the bottlenecks are, according to a recently released World Bank study.

In Digital Trade in Mena: Regulatory Readiness Assessment, the multilateral organisation says that regulation of digital markets in the region remains “underdeveloped”, being mostly covered by general laws not originally intended for the digital era.

While all countries in the region have advanced on regulating electronic transactions, typically following the United Nations Commission on International Trade Law (UNCITRAL) guidelines for e-documents and e-signatures, the World Bank’s research found that most regulatory frameworks remain “incomplete or outdated”, providing partial solutions or unnecessarily burdensome requirements that limit the use of electronic signatures.

“The biggest challenge we have is that regulators don’t allow digital document presentation,” says Zaeem. “This impacts upon banks in terms of managing risks if an exporter has presented valid documentation to us and we are unable to send it.”

So far, banks and exporters have worked together to mitigate those risks. But in order to maintain the free flow of trade amid these difficult times and into the post-Covid-19 future, the region’s regulators and governments need to allow digital acceptance or digital presentation of documents, or risk trade coming to a standstill in one of the world’s most important trading hubs.