E-Commerce and Mobile Commerce in South Africa: Regulatory Challenges

• Author: Z. Ntozintle Jobodwana
• Position: Department of Public, Constitutional and Intl. Law University of South Africa, Pretoria Jobodzn@unisa.ac.za
• Pages: 287-298

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1. Introduction

Electronic commerce (e-commerce) is the process of trading across the internet. A Pan African E-commerce Initiative, sponsored by the Economic Commission for Africa (ECA) and the International Development Research Centre (IDRC), in 2001 adopted the European Commission definition of e-commerce:

Electronic commerce is about doing business electronically. It is based on the processing and transmission of data, including text, sound and video. It encompasses many diverse activities including electronic trading of goods and services, online delivery of digital content, electronic fund transfers, electronic share trading, electronic bills of lading, commercial auctions, online sourcing, public procurement, direct consumer marketing, and after-sales service.¹

E-commerce has the ability to eliminate the time span between ordering, delivery invoicing and payment by using the World Wide Web. It offers benefits to both vendor and buyer. The vendor can create a global presence, thus generating more potential business, reducing costs, increasing competition, and allowing the ability to customise products.² The buyer benefits through increased choice that encourages better standards of service, price reductions and a more tailored service. E-commerce has impacts on our economic and social life as it has the potential to fundamentally change the way commercial transactions, the business of government, the delivery of services and a host of other interactions are conducted, raising issues at the heart of policies directed at the regulation of traditional practices and procedures. E-commerce is sometimes also categorized under four main areas of activity: business-to-business ("B2B"), business-to- government ("B2G"), business-to-consumer ("B2C") and consumer-to-consumer ("C2C").³

M-commerce, which is now an accepted acronym for mobile commerce, is the buying and selling of goods and services through wireless hand-held devices such as cellular telephones, personal digital assistants (PDAs) and wireless computers.⁴ M-commerce, which has become known as the next generation of e-commerce enables users to access the internet without needing to find a place to plug in. Mobile technology has revolutionised the way people communicate and conduct business transactions. Current Third Generation Phone (3G) handsets now Page 288 feature high resolution displays, integrated video camera, audios and video content streaming, internet access at broadband speeds, location-based services, and multi-user 3D gaming.⁵ Michael and Salter assert that these rich computing arrangements will encourage and facilitate the development of business applications for mobile phones. They state that the 3G has opened up the wireless world because of its portability, and bandwidth, making computers one of the most popular devices for data transfer. The technology behind m-commerce is based on Wireless Application Protocol (WAP).⁶ Ahmad states that WAP "is an attempt to define a standard for how content from the internet is filtered for mobile telecommunications. It is aimed at running a mass-market mobile phone into a network-based smart phone"'.⁷ He further states that the WAP has very close connections with the internet technologically.⁸ The WAP incorporates a relatively simple microbrowser into the mobile phone requiring only limited resources on the mobile phone. According to Ahmad, the philosophy behind the WAP's approach is to utilize as few resources as possible on the handheld device and compensate for constraints of the device by enriching the functionality of the network.⁹

Africa imports more than exports goods and services from overseas markets, hence the highest vulnerability of both its consumers and traders. However this trading pattern must be seen in the context of South Africa's economic dominance in the continent, especially in the Southern Africa region. South Africa's economic predominance is underlined by the fact that it produces approximately 80 percent of Southern Africa's GDP.¹⁰Alden and Soko note that an enormously lopsided trade relationship persists, with South Africa maintaining a massive surplus with its neighbouring trade partners.¹¹ The economic power of South Africa is so dominant that it has emerged as the largest foreign investor in Southern Africa in recent years.¹² These business forays are not only limited to Southern Africa.

The further northward expansion of South African firms has been actively encouraged by several African leaders who see the country "as the continent's last best economic hope".¹³ On her part, South Africa is taking advantage of her relative competitive advantages which include: abundant investment capital, marketing and technological know-how, advanced public infrastructure, and human resources, to exploit business opportunities in the rest of Africa. South African companies are also exploiting the resultant global push for economic liberalisation and deregulation in Africa.

Telecommunications is one of the fastest growing sectors of the South Africa's economy, reflecting the rapid growth of mobile telephony in the country.¹⁴ South Africa is the world's fourth fastest growing cellular communications market. By October 2003, there were 15 million cellular users, a number expected to grow to 21 million by 2006.¹⁵ Mobile national operators from South Africa, MTN and Vodacom have undergone significant expansion beyond their home markets into other African markets over the past few years. MTN now has operations in 16 African countries (including the second most important market on the continent Nigeria), while Vodacom is present in five countries (including the DRC). In most of the markets, both operators hold number one positions. Page 289

The uneven economic development in the continent is a big challenge and compromises efforts aimed at the economic integration of the region. In this regard, African governments through The New Partnership for Africa's Development (NEPAD) projects are currently addressing the development of the use of the internet as a means by which information is disseminated and through which communication and connectivity is enabled.¹⁶ The slow process of liberalising telecommunication services is gradually taking off the ground. From these technological advances it is hoped that both e-commerce and m-commerce will emerge as some of those innovative methods that will transform the way products, services, and even information are bought, sold, and even exchanged in the continent. This is attributed to the fact that the content delivery over wireless devices is becoming faster, more secure, and scalable. The industries affected by m-commerce include: financial services, which includes mobile banking (when customers use their handheld devices to access their accounts and pay their bills) as well as brokerage services, in which stock quotes can be displayed and trading conducted from the same handheld device; telecommunications, in which service changes, bill payment and account reviews can all be conducted from the same handheld device; service/retail, as consumers are given the ability to place and pay for orders while on the move and so on.¹⁷

However, regarding general access to Information and Communication Technologies (ICTs), Africa, according to the 2007 International Telecommunication Union Report, still lacks in investment intensive infrastructure such as main (fixed) lines and fixed broadband.¹⁸ Inadequate landline networks and relevant institutions will be some of the drivers of the m-commerce African boom. The investment environment seems promising. Of late, the growing political stability has helped attract foreign investors from a region recovering from years of civil wars. Notable also is that Africa's mobile networks are growing for some other obvious reasons. The national telecommunications are poorly managed and in most cases corrupt. Besides, these utilities cannot even lay new lines or maintain the old and existing ones. On the positive side some African governments are in the process of introducing and adopting regulatory reforms based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on E-commerce.¹⁹

2. The state of e-commerce and m-commerce in South Africa

The communications sector, together with transport and storage, accounts for almost 10 percent of South Africa's gross domestic product (GDP).²⁰The South African network is now reported to be 99.9 percent digital and includes the latest in fixed-line, wireless and satellite communication; above all, the country has the most developed telecoms network in Africa.²¹ The fixed-line monopoly of Telkom, a listed company in which the government is the largest shareholder, expired with the licensing of Neotel as South Africa's second national operator.²² Neotel is licensed to provide the entire range of telecoms services with the exception of full mobility.²³

South Africa has now three mobile operators: Vodacom; MTN and Cell C. Vodacom, which is 50 percent owned by Telkom, has 61 percent of the cellular market, with seven...