Jan 29 , 2022

The business of electronic commerce (e-commerce) will see a long-awaited law come into force that will define tax obligations, determine privacy issues and govern agreements with users made online.

The burgeoning online market has been operating in a legal vacuum where contracts with users are not established. Digital signatures were inadmissible in a court of law until Parliament legislated an e-transaction law last year. The law defines e-commerce as the transactions of goods and services through the internet or other information networks. It also established e-commerce platform operators (aggregators) as legal entities that provide two or more e-commerce operators with online sites for business operations, matchmaking, and posting information.

A regulation governing electronic transactions is close to approval after a draft has been forwarded to the Ministry of Justice. It will be tabled before the Council of Ministers soon, disclosed Abiyot Bayou (PhD), director of the Digital Transformation Programme Office at the Ministry of Innovation & Technology. Officials hope the regulation will bring relief for businesses in e-commerce that have had to jump through a slew of bureaucratic hoops. It has been in the making for two years by experts of the Innovation Ministry.

The draft regulation establishes guidelines for e-commerce operators but fails to mention the registration of e-commerce businesses. All entities operating as e-commerce service providers have to undergo business registration as legacy companies. Individuals in informal e-commerce, however, are exempted from business registration but are required to hold a tax identification number (TIN). Farmers offering produces online need not register as a business, according to Abiyot.

Thus far, e-commerce operators have had to register under different subsectors or operate informally.

For Temesgen Gebrehiwot (PhD), founder and managing director of Zmall, an e-commerce service provider and delivery company, the absence of a regulation that defines and governs electronic business has been a significant challenge.

"We've had to apply for three or four types of permits to run a single business," he said.

The regulation allows e-commerce platform operators to provide auxiliary services such as warehousing, logistics, payment, settlement and delivery for intra-platform operators. Expanded internet penetration coupled with affordable access has provided room for e-commerce to thrive. Mobile internet service users have increased by 40pc to over 25 million since 2018. The online sale of electronics, furniture, and clothing has exploded in recent years.

Cepheus Capital, a private equity firm, counted no less than 200 e-commerce and e-classified companies operating in Ethiopia's digital economy last year.

One of these e-commerce sites is Asbeza, a grocery shopping platform launched two years ago. But it has had to obtain two different permits, according to Bereket Tadesse, a founder and manager of the company. Partnered with seven supermarkets thus far, Asbeza buys and delivers groceries to customers shopping online.

"We thought there would be a regulation to govern e-commerce," said Bereket. "The closest we could get was a commission permit."

Other options would require the company to own physical shops.

"We don't have a store, and we don't want to own one either," said Bereket.

The managers of Asbeza also had to register as a delivery company.

The draft regulation requires e-commerce platform operators to present information on the businesses transacting under them, including legal identity and tax information. Platform operators will have to keep transaction data for at least 10 years from each sale. The time was set based on other laws that require financial records to be kept for at least a decade, according to Abiyot.

Other African countries have travelled far ahead in helping e-commerce, and online transactions flourish. Kenya legislated its Electronic Transactions Bill in 2007; and the Information & Communication Bill the following year.

"The lack of regulation has been a bottleneck for us," said Temsegen.

He observes that the regulation could enhance the e-commerce business, fostering trust between operators and users.

"The government can also better monitor online transactions," he said.

Yehualshaet Tamiru, adjunct lecturer of law at Addis Abeba University, argues that officials will need to introduce a directive that outlines the licensing procedure for e-commerce operators. Although the commercial code revised last year allows individuals to operate as a business, a lack of lower legislation outlining the registration process has made it virtually inapplicable.

"There are usually legal vacuums in approved laws unless a lower legal document is issued to ensure applicability," he said.

PUBLISHED ON Jan 29,2022 [ VOL 22 , NO 1135]

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