WT/GC/W/ 910 
 
1 December 2023  
(23-8198) Page: 1/5 
General Council  Original: English  
 
WORK PROGRAMME ON ELECTRONIC COMMERCE  
CHALLENGES FOR DIGITAL INDUSTRIALI ZATION IN DEVELOPING COUNTRIES  
COMMUNICATION FROM SOUTH AFRICA  
The following communication, dated 1 December 2023, is being circulated at the request of the 
delegation of South  Africa.  
_______________  
1. INTRODUCTION  
1.1. A recently completed Market Inquiry into a broad range of Online Intermediation Platforms by 
the Competition Commission of South African (CCSA)1 provides crucial insights into the challenges 
faced by developing countries to digitally industrialise in the face of dominant global tech companies, 
and the potential levers to level the playing field. In t he process it provides important insights for 
the Work Programme on Electronic Commerce.  
1.2. The Market Inquiry examined eCommerce, online travel agencies, software application stores, 
food delivery and online classifieds, along with the role of Google S earch in mediating platform 
competition. The Inquiry examined (a) market features impeding platform competition, including 
that of domestic platforms in competition to global platforms, (b) market features arising from the 
platform business models impeding  competition amongst businesses listing on the platforms, and 
(c) the ability of SMEs and historically disadvantaged persons to participate and compete at both 
platform and business user levels. The Market Inquiry completed its work on 31 July 2023 and iss ued 
remedial orders against leading platforms in all categories, the vast majority of which are being 
implemented and with only a few on appeal.    
1.3. This submission builds on the Joint Submission by India and South Africa of 18 October 2023 
(WT/GC/W/902/Rev.1 ). Although the Market Inquiry did make many similar findings on the source 
of market power, extent of dominance and entrenchment strategies, these are not repeated in this 
submission. Rather this submission seeks to draw out specific fi ndings around digital 
de-industrialisation and potential remedial actions. This is an important issue for developing 
countries particularly so in the context of growing dominance of digital trade by big tech firms and 
at times to the disadvantage of developing country competitors, including small and medium 
enterprises and start -ups. 
 
1 Available at https://www.compcom.co.za/online -intermediation -platforms -market -inquiry -final-report -
launch/  WT/GC/W/ 910 
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  2. THE UNFAIR ADVANTAGE OF GLOBAL TECH AND THE DIGITAL INDUSTRIALISATION 
CHALLENGE  
2.1. Access to cheap venture capital and global profit streams enable global tech platforms to enter 
developing country markets later than local entrepreneurs. Such access to capital accords them a 
dominant position. This dominance is aided by the gatekeeper role of Search which acts as the entry 
point to most digital  commerce for most consumers, with paid ads dominating the search results 
page (SERP) and consumer clicks. The cheap capital and cross -subsidies from other markets enable 
global intermediation platforms to outspend developing country competitors and domina te the SERP. 
The subsequent network benefits from the consumer acquisition ensure that local and global 
business users then become dependent on the global intermediation platforms for sales.  This 
dependency enables the global platforms to extract higher re nts from business users, which in turn 
enables them to continue to outspend on consumer acquisition. This virtuous cycle enables the global 
tech platforms to tip the market towards monopoly, pushing out local competitors and erecting 
insurmountable barrier s to effective competition. The result is that developing countries become 
customers and not participants in digital industries.       
2.2. The absence of customs duties on electronic transmissions facilitates and exacerbates these 
advantages, and results in knock -on tax revenue losses. The ability to transact internationally absent 
custom duties is one of the factors that enables the global tech companies to execute their 
transactions through any legal entity located globally, locate their legal trading en tities in low tax 
countries, and benefit from a low tax rate for all their global operations. This provides the global 
tech firms with a distinct unfair tax advantage over local competitors in developing countries whose 
corporate tax rates are higher to su pport development of their economies. The lower tax rate allows 
the global tech companies to reinvest the tax savings into outspending developing country rivals on 
customer acquisition and platform technological development, entrenching their dominance.  
2.3. As the CCSA Market Inquiry identified, the global tech companies pay an average tax of c.17% 
globally, but this is often far lower on transactions in developing countries as these are directed 
through low tax countries. For example, transactions for Goo gle and Apple in South Africa are done 
through their legal entities in Ireland, and Booking.com transacts through the Netherlands where it 
has benefited from an innovation rebate. Uber similarly directs its transactions through its 
international entity.  
2.4. Moreover, as all transactions are channelled through to a global entity, this deprives the 
importing country of corporate tax revenue. As tax paying domestic entrepreneurs are squeezed out 
of the digital markets by the global tech companies, there is a lso a loss of tax revenue from domestic 
competitors. However, the impact goes far beyond just tax. The hollowing out of domestic 
competition results in digital de -industrialisation as there is a loss of employment and investment. 
The Market Inquiry found t hat many of the global tech companies made no material investments 
and employed relatively few people, if any, in South Africa (or Africa) relative to their domestic 
counterparts. Ironically, some of the global tech firms even used this lack of investment to argue a 
lack of jurisdiction. Even where some local investment and physical activity occurs, such as in food 
delivery or e -hailing, the transactions can and are channelled through the international entity facing 
lower tax rates due to the lack of custom s duties.   
2.5. The direct and indirect reduction in tax hinders developing countries from supporting other 
digital industrialisation initiatives. The lack of investment and exclusion of domestic competitors also 
hinders the ability of the private sector to build a greater depth of skills and more liquid venture 
capital market that are necessary to provide a base for digital industrialisation.  
2.6. The OECD/G20 initiative2  to address the tax challenges has resulted in a two -pillar solution 
that aims to subject multinationals to a minimum tax rate of 15% and to re -allocate profits to 
 
2 OECD/G20 Base Erosion and Profit Shifting Project  WT/GC/W/ 910 
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  countries where they generate income and profits.3 However, whilst this is a useful step in the right 
direction, the target of 15% is low. Moreover, this narrows the benefit s developing countries could 
derive individually from the initiative, especially relative to the instrument of customs duties on 
electronic transmissions. Nor does that initiative enable the sustainable promotion of investment in 
digital industrialisation through skills and venture capital by both domestic and global investors. 
Rather it only seeks to put a floor on the tax race to the bottom.      
3. BUSINESS MODELS AND CONDUCT EXACERBATING THE UNFAIR ADVANTAGE  
3.1. The CCSA Market Inquiry found that whils t some conduct deliberately harmed competition, 
the business models of many digital platforms can have unintended consequences, hampering 
inclusive participation and competition by developing countries and their SMEs. The moratorium on 
the imposition of cu stoms duties on electronic transmissions (ET moratorium) exacerbates the effect 
of some of this conduct and entrenches the lead position of major digital platforms. The sooner the 
moratorium is removed, the better for reversing digital de -industrialisation  and enabling developing 
countries to levy appropriate tariffs in line with the established multilateral trade rules. Tariffs are a 
proven instrument to promote industrialisation, and digital markets are no different.   
3.2. On software application stores,  dominated by Google Play and Apple App Store, the 
anti-steering provisions which prohibit app developers from directing consumers to their own website 
to pay for content and subscriptions, directs all trade by consumers through these two software 
applicat ion stores. This practice has anti -competitive effects insofar as it enables these software 
application stores to extract excessive commissions from app developers. The ET moratorium 
exacerbates these practices. By directing trade through the application s tore, anti -steering alongside 
the ET moratorium further denies developing countries taxation revenue on such commercial activity 
and reduces the revenue for domestic app developers to invest and grow.  
3.3. For online travel agencies (OTAs), the dominant g lobal OTAs such as Booking.com and Expedia 
make widespread use of price parity clauses which prevent the South African accommodation 
establishments from offering cheaper room rates on domestic OTAs. This is now widely recognised 
to have an anti -competitive  effect as it eliminates OTA competition on room price to the consumer 
and on commission fees to the domestic accommodation establishments. However, it has also aided 
global travel platforms, which initially focused on US and EU travellers, to dominate dom estic travel 
markets across the globe. By preventing competition on room price and commission fees by domestic 
OTAs, there is less reason for consumers to use these domestic platforms rather than the global 
OTAs with extensive loyalty programmes even for d omestic travel. Furthermore, this makes it difficult 
for accommodation establishments in developing countries to develop marketing and pricing 
strategies that segment domestic and international travellers. The ET moratorium has removed one 
of the levers to  address this reality.  
3.4. As the global digital platforms become dominant in the local markets of developing countries, 
business users become dependent on them for online sales. Success on those platforms depends on 
where the business listing appears on  the ranking in the search results page, as consumers tend to 
click on the first few results much like general search. The dependency and importance of ranking 
means that the global tech firms increasingly offer paid results or ranking boosts to business u sers. 
This increases the extraction of rents from business users, which reinforces their leading position by 
enabling more investment in customer acquisition. However, it also favours large and global business 
users in securing prominence with online custo mers and  poses a barrier to digital competition from 
small and developing country business users.  
3.5. For instance, on software application stores the role of ads is becoming increasingly important 
for discoverability and now is typically the first resul t on every consumer search. The Market Inquiry 
found that this favours discoverability of app developers in larger digital markets given the lower 
cost and greater availability of venture capital funding, relative to South African app developers. 
 
3 See https://www.oecd.org/tax/b eps/statement -on-a-two-pillar-solution -to-address -the-tax-challenges -
arising -from-the-digitalisation -of-the-economy -october -2021.pdf   WT/GC/W/ 910 
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  Once disc overability and trial occur through the advertising, the sales of those apps then start to 
feature in top seller curations and editor picks. The Market Inquiry identified that such was the 
disadvantage faced that there were only 500 paid app developer comp anies in South Africa, all of 
whom were SMEs. The effect of this business model on small and developing country business users 
is often exacerbated by rebates to multinational business users, distorting other trade flows.  
4. REMEDIAL ACTIONS TO  PROMOTE DI GITAL INDUSTRIALISATION  
4.1. The CCSA Market Inquiry sought to negotiate and agree remedial actions that may offset these 
market features which hinder competition and reduce participation by South African businesses, in 
particular SMEs and historically dis advantaged persons. The legal standard is that the remedies must 
be reasonable and practicable, and that they must directly and proportionately address the cause of 
competitive harm. These remedies were then imposed as remedial orders and are already being  
implemented by most of the market participants, including global platforms such as Google.  
4.2. Some of those remedial actions at a platform competition level resonate with other 
competition enforcement globally, such as an end to self -preferencing on Go ogle Search, no 
anti-steering on Google Play and Apple App Store, and an end to price parity clauses across all 
platform categories. However, a substantial number of remedial actions were aimed at fair 
participation by South African platforms and business users in competition with global businesses, 
i.e., more inclusive digital industrialisation. These included:  
• Enhancements to Google Search to promote the visibility of South African platforms to South 
African consumers, through search filters, domestic pla tform identifiers and a local platform 
search unit on the SERP.  
• A Google Fund that will invest in developing domestic SME platforms to grow and mature 
through ad credits, technological support and capacity building, enhancements to customer 
acquisition ca mpaigns and some venture capital.  
• Similar enhancements to software application stores to improve the visibility of South African 
apps through a local app curation and provision of ad credits to enable promotion through a 
Fund.  
• All leading platforms to pr omote greater levels of participation and promotion of historically 
disadvantaged SMEs on the digital infrastructure through funding via fee rebates for 
onboarding and subscription, and ad credits or targeted promotions.   
• A recommendation that Government deepen local venture capital markets through providing 
first loss social impact funding to venture capital funds that can crowd in more risk averse 
institutional and private funding. This is a recommendation only given the fiscal challenges 
and competing p riorities.  
4.3. The remedial actions imposed by the CCSA Market Inquiry related to the specific platforms 
included in the Inquiry and were in respect of the specific powers of the CCSA. However, the 
principles underpinning those remedial actions relating to the promotion of more inclusive and 
competitive digital industrialisation have broad applicability. This includes the use of Funds to 
promote technical capacity, deepen venture capital markets, and then promote visibility and 
discoverability amongst con sumers.   
5. CONCLUSION  
5.1. The CCSA Market Inquiry provides insightful findings on how the dominance of global tech 
firms and other features of these markets are undermining digital industrialisation in developing 
countries. This is causing growing globa l inequity and condemning developing countries to be a 
customer and not a participant in the digital economy. Moreover, it is evident that the ET moratorium 
both facilitates and exacerbates this outcome in numerous ways. For the stability of the global 
trading system it is important to find a path to more inclusive digital industrialisation.  
5.2. The CCSA Market Inquiry focused on online intermediation platforms, but the insights in the 
findings on how the market features are impeding digital industrialisat ion outside of the home 
countries of global tech firms, and the role that the ET moratorium plays in facilitating and WT/GC/W/ 910 
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  exacerbating this effect is informative for a wider set of digital markets. The CCSA has recently 
launched another market inquiry into the  impact of digital platforms on domestic digital media 
markets, a concern shared by many countries globally. The communications industry sector 
regulator, the Independent Communications Authority of South Africa, has fielded concerns that 
global streaming services have an unfair advantage over domestic rivals as they do not have the 
same regulatory requirements such as minimum local content levels. In gaming and music streaming 
the markets are dominated by global tech companies. The ability to operate remot ely and trade 
through low tax countries is common in all these cases.  
5.3. South Africa is not alone in reaching such conclusions. The Africa Heads of Competition 
Dialogue on digital markets initiated by the largest jurisdictions on the continent4  and expanded to 
other digitally industrialising countries and regions ,5 has identified similar concerns across the 
continent and has called for a more inclusive enforcement approach to competition policy that 
promotes digital industrial development on t he continent.6 Trade policy should do the same.  
5.4. The findings of the CCSA Market Inquiry also provides useful insights for the Work Programme 
on Electronic Commerce.   
• As the ET moratorium facilitates and exacerbates the market power and inequity in d igital 
industrialisation, an end to that moratorium would provide developing countries with an 
important lever to promote domestic digital industrialisation and enhance competition in 
many of these markets to the ultimate benefit of consumers. Tariffs have  always been an 
important part of the overall toolkit of policymakers  to promote industrialisation, and it is 
evident that this is equally true of digital markets.  
• While the moratorium on ET is facilitating and exacerbating the dependency of developing 
countries as consumers and not participants, it is also taking an important policy tool away 
from the governments which can be used to provide a level playing field to their SMEs in the 
digital sector vis -a-vis the digital giants. Tariffs on ET will not only allow governments an 
opportunity to promote domestic digital industrialization but will also provide finance for it 
as this is a rapidly growing revenue stream of the future.  
• There are practices by global tech companies that may abuse the ET moratorium an d distort 
trade flows, such as transacting through low tax countries or the use of anti -steering, which 
could either be the subject of trade rules or tariff adjustments to offset those practices, 
similar to anti -dumping in the trade of goods.    
• Other tool s can complement these trade measures to promote digital industrialisation in 
developing countries, including building technical capacity, deepening venture capital 
markets, and promoting visibility and discoverability amongst consumers.  
 
__________  
 
4 This includes South Africa, Nigeria, Egypt, Kenya and Mauritus  
5 The Dialogue was exp anded to include Comesa, Gambia, Morroco and Zambia. See 
https://comesacompetition.org/wp -content/ uploads/2023/02/Joint -Statement -of-the-Africa -Heads -of-
Competition -Dialogue -08-Feb-2023-Cairo83561.pdf  
6 See https://www.compcom.co.za/wp -content/uploads/2022/02/Joint -Statement -of-the-Heads -of-
Competition -Authorities -Dialogue -on-Regulation -of-Digital -Markets.pdf