South Africa and Data Flows: How to Fully Exploit the Potential of the Digital Economy

South Africa is in a privileged position to become the regional hub for provision of data processing services and other innovative digital services. In order to do so, the country should promote the free flow of data, allowing local companies to extract the benefits of data created regionally. This paper provides clear economic arguments to support such a regime in South Africa, and shows that restrictions on movement of data have detrimental effects on productivity, innovation, access to information, investment and ultimately the growth and welfare of the country. The introduction of this paper looks at the importance of data in today’s digital economy, while section two introduces the issue of restrictions to data flows, and clarifies the current state of play when it comes to such restrictions, both globally and in BRICS countries. The third section discusses data policy regimes in BRICS economies. Section four provides a broad analysis of the costs of data flow restrictions for countries implementing these policies. Section five summarises how data flows are regulated in free trade agreements, and provides food for thought on a multilateral discussion on the issue. Section six shows the options ahead for South Africa, and the paper concludes with recommendations for South Africa on how to fully exploit the benefits of the digital economy.