The rapid pace of digital transformation is ushering in an era of highly personalised services and innovative business models that often challenge existing regulatory frameworks. These insights are outlined in a research report conducted by Naspers and the Mapungubwe Institute for Strategic Reflection (MISTRA), which explores the untapped potential of South Africa’s digital platform economy—a sector encompassing online platforms that facilitate economic transactions.
The report states that as technology evolves at an unprecedented rate, regulations can lag behind, potentially creating gaps in addressing emerging risks such as cybercrime and fraud.
The swift integration of technology into financial services also introduces systemic risks that could impact the stability of the financial system.
Challenges in Labour Rights and Tax Compliance
Moreover, the rise of gig work is reshaping traditional concepts of labour rights and job security, while the expansion of global platforms complicates tax compliance and revenue collection. These challenges, however, present significant opportunities for economic growth.
By updating regulatory frameworks to better align with these new business models, we can foster innovation while mitigating associated risks.
Proactive and adaptable regulation is essential for creating a secure and efficient digital economy, benefiting both businesses and consumers. Embracing these opportunities will enable us to unlock the full potential of digital transformation, driving sustainable economic progress and greater inclusivity.
Evolving Regulatory Frameworks
“The regulatory environment in South Africa is still evolving to fully address the complexities of the digital economy,” reads the report. “As digitalisation accelerates, there is a need for a comprehensive vision that encompasses all aspects of the digital commerce landscape.”
Currently, freelance workers, especially those engaged in last-mile deliveries, find themselves in a grey area regarding their classification under labor laws.
“This uncertainty leaves them uncertain about their rights and protections,” reads the report. For instance, a recent ruling by the UK Supreme Court mandated that Uber drivers be classified as workers entitled to minimum wages and paid holidays.
“This decision highlights the need for clear guidelines that protect workers while adapting to modern employment models,” reads the report.
Addressing Gig Work and Tax Challenges
To address these challenges, the report suggests that South Africa could develop a regulatory framework that recognises the diverse nature of gig and freelance work.
“This could involve setting clear definitions and protections for different types of workers, ensuring that they receive fair treatment and benefits,” reads the report. “By establishing a forward-thinking regulatory approach, South Africa can better support its growing digital economy and ensure that all workers are fairly represented and protected.”
The treatment of platform sellers based in foreign countries remains a headache for the South African Revenue Service (SARS) as they are unable to apply the principle of permanent establishment on income tax.
Similarly, companies like Shein and Temu exploit loopholes created by the 2007 tax concession, which allows courier companies to pay a 20% flat rate on high-value, low-volume shipments instead of full customs tax and VAT.
“The potential for regulatory arbitrage poses significant challenges, particularly for digital platforms in sectors like financial services, where some platforms have circumvented established regulations. This has been evident in areas such as crowdfunding, on-demand early-wage access, and crypto investments.”
Additionally, the Competition Commission has yet to establish clear guidelines for when various platform segments should be subject to restrictions under the Competition Act.
“These gaps in regulation can create an uneven playing field, potentially disadvantaging both local and incumbent platforms,” reads the report.
Moving Towards Collaborative Regulation
“To address these challenges, there is an opportunity for the development of collaborative and forward-looking regulatory frameworks. Regulatory sandboxes could be employed to allow platforms to operate within a controlled, temporary regulatory environment while innovations are assessed.
“Furthermore, fostering cooperation between digital platforms and regulatory bodies through information-sharing agreements can help keep regulations aligned with emerging market trends and innovations. By engaging in such collaborative approaches, South Africa can ensure a balanced regulatory environment that supports innovation while maintaining fair and effective oversight.”
Also read: SA’s Digital Platforms Show Impressive Progress But Still Have Untapped Growth Opportunities
