By Phumza Dyani, Sales and Marketing Chief Officer for Broadband Infraco
Africa is at an edge of decisions that can either propel us forward or potentially diminish the growth enjoyed over the past two decades dependent on the choices the continent will make. Continentally, the economy has been renowned for very low GDPs, unstable political systems and limited Internet coverage. To add fuel to the fire, one of the major difficulties giving the African continent constant headache is corruption.
Interventions for economic recovery, specifically for the grassroot level citizens may take a while unless driven by intentional initiatives and innovation. Digital technologies have been mentioned in a number of studies taking place in the continent as being central to the acceleration of recovery. Blockchain is at the centre of all of these. Blockchain technology solutions are particularly significant as they have a capability of providing solutions to some of the major continental issues prioritized for recovery which include strengthening of the health system, optimizing agriculture and food supply, development of continental trade and SMME growth acceleration. Innovation is especially crucial at this opportune moment and has a potential to not only bolster economic recovery and development but to introduce a new era of progress where countries are supportive. We generally get more new products, better value for consumers, and more good jobs when sensible innovation is allowed to incur.
Blockchain, at a high level, is a decentralised ledger, or list, of all transactions across a peer-to-peer network. It is, potentially, the most transformative technology innovation since the Internet which will change how transactions are enabled for a lifetime. It will transform how we transact by democratising transacting, bringing greater transparency, improved security, traceability, speed and reduced costs. The World Economic Forum (WEF) predicts that by 2025, 10 percent of global Gross Domestic Product (GDP) will be stored on Blockchain and Blockchain-related technologies.
Blockchain, in essence, provides a technological solution that can help to improve African economies as it has a capability to leapfrog the development mistakes of the West by reimagining entire systems of production, financial services, and governance fueled by Blockchain.
Of importance, Blockchain has a potential of formalising financial transactions in village and township economies, enabling stimulation of economic activity which the current systems are not able to. Blockchain for example can be used by spaza shops, the taxi ride and all the elements of the township business can ensure circulation of money and increase financial inclusion which in turn increases the spending and investing power of those who were previously unbanked. Formalisation of the township economy has the potential of supporting the development of township industrialists, enabling economic transformation, and be a catalyst for change and inclusive growth.
Importantly, Blockchain has a potential to be at the centre of progressing a fundamental engine of the economy which is the Small Medium and Micro (SMMEs). It is a technology that can provide a speedy progression by reducing the cost of banking, enabling access to finance and by accelerating processes of trade transactions and thereby positively influence the cash flow of the SMME. Blockchain can be at the centre of accelerating and preparing a platform for implementing the African continental trade agreement (AfCFTA). At the core of it, Blockchain can eradicate the issue of trust by validating the transactors. Intermediaries can be eliminated and the costs of transactions decrease. Blockchain also offers faster trading between businesses, provides real-time data of goods moving in and out of a country, and eliminates barriers such as cross-border regulations, fraud, and customs delays. When all the friction that works against trading is removed, the GDP of an economy will improve as a result.
In the Agriculture sector for instance, Blockchain has the potential to increase financial inclusion by formalising the major issue of the Continent linked to property rights such as land. Contradictory ownership claims often create disputes that are difficult to resolve because of a lack of record keeping. By formalising land ownership using blockchain technology, the landowner receives legal protection and a sense of trust, which means that any transaction concerning the piece of land is accessible and cannot be interfered with. Perhaps most importantly, the landowner can use the land as collateral for a loan to develop the land and hence get himself/herself out of the impoverished situation. Companies like Land LayBy and Bitland, for example, are making strides towards applying blockchain technology to the real estate sector in Kenya and Ghana. Blockchain can also contribute to bringing about efficiency in the traditionally fragmented value chain in Agriculture. AB InBev, for example, invested in BanQu, advancing an undisclosed amount to ZX Ventures, the company’s global growth and innovation group, in June 2019. Through BanQue, farmers now have access to full accounting information, such as sales price, volume sold, and payment – with this information made available via SMS. They also have records that they can take to the bank, allowing them access to credit and form a verifiable economic identity.
In the Health sector, Blockchain can enhance patient data privacy, interoperability and security of all healthcare data, making patients safe by boosting the professionalism of surgeons, doctors and nurses. In East Africa, Doc.com is a revolutionary blockchain platform that made Telemedicine accessible to everyone through use of Tokens for receiving help. The mission is to really address the inequality barriers, making health services accessible to millions of people.
Blockchain can also be utilised by the Donor community for ensuring that the donated funds reach their intended recipients. The United Nation’s (UN) World Food Programme (WFP) is exploring the Blockchain for food supply chains in Africa. While, the WFP has already implemented Blockchain tracking for food in Djibouti and Ethiopia and was able to reduce the shipping documentation and other processing time to under five days from the previous 15-20 days.
It then begs to question that, if Blockchain is a solution to a vast number of our continental challenges, why has adoption been so slow. Adoption of Blockchain in Africa has been slow, due many factors that have hindered its development including extreme poverty, poor infrastructure, and corruption being chief amongst them. Governments are still struggling with how to manage crypto space and this is affecting the conversation around Blockchain. Regulation of crypto currency is still in early days and requires understanding of the Technology and its principles prior to regulating.
Some African countries seem to be ready to lead the change and their governments have begun to make inquiries into the potential of the Blockchain. Countries like Kenya have already created a blockchain and AI task force to investigate the application of the blockchain. Nairobi and South Africa have implemented crypto-friendly laws and Kenya’s president, Uhuru Kenyatta, has launched a blockchain and artificial intelligence task force and other countries are expected to follow suit. The Blockchain Association of Uganda was also established to create a credible vehicle for driving standards for blockchain across industries in Uganda. The membership organisation also aims to make blockchain-related resources available to government and public-sector consumers.
The South African Reserve Bank (SARB) ran the Project Khokha proof of concept trialling a distributed ledger technology-based wholesale payment system in a ‘real world’ environment. It reported that the typical daily volume of the payments system could be processed in less than two hours with full confidentiality of transactions and settlement. Additionally, a South African Blockchain Association (SANBA) exists, with an aim of developing an ecosystem of players, providing research and innovation capability as well as facilitating funding.
With Kenya, Nigeria, Uganda and South Africa among the countries taking the lead in Blockchain experimentation, the financial sector is also paying attention and looking at ways fintech can be integrated to their business models. Development and trials are also underway to apply blockchain technology to virtually every industry sector – from health and social development to retail and agriculture. Governments are also increasingly exploring ways of using blockchain to aid corruption across multiple verticals and also to push value to service sectors. Sierra Leone, with the help of Swiss firm Agora, became the first country to use the blockchain to ensure transparent and fair elections. Kenya’s Independent Electoral and Boundaries Commission chairman Wafula Chebukati also embraced blockchain as having a potential to provide real-time election results and restore faith in the system.
The Nigerian Government is still investigating regulating the technology, Ethiopia is already applying the blockchain to its coffee exports and the Ugandan government has also introduced the blockchain technology to its ministry of science and technology.
It is true and apparent that use cases do exist to prove the importance and significance of Blockchain as a potential for addressing the financial inclusion problems for Africa. What is required is education in order to catalyse adoption of the masses on the uses of Blockchain as well as developing more and more ecosystems for enabling scale. Trust is also central to the adoption of the technology and with a myriad of scams and schemes that have been developed, people have been cautious on engaging in anything that has to do with money.
Additionally, many associations and hubs have been built across Africa to develop more solutions and increase participation. More collaboration is required in order to scale the solutions. More importantly, the participation of women is ever key to this.