A look at the burgeoning blockchain industry through the lens of ecosystem players on the continent of Africa
Blockchain came onto the scene in its functional form about a decade ago as the basis of the Bitcoin protocol. The combination of cryptography and distributed systems initially made it possible for value to be transferred almost as speedily as the internet transfers data. And as the technology continued to be augmented, terms under which value could also be transferred at a future point in time were enabled on blockchains such as Ethereum, giving rise to enterprise level interest, especially in financial services.
More recently, blockchain protocols with business-oriented uses have been disrupting business models and transforming operations by offering key benefits such as risk mitigation, cost reduction and improved customer outcomes.
Cryptocurrency will continue to disrupt financial services
Today, Google Trends shows that Nigeria, South Africa and Ghana are among the top countries in the world with the highest ranking Bitcoin related search terms. According to Gartner’s Top Strategic Predictions for 2020 and Beyond, 50% of people with a smartphone but without a bank account will use a mobile-accessible cryptocurrency account by 2025. Interestingly, Africa is expected to have the highest growth rates as marketplaces and social media platforms begin supporting cryptocurrency payments and much of the world shifts to mobile-accessible cryptocurrency accounts. In addition, cryptocurrency accounts are expected to also drive e-commerce as trading partners emerge in areas previously unable to access capital markets, based on the findings.
“Blockchain technology's biggest contribution will be in the financial sector - redefining what money is and how it works,” said Farzam Ehsani, Co-founder and CEO of VALR.com. This view aligned with South Africa’s lead for ConsenSys, Monica Singer, who was a speaker on a panel discussion about how cryptocurrency will drive the future of Africa’s financial services. “I helped build the central securities depository in South Africa 20 years ago and reengineered financial markets from paper-based to fully digital. At Strate, we maintained records of all purchases and sales of securities on organised exchanges and implemented electronic settlement for equity transactions and money market instruments, so when I encountered Satoshi Nakamoto’s Bitcoin whitepaper, I was awakened to the power of decentralized databases and distributed ledger systems and the superior advantages over the centralized databases I’d been working with for so many years,” said Singer.
This sentiment was also echoed by speakers who highlighted how crypto adoption will be a key factor in the advancement of Africa’s technological future at last week’s AfricaCom conference. “The perceived issues with crypto serve to make us forget the problems which have beset the traditional financial systems and which have led to a lack of financial inclusion and huge unbanked deposits, thus severely hampering economic growth and financial freedom in Africa.” said Luno’s CEO, Marcus Swanepoel. “Cryptocurrencies can help solve some of the problems and although the technology is still nascent, the long-term benefits are very clear,” he added. “Our recent Future of Money research suggests that in Africa cryptocurrency can provide a more secure and cheaper means of exchanging value. This is why we believe that as new cryptocurrencies linked to global brands are introduced, they’ll gain massive adoption across the continent,” Marius Reitz, Luno GM for Africa elaborated.
“Blockchain-based technologies have the potential to improve Africa’s digital economy and upgrade the continent to a better financial system. With cryptocurrencies users will have access to a more inclusive financial system,” added Reitz.
One of blockchain technology’s unique properties is that it is able to manage
millions and millions of micro accounts at virtually no cost. “If you look at Africa, there are a lot of transactions and spending power but that spending power is limited and therefore there’s need to include more people into this economy,” said Llew Morkel, Founder and CEO, Fraxeum at AfricaCom. “Blockchain allows us to create financial services for this African market in micro fashion,” he added.
“We've built a fintech innovation platform that allows developers all over the African continent and the world to build their solutions on top of our platform. Typically, the business of fintech is a very expensive and legally complex so our platform helps with
the development, legal, and we even source funding for the right projects. Our immediate focus is South Africa where we’ll launch our first financial product before year-end, with a view to expand into other markets on the continent,” Morkel explained.
Three key components make it possible to serve the unbanked populations, particularly in developing markets such as Africa. “We have essentially created a peer-to-peer financial marketplace which includes all three: a listing service similar to eBay, an escrow service much like PayPal, and a cryptocurrency wallet,” said Ray Youssef, CEO of Paxful Inc.
Once people, particularly in developing countries have alternatives to government issued fiat currencies which have historically been prone to hyperinflation, they’ll be able to gain greater participation in an inevitable global digital economy of the future. “At that point we’ll see a significant shift in how global commerce is conducted and this should level the playing fields and enable effective cross-border trade,” explained Richard de Sousa, Founder of cryptocurrency trading platform AltCoinTrader.
Blockchain technology progressing by leaps and bounds
Blockchain as a Service
Among the exhibitors at AfricaCom was æternity blockchain, a scalable blockchain platform that enables high-speed transacting, purely-functional smart contracts, and decentralized oracles. “æternity is promoting the adoption of blockchain technology, which has the potential to disrupt the current centralised, linearly structured systems that typically create bottlenecks and thus a perception of scarcity,” said Apollo Eric, the Africa lead for æternity Hub Africa – a Kenyan based software company developing decentralized applications on æternity’s open-source blockchain platform. “Africa will hugely benefit from a decentralised planning of economic and governance systems, and in doing so, grow the continent out of poverty,” he added.
At the AfricaCom event, in the Microsoft Learning Lab at the AfricaTech Exhibition, Fabian van der Merwe, the Azure Blockchain Service Lead for South Africa led a demo showcasing the ease with which blockchain solutions can be deployed on Azure Blockchain Workbench. The demonstration showed how Blockchain as a Service (BaaS) can be used in Microsoft Azure to build a secured data structure and create a distributed transactional digital ledger.
“Using a solution template in the Azure Marketplace, Blockchain Workbench can be deployed,” explained the team. “Azure Blockchain Workbench Preview simplifies blockchain application development by providing a solution using several Azure components. The template allows users to pick modules and components to deploy including blockchain stack, type of client application, and support for IoT integration. Upon deployment, Blockchain Workbench provides access to a web app, iOS app, and Android app,” they elaborated.
Trade
Attendees discussed some of the recent developments in live application of blockchain on the continent including how the Eastern and Southern African Trade and Development Bank (TDB) closed the first live end-to-end trade finance transaction using blockchain technology in a US$22mn sugar transaction deal. “With this transaction, we have the potential to revolutionise how we finance cross-border trade at the bank, said Michael Awori, chief operating officer at TDB. “Not only will it impact our bottom line, but it will enable us to reduce processing time, be more responsive to our clients, and de-risk transactions,” he added.
In this blockchain tech use case, a letter of credit confirmation and a discounting transaction were performed digitally in one single private blockchain, reducing the duration for deal completion by four days when compared to a conventional paper-based process. The process also minimised all parties’ risks by eradicating potential errors and inconsistencies in the exchange or amending of documents. “We have plans to carry out US$10bn-worth of African trade transactions with the Asia Pacific region, including Japan, by June 2020,” said Samir Neji, CEO of dltledgers, an inter enterprise blockchain company which was involved in the deal.
Education
Cape Town blockchain-based startup, Registree struck a partnership with the University of Cape Town to create blockchain-based records for thousands of students. The blockchain-based student registry is aimed at addressing the most problems of youth unemployment rate and skills shortage.
Registree uses a combination of traditional databases and the Ethereum blockchain. “Protecting student’s privacy is a priority that’s why blockchain is a key component of our technology stack. With it we are able to strike a fine balance between the universities’ responsibilities as data custodians, the students’ right to privacy, and third parties’ demand for these data,” said Sabine Bertram, Chief Technology Officer of Registree and Ph.D. student at UCT.
In a demonstration hosted by UCT and McKinsey & Company, students were invited to register via Registree, which provided blockchain-verified digital transcripts.
Property
Data from Statistics South Africa (StatsSA)’s General Household Survey indicates that 13.9% of households live in informal dwellings which makes property registry administratively complicated. However, recently the Centre for Affordable Housing Finance in Africa (CAHF), research consultancy 71point4 and Seso Global announced their partnership intended to develop South Africa’s first blockchain-based property register. The pilot study area will consist of almost 1,000 government subsidised properties located in four sites in Makhaza, Khayelitsha that have not been registered on the deeds registry properties.
“The title deed backlog in government subsidy housing properties is enormous,” said Kecia Rust, the CEO of CAHF. Using blockchain they intend on storing the data about who lives or has ownership claim of these properties in a decentralised, secure database that can be updated without any loss of historic data.
“The Seso platform facilitates and records transactions such as sales and transfers out of deceased estates and integrates with third parties who facilitate transactions, including mortgage lenders,” said Daniel Bloch, the CEO of Seso Global.
Written 2019. For more check out Tech in Africa
