Can Blockchain Help To Democratize A More Transparent Africa?
Blockchain and cryptocurrencies have been controversial topics, linked to Silk Road and the Dark Web, but they could have huge potential in Africa.
Panelists at the recent Dot Finance Summit in Kigali, Rwanda waxed lyrical on blockchain’s potential to “democratize” Africa, saying the technology could bring in transparency which has until now often been missing across Africa.
This is because blockchain as a distributed ledger enables communities to record and share information, which could represent transactions, contracts, assets or identities. All entries are permanent, transparent and searchable, with blockchain tech replacing third-party intermediaries as the keepers of trust.
Viola Llewellyn, CEO of African alternative lending company Ovamba, told the conference blockchain could help “create a permanence” in Africa, levelling the playing field, while Samer Saab from payments company Wala said blockchain could help millions of people gain access to financial services for the first time.
The positive potential of blockchain tech is already in evidence across the continent. In the Democratic Republic of Congo (DRC), it is being used to track cobalt from mine to electronics manufacturer to ensure nothing mined unethically – such as by children – enters the supply chain.
Companies like BitPesa, Wala and SureRemit are using blockchain to cut the cost of and increase access to digital payments, making sending money even more affordable than through mobile money services such as M-Pesa.
The latter two companies were also amongst those that have managed to raise funding via cryptocurrencies, with initial coin offerings (ICOs) allowing cash-strapped startups the opportunity to bypass more traditional investors and raise money by selling digital tokens to the crowd.
Potential is there from every sector, from healthcare to agriculture. For example, mineral investor African Potash is working with Global Markets Exchange Group International’s (GMEX) FinComEco to develop blockchain-based platforms for Africa’s agricultural commodity markets.
The new system will connect farmers and traders with brokers and buyers to help them obtain better prices, cutting out middlemen. It is blockchain’s ability to do this that means it can be applied across the board to make African trade more transparent.
That being the case, there is a need for regulators across the continent to catch up and become more aware of the positive impact blockchain and services built upon it can have in Africa. That, thus far, has not been the case, with regulators and governments far more likely to be hostile.
Kenya’s Central Bank has warned people off bitcoin, and BitPesa is in fact barred from operating in its home country. The government has, however, just set up a blockchain taskforce to analyse how the tech could be harnessed for positive social and economic impact, but significant adoption is still some way off.
The same can be said of Nigeria, where the Senate has asked the country’s central bank and other regulators to “investigate the proliferation of bitcoin” and inform citizens about the “dangers” of cryptocurrencies.
Too often, African governments and regulators are scared off by the negative press surrounding bitcoin and the like, and fail to spot the potential of the underlying blockchain.
The same can also be said of banks, who have for years been concerned by new technologies and are only now starting to grasp that they must adopt them – and work with innovative startups – in order to grow their customer bases.
This was a view expressed by Saab at the Dot Finance Summit, who said though regulators make the rules, it is the compliance officers at African banks that apply them. He urged banks to go out and find new ways of using blockchain to encourage its further spread and gain more customers.
Happily, there is evidence African banks are taking on board such advice. Barclays Africa was involved in the first ever live trade finance transaction using blockchain, and other banks are starting to wake up to the potential of smart contracts, among other things.
The South African Reserve Bank (SARB), the Payments Association of South Africa, Financial Services Board, South Africa’s Central Securities Depository, and major banks likes ABSA and Standard Bank have also managed to circulate a smart contract on a private Ethereum-based blockchain network. The idea is that the solution can be used for issuing syndicated loans via blockchain.
These are all just the first, baby steps towards a new Africa, democratized and made more transparent by the blockchain. But as each new development proves its worth, and if regulators and governments awaken to the potential, they might in future be seen as the beginning of the blockchain revolution on the continent.
Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.
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