Can blockchain make a difference? Africa sees vast monetary potential

As technological innovations continue to spread across Africa, the continent could provide some unique use cases for blockchain technology. The African has continually been driving innovation across multiple industries, with mobile payments a prime example of the potential of technology to dramatically improve the lives of everyday Africans.

While many countries in Africa are still considered to be developing economies, some of its major states have been at the forefront of technological innovation. The use of blockchain technology is becoming part of the equation as it permeates different sectors and institutions.

Michelle Chivunga, CEO and founder of the digital economy and blockchain solutions group Global Policy House, as well as an advisor to the governments of Bermuda, the African Union and the United Kingdom, told Cointelegraph:

“Countries in Africa, including Ghana, are looking to use blockchain for the land registry and many countries for digital identity, provenance in supply chains, healthcare and financing. E-commerce and fintech are the main drivers of the digital economy in Africa. I see it grow and pave the way for more blockchain businesses. “

Victor Mapunga, a Zimbabwean blockchain entrepreneur who co-founded FlexID, a blockchain-based digital identity solutions portfolio running on the Algorand protocol, told Cointelegraph that the infrastructure that powers the use and trade of cryptocurrencies is has been an important engine of blockchain technology across the continent but a plethora of use cases have already been explored: “There is still a lot of work to be done, so far peer-to-peer and centralized crypto exchanges have been the predominant flavor “.

Cape Town-based software developer and smart contract engineer Stephen Young, the founder and CEO of the decentralized finance platform NFTfi – a peer-to-peer marketplace for non-fungible token-backed loans – told Cointelegraph that l ‘cryptocurrency onboarding infrastructure such as centralized exchanges and P2P have been implemented efficiently in several African countries and is the most prominent use of blockchain technology in the continent. He added that the potential use of DeFi platforms could be on the cards in the coming year:

“In recent years, the infrastructure that allows people to buy and trade cryptocurrencies has come a long way. This, combined with informal peer-to-peer trading, allows far more Africans to get hold of cryptocurrencies. “

Potential for the greatest impact

Peter Munnings, a former ConsenSys engineer who co-founded decentralized liquidity management and international payments firm Adhara in 2018, stressed to Cointelegraph the potential for better cross-border settlement through blockchain solutions in the wake of his work experience in the South African banking sector, “Across Africa, settlement is slow and complicated due to lack of liquidity.” According to him, most of the intra-African settlements are still undertaken across the United States, adding: “Switching from Kenyan to Tanzanian shillings via the USD will always be slow and complicated.”

Munnings pointed out that a couple of projects are looking to overhaul this space, such as the Pan-Africa Payment and Settlement System and Fnality, which are actively collaborating with local government bodies. According to him, JP Morgan has also been active in space: “Having a commercial bank that incorporates the USD leg on all transactions (even if they are fast, simple and transparent) risks heading down the low road – or at least limiting the ability to create direct FX markets between African currencies “.

Young highlighted the potential to improve transactions between countries while also adding that people could potentially make a living from some cryptocurrency gaming platforms, which is a less obvious way to get paid. He added: “The obvious answer here is cross-border remittances. This and having hard money available as an option out of the corruption and terrible monetary policies imposed on many Africans by their governments. “

Chivunga believes blockchain technology could become a major catalyst for transforming some important industries across Africa. It identified challenges related to land registry, identity, pharmaceuticals / healthcare products and counterfeit products / medicines as prime candidates for blockchain-based solutions.

Chivunga also highlighted the upcoming implementation of the African Continental Free Trade Area as an opportunity for blockchain to play an “important catalytic role” in supporting greater transparency, visibility and inclusiveness across supply chains. He also hopes that blockchain will help stop wealth inequality across the continent and provide greater access to transparent and accountable finance:

“An area that fascinates me is the opportunity that the blockchain offers to decentralize access to wealth to support greater financial inclusion and support especially for micro, small and medium-sized enterprises; they represent at least 80% of businesses in Africa and yet they are so short of resources “.

The road ahead

As blockchain solutions are slowly being explored and developed to address uniquely African challenges, the potential for greater influence seems almost limitless. As Munnings told Cointelegraph, the continent is already leading the way in terms of cryptocurrency adoption, according to a Statista survey conducted in August 2020:

“Africa has another advantage in that it doesn’t have many legacy systems already in place. Kenya’s adoption of MPESA was less for how good MPESA was and more for lack of any other alternative. While first world countries have payment systems (credit card infrastructure) and highly liquid currencies, fast settlement times, etc., Africa has very few. “

Mapunga echoed Munnings’ sentiments about the lack of existing legacy infrastructure, but stressed that African universities are now more willing to try using digital credentials such as bachelor’s and diplomas. Indeed, education is a very important component in aiding the proliferation of blockchain technology and its potential application for Africa’s most relevant challenges. Chivunga stressed that it is not an answer to all problems, but understanding its capabilities will be the key to adoption.

Related: Blockchain Africa Conference: Education is a key driver for crypto adoption

Overall, there are a number of challenges hindering innovation, including digital connectivity, infrastructure issues, access to affordable data, increased education and awareness, according to Chivunga:

“As the foundations are strengthened, I think Africa will see more solutions developed not just with blockchain, but a convergence or mix of technologies. Africa can effectively promote greater adoption by avoiding the challenges of the past and designing solutions that are homegrown could benefit Africa significantly. “