Emerging Markets: Unlocking Africa’s Untapped Potential with Blockchain
For years, the narrative surrounding Africa’s postcolonial economic development was one of failure. The reality however, is that African communities have been growing. Tipped as the next big growth market due to its young population, Africa is expected to experience exponential growth. Central to this is an emerging digital ecosystem.
Mobile phones have been a key enabler for payments, accounts and enhanced consumer information . The adoption of cryptocurrencies and blockchains continues to rise, enabled through companies that have allowed for remittances that are not plagued with high transaction settlement times and fees. Now more than ever, there is certainly reason for optimism surrounding Africa’s future development and blockchain leapfrogging current systems, as reflected in our community poll:
However, there are still barriers to realizing the promise of exponential growth. In 2019, the World Bank had cut its growth forecast for Sub-Saharan Africa to 2.8% from an initial 3.3% ; while the IMF cut its 2019 economic growth projection for sub-Saharan Africa to 3.5%, from 3.8% . These cuts reflect a continued global uncertainty on the development of the continent that stems from a host of factors, primarily the macroeconomic instability that includes poorly managed debt, inflation and deficits.
If Africa is to transform into the global powerhouse that it certainly has the potential to be, blockchain solutions need to not only be examining immediate financial services that make finance more inclusive, but also utilities that resolve the deeply rooted issues that have troubled the continent for decades.
A primary obstacle to better development trends for many developing countries in Africa and beyond is institutional weakness . With corruption more likely to occur in developing communities, it weakens national institutions and results in a host of adverse effects on economic growth. Africa has certainly felt the effects of institutions weakened by corruption as evidenced by reduced investment, increased inflation and decreased personal income . Institutional weakness has also led to low social trust among communities as well as minimal improvements to both infrastructure and education.
To mitigate the issue of institutional weakness, blockchain based budget tracking mechanisms could be implemented on both a national and local level. Given that such applications could provide transparency with regard to transactions and expenditure tracking, it would significantly raise the difficulty of corruption and embezzlement. Not only this, but it would provide a source of conclusive information for foreign investors, the general public and governments to track expenditures and analyse budgets. With this accurate data, governments and international organizations can properly compile solution concepts to poverty as well as monitor development goals.
Although there is still the risk that assets could be redirected, further measures could be introduced to discourage such behaviour. For example, Blockchain facilitates smart property via smart contracts. Property in this case could range from material possessions to non-physical property such as shares. If the property is put forward as collateral in a bribe for instance, the smart contract would not allow the owner to extend the same property as a collateral or security to another bank .
Furthermore, the electoral process must be restructured. Allegations of voting fraud have been particularly prevalent under dictatorial regimes in Africa which has resulted in considerable social distrust toward governments . Although efforts have been made to eliminate both election corruption and invalidation, they have thus far proved unfruitful due to centralised voting architecture . If properly installed, a blockchain based voting mechanism would provide anonymity, security, and transparency to the entire process.
Close to 500 million people in Africa, or 40% of its total population, are without proof of legal identity . Not having any form of identification significantly impedes one’s ability to participate in activities such as opening a bank account, voting in elections, or using government services. Furthermore, on an institutional level, the lack of data capture and information on individuals leave many institutions unable to serve the public needs efficiently.
Fortunately, blockchain solutions are capable of providing digital and self sovereign identification to individuals in Africa in a manner that prevents deception and hence eliminates the necessity of expensive verification practices. Financial inclusion would be increased through accessible, robust, and verifiable ID systems that facilitate the Know Your Customer (KYC) requirements of providers and expand the general usage of financial services. Also, access to social safety nets and health services would be improved through the accurate identification of the vulnerable . Fundamentally, individuals would be able participate fully in society and exercise one’s rights.
Agreed-upon property rights allow entrepreneurs to use the assets as collateral and thus increase their access to capital. However, according to , approximately 90 percent of land is undocumented or unregistered in rural Africa. As a result, the lack of property rights is a significant barrier to entrepreneurship and economic development in the continent. Furthermore, for the individuals that have attained property rights, many have suffered from corrupt government officials and local agents who allocate the titles to themselves.
Given that an immutable property registry could be created through blockchain technology whereby all real estate can be legally registered and documented, solutions that offer such services hold the most promise in resolving the issue of property rights not only in Africa but across multiple developing countries. The result of titling property in a manner that is immutable and frictionless is a transformation from existing land rights to individualised, tradable assets that can circulate within a market economy facilitated by Conflux Network protocols, thus promoting economic growth by transferring land into the hands of those who can use it most productively. Furthermore,
Implementing such blockchain solutions in these areas would not be without its challenges. Infrastructure remains an issue across the African continent while regulation and policy varies from country to country. Questions remain on whether governments would be willing to adopt solutions that bring transparency and accountability into their actions. To address these concerns, those operating in Africa need to develop healthy and ongoing relations with respective governments. Educate those who are unaware of the systemic change and positive impact it can make while illustrating that blockchain technology can lead Africa toward meeting the goals outlined in the continents development plan, Agenda 2063. Furthermore, show how entrepreneurs and individuals alike can create opportunity and growth through decentralised applications.
At Conflux Network, we are building the infrastructure for such applications that can foster innovation and broaden access to systems that will propel Africa toward people centered development, empowerment and economic growth. Recently, we partnered with Fliqpay, a cryptocurrency payment gateway and cross border payment solution based in Africa, to ensure faster payment processing as well as cheaper settlement for cross-border transactions through our blockchain. This is the first of many steps we are taking to empower those in developing communities and cultivate an ecosystem that realises their untapped potential.
Written by Conflux Network’s Analyst Niall Yorke