by Reda Mansouri

Blockchain promises.

Blockchain, the technology behind Bitcoin and every other cryptocurrency is a type of database. A decentralized network that stores data and encrypts it in blocks of code that cannot be altered, where anyone can track back the information until its origin. One advantage of this technology is that it allows to complete exchanges without the need for a third party. In most common business transactions these third parties such as banks cause international transactions to be slow and costly. The promise of Blockchain technology is the acceleration of the economy through the simplification of business transactions because it adds the element of trust to business relationships, increases security, and offers lower transaction cost. 

Blockchain beginnings in African business.

TDB (Trade and Development Bank) in October 2019 the first development financial institution in Africa to complete a transaction using blockchain technology, in order to facilitate the import of sugar from India.

In the beginning of 2021, 400 million $ of fertilizer were exported from Morocco to Ethiopia thanks to blockchain technology, which marked the first intra-African business transaction of the sort. In fact, the OCP (Morocco’s phosphates and fertilizer producer) and TDB communicated on the matter early April 2021 mentioning that a conventional process would have taken 3 to 6 weeks, when the use of blockchain allowed for the transaction to happen in 2 hours. Among the advantages that characterized using blockchain in this trade are the security of the operation, transparency in the supply chain and low carbon impact.

IOHK, Blockchain pioneers in Africa with Cardano.

It is hard to talk about Blockchain in Africa without mentioning Cardano, an emerging blockchain platform developed by IOHK. The company was created by Charles Hoskinson who co-founded Ethereum, the second biggest crypto asset after the famous Bitcoin. A lot of crypto investors who put money on the currency linked to Cardano, the ADA, are awaiting news on the partnerships in Africa, hoping it will pump the price in the very volatile crypto market. In fact, IOHK decided to focus on the continent, aiming to increase adoption with a strategy of teaching people how to utilize blockchain technology instead of using ready-made solutions. 

The company debuted its activities on the continent in 2018 with Ethiopia as a point of entry and implemented Cardano to the supply chain systems, notably in the coffee industry. On April 29th, IOHK announced a deal with the Ethiopian government, presented as being the biggest public blockchain deal in the world. 

This deal concerns one of the emerging applications of the blockchain: digital identity. In fact, the initiative consists in providing 5 million students with blockchain-based IDs, running on the Cardano platform, to allow the authorities to track their academic performance. This aims to solve the problem of fake certification, which is a serious one in Ethiopia. The hope is also to open more opportunities to young Ethiopians in Western countries, where their certification could be documented in the blockchain and help potential host universities around the globe verify their academic records. 

IOHK is now implemented in 5 focus countries: Ethiopia, South Africa, Kenya, Nigeria and Tanzania, but according to John O’Connor, director of African operations at IOHK, 15 more African countries are expected to follow.

According to IOHK founder Hoskinson, in order to accelerate its development in the coming decade, Africa will go towards an infrastructure overhaul in every major legislative, administrative, and financial system in the next decade. He also sees an opportunity in “Banking the Unbanked”, with a relatively large African population without access to basic financial services and a smartphone adoption already huge on the continent, representing an opportunity to provide crypto financial services quickly and efficiently.

Will African countries use Blockchain in infrastructure development ?  

Blockchain sceptics often point out that the technology is not needed in the western world, that it is a non problem-solving luxury. Mainly because of the already existing strong infrastructures in the western world. In developing countries however, blockchain could impact the governance tools such as identity systems, property ledgers, supply chain systems and payment systems.

Governments could be tempted to use this technology, depending on how advanced the current infrastructures are in their country. In fact, blockchain could represent a good opportunity for Africa to get to the next level, without building the intermediary infrastructures that are currently in place in the western world. However, governments are still measuring the benefits and future outcomes of adopting blockchain. For instance, cryptocurrencies are banned in several African countries since they are considered a threat to their domestic currencies. Therefore, the implementation of such a technology will depend on the regulations that will be put in place as blockchain is still at the beginning of its journey.