How Blockchain Technology Can Shape the Future of Africa’s Digital Economy

Wednesday, November 24, 2021/04:40PM/
by Business & Market Unit/ Header Image Credit: Blockgeeks

Many
have asked and will continue to ask questions around what the future holds in a
digital economy, as we continue to witness increased digital connection among
people, businesses, governments, devices, data, and processes, with the global internet of things
(IoT) market projected to reach USD$1,463.19 billion by 2027.

As
the digital landscape continues to evolve, businesses seek clarity and
opportunities to scale and reinvent themselves to ensure they remain relevant
in the ever-changing world. While some ambiguities persist, organisations like
Interswitch are helping to demystify the ambiguities around critical
technologies that are poised to shape the business environment especially in
Africa. One of such is Blockchain technology.

On
October 15, 2021, Interswitch unveiled its whitepaper on blockchain technology
titled “Blockchain Technology: The Future of Africa’s Digital Economy”.
The 12-page whitepaper (available for download here) is an effort by the
leading integrated digital payment and e-commerce company to share thoughts
around blockchain technology and how organisations can leverage this innovation
to transform their businesses. The report shone light on the prospects it
portends for the future of Africa’s digital economy, the key players involved
in blockchain tech, some use cases, the challenges and recommendations that
will facilitate the adoption of blockchain technology.

According
to a PwC research report that assessed how blockchain is currently being used
across industries, Blockchain has the potential to boost global
GDP by USD 1.76 trillion by 2030, with Source Verification
(USD 962bn), Payments and Financial Instruments (USD 433bn), Identity (USD
224bn), Contracts and Dispute Resolution (USD 73bn) and Customer Engagements
(USD 54bn) as the five key areas with the most potential.

Blockchain and the AfCFTA, Riding a Bull

With
the implementation of the landmark African Continental Free Trade Area (AfCFTA)
agreement, it is expected that Africa will be the largest free trade area in
the world connecting 1.3 billion people across 55 countries together with a
combined gross domestic product (GDP) valued at US$3.4 trillion. Paul Kukubo, Chief
Executive of the Kenya ICT Board, is optimistic that blockchain and smart
contracts could help administer border procedures and national single windows
in a more efficient, transparent, and secure manner, and improve the accuracy
of trade data.

Africa
can benefit from the use of blockchain technology to facilitate cross-border
transactions, this will help reduce the high cost of remittance payment, enable
access to financial services, ensure privacy, create jobs, improve business
environment and foster healthy competition.

Parties
of the AfCFTA and interested stakeholders understand that the lifeblood of
trade is payments. Therefore, cross-border trade will be difficult without an
efficient and effective means to make payments. With the blockchain technology,
cross-border payments will rely less on correspondent networks, standardise
data and manage credit risks better, to mention a few. It is therefore no
wonder that Afreximbank recently rolled out PAPSS stating that the system will
serve as a continent-wide platform for the processing, clearing, and settling
of intra-African trade and commerce payments leveraging a multilateral net
settlement system, and its full implementation will save the continent more
than US$5 billion in payment transaction costs each year.

Making Digital Count for More

Experts
also agree that with blockchain, the AfCFTA proposition will be strengthened
such that that while individual African countries deal with the process of
digitalising their trading systems, they can also adopt a common digitised
platform that would facilitate continental free trade, and these platforms can
help realise the goal of increased inter-regional trade within Africa and
change Africa from a resource dependent continent to an active trading partner
with the world and within Africa.

Little wonder why
Interswitch has recently partnered with Interstellar to jointly develop
blockchain-powered infrastructure services and solutions. Akeem Lawal, Managing Director, Transaction Switching and Payment
Processing (Purepay) at Interswitch explained that the partnership underscores
the company’s intent on driving blockchain enabled solutions on the continent.
He said, “This new alliance
underscores the directional evolution of our blockchain innovation strategy
which is premised on our strategic intent of developing a native, proprietary
enterprise-grade distributed ledger technology stack that is practically
tailored to the African context. This enables us to progressively digitise
multiple industry value-chains across African markets whilst also supporting
the actualisation of the Pan-African Payment Ecosystem, riding the wave of
opportunities created by such initiatives as the AfCFTA”.

Leveraging
P2P

Information security
experts also assert that that blockchain can enable peer-to-peer payments
without an intermediary, leveraging a robust multilateral net settlement system
as the Interswitch blockchain platform.

As
explained in the whitepaper, blockchain is a chain of blocks that solves the
problem of centralisation, hence it is said that blockchains are decentralised digital
ledgers which utilise cryptographic algorithms to verify the creation and
transfer of digitally represented information over a peer-to-peer network. The technology
is built on the principles of decentralisation, transparency, auditability, security
and privacy, which are poised to encourage quick adoption especially amongst
digital natives.

The
whitepaper emphasised that blockchain technology has the potential to foster
innovation and broaden access to banking systems for countries and provide
greater access to financial services in developing and emerging markets like
the African continent. Therefore, African financial institutions need to
position their business strategically to embrace this new and disruptive
technology.

However,
to achieve this, the whitepaper identified the following as some of the
steps that need to be taken.

Private and
public stakeholders need to make necessary adjustments and infuse blockchain
technology into their policies, while engaging responsible bodies with the aim
of influencing policy and regulation changes that will favour the adoption of blockchain
technology.
Investment in
proper infrastructure is necessary.
Skill development
is critical to achieve the critical mass of skilled human resources in terms of
developers, integrators and administrators that can build and maintain the
system this technology will be operating.

The Whiteness of a White Paper

Other
insights shared in the whitepaper include various use cases in finance,
education, insurance, health, law, governance, travel, supply chain, amongst
others. The paper further noted that technical, regulatory, and institutional
challenges need to be addressed to encourage the adoption and acceptance of blockchain
by businesses

and
individuals in Africa.

To
download the whitepaper, visit https://www.interswitchgroup.com/blockchain

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