Earlier this year, EMURGO Africa partnered with PwC, a leading global accounting firm, to roll out a report on the state of Web 3.0 in Africa, with a specific focus on Kenya, Nigeria, and South Africa. The groundbreaking report titled “State of Web 3.0 in Africa: Kenya, Nigeria and South Africa,” showcases the unprecedented potential of blockchain technology within the African landscape and the current standing of African countries within the global blockchain industry. With adequate backing of existing case studies, the report emphasised the roles Web 3.0 plays in various sectors of the economy including financial services and lending, healthcare provision and accessibility, trade and industry, logistics, and supply chain management.

The adoption of blockchain technology in Africa is slow but progressive. Blockchain and crypto assets are growing in popularity across the African continent, with the cryptocurrency market growing by over 1200% between 2020 and 2021. This shows that Web 3.0 presents a plethora of opportunities in Africa and there is a huge potential for implementation in areas like SME financing, smart contracts, governance, title deed registration, etc. The report highlights the various efforts by different players within Africa in the implementation of blockchain technologies, buttressing the fact that there is room for exponential growth in the blockchain industry.

About EMURGO Africa

To understand what EMURGO Africa is, one needs to delve into the Cardano platform. Cardano is an open-source blockchain platform that aims to be a decentralized application development platform with verifiable smart contracts and a multi-asset ledger. EMURGO is the co-founding firm of Cardano that has a specific focus on creating tools and resources for individuals and businesses building impactful Web 3 products on the Cardano platform. As one of the regional entities of EMURGO, EMURGO Africa was established to focus on developing the blockchain landscape of the African continent.

Since its creation, EMURGO Africa has invested in over 40 African startups that are solving problems and empowering African citizens in building financial capabilities, possessing identities, and accessing adequate healthcare. EMURGO Africa is committed to supporting, identifying and incubating blockchain talents that can impact most people in Africa. The report helps identify the current players in Kenya, Nigeria and South Africa and the potential and barriers associated with new actors performing there.

Blockchain and Cryptocurrency in Africa

Across the African continent, the popularity of cryptocurrency and blockchain is increasing. A report from Chainalysis showed that Africa is one of the fastest-growing cryptocurrency markets globally with Kenya, Nigeria and South Africa having the highest active users in the continent.

Despite the widespread adoption of blockchain technology, the country-wise use of unregulated digital currencies like cryptocurrencies can pose a threat to the financial system of the nations. They can be used to illegally transfer funds out of the region as a deterrent to the existing monetary policies and can be used by bad actors to prevent cashflows. The ability of cryptocurrencies to worsen the macroeconomic situation of countries and deter their monetary policies is why policymakers are sceptical about the mass adoption of cryptocurrencies as legally accepted entities.

Image showing the legal standpoint of African countries in the endorsement and acceptance of cryptocurrencies. Source: IMF

Home to approximately 1.17 billion people, 45% of whom do not have a bank account, Africa needs to explore new ways of exchanging value and harnessing a distributed ledger solution like blockchain as a way to foster socio-economic inclusiveness and financial security amongst the African citizens.

Because of the perceived opportunity for growth in Africa, investors have continually injected capital into the various African companies solving problems using Web 3 technologies. In fact, Kenya, Nigeria, and South Africa received 70% of Africa’s total blockchain funding in 2021. Despite the continued investment into African countries, the amount invested is still comparatively poor. Standard Bank reported that Africa, the second-largest continent in the world, only received 0.5% of the total global blockchain funding. To encourage more investment into African blockchain projects, decision-makers in Africa need to navigate the uncertain regulatory environment while promoting stakeholder awareness of the technology.

Potential Areas of Application for Blockchain in Africa

The report highlights the potential areas of application of blockchain technology for the benefit of the African people. There are currently few use cases of blockchain applications because of the poor understanding and knowledge of the technology. By harnessing the power of blockchain, it is clear that the potential of leapfrogging traditional infrastructures in African countries is enormous. Explore the potential use cases below:

SME Financing: Payment infrastructures and financing options running on blockchain platforms can facilitate the access of small and medium enterprises to funding and payments. There is also a huge opportunity in the use of AI to help business enterprises make credit decisions without the conventional documentation processes.

Supply Chain: The ability of blockchain to enhance the traceability of processes within supply and value chains can greatly help in improving logistical efficiencies. They can also be used to align stakeholders on the secure sharing and access to crucial data within the business operation.

Smart Contracts for Informal Labour Markets: Blockchain platforms can also be harnessed in the fulfilment and enforcement of obligations of contracting parties. Using immutable systems, contracts can be executed automatically and contracting agents cannot go back on their promises even if the parties don’t know one another.

Digitizing Trade Infrastructures: Trades can be more efficient when blockchain systems are utilized in making fast exchanges of value that are secure, efficient and transparent.

Governance: Blockchain can instil accountability in public officials by improving transparency in judicial and legal systems. It can also help in maintaining the integrity of the voting system eliminating instances of electoral malpractices.

Title Deed Registration: A centralized data where all the records of land allocations are documented can help the real estate industry in addressing challenges associated with the loss of data and forging of records. In addition, there can be more transparency in ownership changes which can decrease the instances of manipulation of deed titles.

Mobility: Blockchain can play a huge role in seamless ridesharing and tracking of vehicle histories. Because of the extra layer of traceability blockchain systems offer, the confidence in the logistics business can be greatly increased.

To conclude, the report did a great job of reiterating the plethora of opportunities that Web 3.0 technologies present for the African continent. Because of the decentralization and transparency that they offer, blockchain can be useful in solving germane African challenges like international remittances, land registration, and financial inclusion. To foster a more consolidated implementation of blockchain, key stakeholders need to work closely with regulators to create an African space that is receptive to the growth opportunities embedded in blockchain.