Blockchain in Africa

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GUEST POST by Paul Scott Managing Director at P2 Digital Holdings & Co-Founder at eXtendIT, Xigital & P2DH. Non-Executive Chairman at Whrrl

Paul will return next month to talk about some of the solutions offered by blockchain.

While Blockchain adoption in Africa is incredibly slow and lags the world by significant margin in all metrics such as number of projects, funds raised, use cases developed and regulatory initiatives (the list is exhaustive), the best use cases for Blockchain can be found on the continent of Africa.

My first world colleagues, counterparts and connections revel in the stories that I tell them about what life is like in Africa, and that’s from the relatively privileged position that I find myself in on the continent.

I ask them to imagine a world where service delivery failure is the norm, not the exception (up to 90% failure in many countries) – primarily through government corruption.

A world where alternative payment systems through mobile airtime have had to become pervasive due to the complete lack of services for the unbanked and under-banked – to the extent that banking has become effectively disintermediated by mobile money, where mobile airtime becomes a medium of exchange and can be used to purchase tens of thousands of products from thousands of merchants, both formal and informal.

A world where donor funding into some of the poorest countries in the world has an attrition rate of 85-90% (yes, the beneficiary sees 15% of the funds IF THEY ARE LUCKY) meaning that delivery of the absolute necessities in life like healthcare, food, water and shelter has almost zero chance of being delivered, an issue compounded when government delivery is non-existent and donor funds are all that can be relied upon.

A world where the strong man syndrome is well entrenched through rigged voting systems that render term-limits obsolete – constitutional changes are rife and almost unbelievably universally supported in referendums by 80+% of the population – and big business drives economies thereby ensuring the almost complete exclusion of small entrepreneurial endeavours from the market.

Let’s deal with each of these issues in turn and consider the role the Blockchain industry could play in enabling the population of the continent to reach their fullest potential.

  1. Government corruption:

The misappropriation of taxpayer funds in Africa has reached the level of a sport. There are ongoing tax revolts across the continent where many, varied and highly creative avoidance measures have been invented by the population due to the complete breakdown of trust in the government’s ability to deploy funds for the benefit of the population. Taxation collection and distribution on the Blockchain is the answer, where trust is immediately rebuilt, ironically through a trustless technology. What could be more African than this?

  • Payment systems:

In most countries other than those in Southern Africa, banking systems are massively fragmented to this extent: South Africa, the most advanced country has issued 19 banking licenses, of which 3 were issued in the last year. Countries in East and West Africa by comparison have in excess of 40 banking licenses and in some cases as many as 80. The natural result has become a fundamental lack of trust in institutions that are here today and could be gone tomorrow. This has created the opportunity for telecommunications providers to disrupt through innovative financing schemes utilising airtime balances. We know that the largest use case for Blockchain is financial disruption and this still remains the ideal scenario on the continent. I know of at least 8 projects that managed to raise some ICO funding however nothing has transpired, and possible the most advanced of these has had to wrap up their company due to lack of funds and adoption rates.

  • Donor funding:

A donor in the USA can claim a tax deduction if they donate funds into a an eligible 501(c)(3) regulated fund of up to 60% of adjusted gross income. These funds gather donations and the select projects in African (and other emerging) countries. A combination of theft, fraud, corruption and malfeasance means that up to 90% of the funds are stolen before reaching the project. Donor funds on-chain would solve this problem in a heartbeat. All funds are tracked – helping the US IRS too, by the way – and the donor and fund manager therefore has complete line-of-sight into the projects that benefit from their donations.

  • Government Business

In a blockchain-enabled society, similar to the way the Estonian government has been set up, there is no possibility for corruption, stealing an election, misspending taxation or any other means by which many African governments abuse their populations. I think this is by far the last of all Blockchain adoptions that will happen in Africa, however one can dream of the brightest futures!

Blockchain adoption in Africa will take time, however I am heartened by the number of people who continue to enter the field, even if only to educate themselves on the benefits and use cases for the technology. A really great trend in the last year has been the disconnections between cryptocurrencies and Blockchain. People are finally seeing the technology for the real benefits, rather than a noble means to a cynical scam ending.