Frontier markets can use innovative technology to leapfrog traditional infrastructure and grow at an accelerated pace.

How can blockchain technology be applied in Africa? There have been many applications of this in payments, governance structures and agriculture – there are even blockchain accelerator hubs for local startups in Africa. One of which is BitHub.Africa, which aims to accelerate blockchain applications in the following sectors: Agriculture, Identity Management, Sustainable Energy Access & Financial Services. If you’re unsure what blockchain technology is, then here are the basics below (if you’re a pro then feel free to skip ahead).

Blockchain this Blockchain that – Just a Buzzword?

A blockchain is a growing list of records, called blocks. Each block contains the previous blocks information, a timestamp and transactional data. Due to its innovative design, a blockchain is resistant to modification of its data. It is ¨an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.¨ If you want to dig deeper into this technology and as to why the blockchain data is ‘unmodifiable’ then click here. Below are a few examples of how startups have used blockchain in Africa.

BanQu – An Economic Identity

BanQu is aiming to give economic identities to those in extreme poverty who have a lack of documentation. They do this by leveraging blockchain technology, once these people get this identity they can prove more about themselves in order to, for example, get a favorable micro-loan. Let’s take a farmer in the agriculture business.

  1. Register a farmer who owns a farm onto the blockchain.
  2. Digitalize their land by taking a GPS picture.
  3. Verify the fact that they’ve owned the farm for 20+ years.
  4. Record the transactional data history with buyers during those 20+ years.
  5. Record their micro-loan history with the various providers they have used.

Here you now have a secure public distributed ledger with multiple transactions which this farmer has been involved in. Now this farmer can prove their financially stability to others. Thus, they will be more inclined to obtain a larger micro-loan and/or a better interest rate.

Energy Web Foundation – The Sustainable Electrification of Africa

The harnessing of electricity will be a great boost for the African economy and standard of life. There is too much land to create a single grid for each country in its current situation. The logistical problems in order to achieve this are exhaustive. Instead, a more efficient method would be for towns to individually install a power source e.g. solar panels or turbines. Neighboring towns can then become interconnected and join a blockchain-based platform. This platform would allow surplus energy to be sent and sold to these nearby communities. As time goes by the network can connect to more towns. The supply & demand issue will then become less of a problem thanks to the blockchain platform.

The above is what Energy Web Foundation (EWF) is working on. Through a decentralized set of micro-grids spread across small communities, it could be possible to trade energy between them using the blockchain powered platform. This would mean that there would be no need for intervention by an energy company. Alternatively, smart meters will permit the blockchain to hold all transactional data.

Billmari – Minimizing Remittance Fees with Blockchain

Bitmari, a Zimbabwe based startup, is aiming to lower remittance fees in cross-border transactions to Africa. Transferring money to and from South Africa had an average fee of 17%, while other less connected African countries paid even more. The start-up wants to connect the African economy by lowering the barriers of cross-border transactions (e.g. time & fees).

The Bitmari app allows you to transfer your local currency into bitcoin, then instantaneously send it across borders with minimal fees to the receiver in Zimbabwe, who can then transfer it into their local currency. To be clear this is not a platform to buy and sell Bitcoin. Instead Bitmari is leveraging bitcoin’s extremely cheap and efficient attributes for remittance purposes. For those worrying about the volatility, it’s a rather quick process of transferring between currencies. Even so, if the value did drop by 5% during those few minutes, you would most probably still be paying a total less than the average of around 20% remittance fees.

Main Takeaways

  • Blockchain can be used in supply chains in order for them to become more transparent and reliable. This is a benefit for those who could potentially be getting taken advantage of.
  • Blockchain can imitate the job of governing bodies that verify and keep transactional data. Using this democratized system allows for efficiency, flexibility and cost reductions, as we have seen with BanQu and EWF.
  • Remittance fees are absurdly high for Africa, around 20%. It is possible to bypass banks and money transfer operators that charge these high amounts. This can be done by leveraging alternative currencies that are based upon blockchain technology.