Standard Bank: Blockchain can add impetus to Africa’s free-trade drive

By David Whitehouse

Posted on Monday, 27 June 2022 06:00
REUTERS/Darrin Zammit Lupi

African free trade can be a beneficiary of Blockchain as applications mature beyond crypto currencies, Ian Putter, head of blockchain for Africa at Standard Bank, tells The Africa Report.

Putter says Moroccan fertilizer group OCP has shown that Blockchain can be used to eliminate documentation and accelerate dispute resolution. OCP in 2021 became the first African company to execute an intra-African trade transaction using Blockchain, delivering phosphate fertilisers from Morocco to Ethiopia.

Smaller companies can also benefit in “a transparent environment lowering buffers to entry,” Putter says in Johannesburg.  “The transparent ledger will highlight where the bottlenecks are not only in fertilizers, but for soft commodities and ultimately will track produce through every step of its transformation.”

Blockchains work as decentralized ledgers which record digital transactions in the absence of any central administrator. Transactions are immutable and visible to anyone within the network. Blockchains can be used to support crypto-currencies, but also for other purposes. OCP says import-export trades can be executed digitally in under two hours, compared with weeks for paper-based transactions.

In Africa, Blockchain remains largely under-invested. The Africa Blockchain Report published by Standard Bank in May notes that Africa is still waiting for its first Blockchain “mega deal.”

  • Only $127m was raised last year, just 0.5% of total global blockchain funding.
  • Almost all of that was concentrated in just four jurisdictions. Nigeria, Kenya, South Africa and the Seychelles attracted 96% of the continent’s Blockchain venture funding.

Use cases

The continent is now seeing “huge interest in building use cases,” Putter says. He points to five key areas where Blockchain can have a positive impact in Africa.

Trade finance: The biggest challenge here is in administration and documentation, Putter says. Use cases have been implemented to manage letters of credit, strip out documentation and speed up international reconciliation processes.

Education: The higher education sector needs knowledge transfer between providers and learners, and tools to track and store this data are needed. Forward protocol provides the infrastructure for platforms to connect experts and learners by facilitating knowledge transfer with an incentivized reward system.

  • Putter points to Nigeria, Kenya, Uganda and South Africa as markets where Blockchain for education delivery can take off.
  • The potential educational impact is greatest in countries where Blockchain is not yet well understood, such as Tanzania and Malawi, he adds.

Agriculture: Blockchain can be used to connect all participants on the value chain and ultimately enable exchanges to ensure observable and fair prices.

Emissions: Carbon-reduction initiatives can validated and recorded in immutable form.

African art:  The continent’s creative talent can gain exposure through non-fungible tokens (NFTs).

“The biggest hurdle still for blockchain use cases are knowledge and understanding, “ Putter says. But there are now African initiatives to enhance education and research to enable use cases, he says.

  • Standard Bank has a partnership with Blockchain Research Institute Africa which promotes research and education.
  • Other groups such as Hedera and Cardano are also driving education initiatives, he adds.

Bottom line

African free trade could be the big problem that Blockchain is capable of helping to solve.

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