Will Africa become the Next Big Financial Technology Innovation Hub?

December 22, 2018

Illustration


By David Drake

As the interest in blockchain grows around the world, Africa as a continent is progressively embracing cryptocurrencies in various sectors. Just recently, Binance Exchange, a facilitator of crypto transactions, began operations in Uganda. This move came as a surprise to many in the crypto industry, and has since generated the interest of among other exchanges.

Soon after Binance’s entry, Luno, a London crypto-based company, set its eyes on Uganda. The company already has a regional headquarter in South Africa and is aiming at changing the financial industry and improving trading through the banking sector. This interest by Luno and Binance, shows the potential of the African market in adopting blockchain technology and cryptocurrencies.

Key Drivers

Several factors have led to the growing interest of crypto companies in Africa and money transfer is one of them. The high cost of transferring and converting money across borders has brought about the need to find money transfer alternatives. The security and ease with which crypto users can transfer money around the globe using the internet, at fairly less costs and with no third-party involvement, will be a big plus for the continent. This makes blockchain technology a viable platform in the huge money transfer industry.

High unemployment rate is the other reason for the growing virtual currency acceptance in the continent. The emergence of opportunities to work and do business online is slowly pushing chances for use of cryptocurrency e-commerce sites like BlockCommerce up, making work easier.

“This definitely will set the foundation of early entrants like Binance and others to establish themselves in a country like Uganda that has massive public support of crypto/blockchain businesses. Positive signs towards are also coming from several African countries, like Mauritius, Kenya, Nigeria, South Africa, Ghana and Zimbabwe. Indeed Africa is ready to potentially become a massive crypto/blockchain market opportunity for companies and can no longer be ignored,” notes SID Limited co-founder, Jose Merino.

African governments are increasingly supporting openness. Blockchain technology facilitates transparency and this is driving cryptocurrency interest to a whole new level in Africa. Uganda, for example, has set up a task force to discuss and identify the potential benefits of blockchain.

Initial coin offerings (ICO) startups are seen as avenues for raising money and cryptocurrencies are seen as an alternative to bank currencies and helps curb inflation. When combined, all these factors create space for African countries to incorporate blockchain in diverse areas.

Real Application

There are African countries that have already identified opportunities for real application of blockchain. The Kenyan government intends to use blockchain to manage a 500,000 units housing project by targeting possible home proprietors. Blockchain will be used to guarantee that allocation of houses is done fairly, reducing the risk of possible corruption by representatives. Another aim of the government is to gain citizens’ trust which has dwindled significantly due to previous corrupt practices.

ONE Communications, a UK-based company stated it will launch mCoin in Africa. mCoin is recognized for its ability to transfer digital currency via text and an application embedded in smartphones. The company targets the unbanked population that has access to mobile phones. South Africa is considered the most friendly when it comes to cryptocurrencies and has been a host to blockchain events.

The Kenyan population is being considered for introduction of crypto innovations by companies such as Pesamill Africa, an exchange that resolves KYC requirement issues in exchanges around the world. Pesamill will begin trading using Bitcoin, Ethereum, Bitcoin Cash, Ripple and Litecoin.

As more and more blockchain application opportunities emerge, Africa will likely use the technology to solve issues relating to its economies. But of important to note is the fact that cryptocurrencies and blockchain are being viewed as important technologies and are being incorporated in different sectors.





Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.