a BitcoinNews.com series
Part 4: Cryptocurrency and Blockchain in Africa Is Making a Difference
Both cryptocurrency and blockchain have a part to play in empowering African leaders to inject growth and financial inclusivity into their economies. Individual and local empowerment by taking responsibility for water, electricity, banking, IT, communications, education, local elections, and research are all achievable, as shown by a growth in crypto and blockchain projects in these sectors around the huge continent of Africa. Bitcoin News explores how some projects are making a difference.
Globalization has arguably transpired at the cost of the African nations, which primarily exports raw materials rather than manufactured goods that hold the larger profit margin. Cryptocurrency is an opportunity for the citizens of Africa to enter the global marketplace, investing in entrepreneurial ventures on a scale previously inaccessible.
The application of blockchain-based solutions to small local run enterprises may be a way of breaking the chains of corruption, exploitation by multinational industries and corrupt national governments for many Africans. The reason for using blockchain is that it is secure and transparent in nature. No individual or single entity can alter entries on the distributed ledger.
Connectivity is essential across Africa if it is to address the disparity of those that have and those that don’t and attract business from overseas. A new report by the International Telecommunications Union (ITU) has outlined that Africa will need to invest more on internet connectivity in order to maintain the continent’s current pace of cryptocurrency adoption.
Using the Sun
Solar power needs to be utilized more readily across some of the poorer and more remote parts of the continent. A project by Sun exchange is addressing this problem. AfricaPowerhive will be the beneficiary of funds generated from the sale of Sun Exchange’s SUNEX rewards tokens by public sale. The money will then be spent on developing solar-powered mini-grid projects in Sub-Saharan Africa.
The project will allow for the used solar panels to be sold off later to Sun Exchange members who will, in turn, own the cells used in the projects and subsequently profit from a sustained period of “solar-powered money”. Sun Exchange founder and CEO Abraham Cambridge said in a press release that:
“Together, we are working towards a world where no one is forced to cook with unsafe kerosene or wood-burning stoves, no child has to worry about how they will study after dark, and lack of energy access ceases to propel cycles of poverty.”
Education is an area being tackled using crypto in Rwanda where an NGO and a cryptocurrency platform are planning to construct a school by using only cryptocurrency funding.
The non-profit organization, Zam Zam Water, in a cooperative project with Peer-to-Peer finance platform provider Paxful is aiming to raise $100,000 for an education center. The project will be implemented in Rwanda’s Bugesera District, complete with full-time teaching staff.
The raising of estimated building costs of around $100,000 has been started for the new project with a donation of $20,000 from Paxful. The remaining funds will be raised through online crowdfunding. Cryptocurrency donations via Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Dash will be matched by the crypto platform’s BuiltWithBitcoin initiative until the necessary funds have been raised.
Out of the 20 countries with the highest fiat inflation according to the CIA World Factbook, 13 of them are in Africa. South Sudan has the worst inflation rate in Africa, over 100% per year, with Congo, Libya, Angola, Sudan, and Suriname having yearly fiat inflation in excess of 20%. Burundi, Mozambique, Sierra Leone, Nigeria, Egypt, Malawi, Liberia, and Ghana, have yearly fiat inflation rates in excess of 10%.
Additionally, a large fraction of Africans doesn’t have banks or access to the financial system. For example, in Sub-Saharan Africa, only 43% of those 15 or older have bank accounts, versus 69% in the rest of the world. Cryptocurrency can provide the financial infrastructure that Africans desperately need but don’t have access to.
Lady Victoria Walker, CEO of the United Digital Currency Reserve Foundation and UK based fintech entrepreneur feels that new technologies such as blockchain and cryptocurrency are essential factors in empowering African leaders to inject growth and financial inclusivity into their economies. She argues:
“Bitcoin is a reality. We have all major world governments scrambling to make sense of it and world leaders sharing their views on the currency. For the past 700 years, our world has relied on the European legacy banking system for means of payments and transactions. Bitcoin is definitely challenging the traditional way when it comes to the transfer of value. Just like the internet changed how we shop, bank, date and find information.”
Solutions are there, such as Africa-focused cryptocurrency exchange called Coindirect. Co-founder Stephen Young says that Africa has unique problems and these must be considered in any startup plan for cryptocurrency adoption on the continent. He feels that current exchanges don’t take these into consideration. In terms of African fiat currencies, Young identifies their systemic volatility, insecurity and lack of governance as factors that the crypto space need to take on board: He argues:
“If Africans are to benefit from the cryptocurrency revolution we need make it easier to buy, store and trade cryptocurrencies. As Africans, it is our responsibility to help build the infrastructure and we need to be a part of the revolution.”
Although cryptocurrency isn’t a solution to all of Africa’s economic instabilities, it is a marketplace full of innovations that have the potential to diversify and better the economy of the continent.
Skeptics have argued that it has been lenders who have historically benefited from microloans, due to non-restrictive or in some instances a complete lack of barriers, which often translate to high-interest rates. The application of blockchain-based solutions to these loans is increasingly being cited by business as a way of addressing other microloan issues such as large overheads, slow delivery, and corruption. The reason for using blockchain is that it is secure and transparent in nature. No individual or single entity can alter entries on the distributed ledger.
An IBM pilot project, developed at the IBM Lab in Nairobi, uses Hyperledger Fabric, a blockchain framework implementation that acts as a bedrock for developing applications and solutions. The project simply requires African users to own a mobile and need capital to grow their business. The IBM blockchain program aims to fill the finance gap so small ventures can flourish on the African continent.
Andrew Kinai, the lead researcher at IBM research, suggested that the aim of the program was to offer the opportunity for small businesses to participate in an interdependent ecosystem based on SMS. Users, some with limited IT literacy would be better positioned to access financing for their orders.
In Kenya, misappropriation of funds and fraud at a local level has been a huge problem, with the police, local leaders and utilities all taking bribes. Blockchain is now the last attempt at addressing some of these local issues after years of mismanagement when it was realized that other methods were prone to illegal intervention. A new local building product will be its first use-case. The National Housing Fund under the Finance Act of 2018, to which Kenyans contribute 1.5 percent of their salary, will be responsible for the new blockchain-backed building project, with further financial support from employers.
Also in June, decentralized liquidity network Bancor, in partnership with the non-profit foundation, Grassroots Economics, launched a network of blockchain-based community currencies in Kenya aimed at combating poverty. The project seeks to stimulate local and regional commerce and peer-to-peer activity by enabling Kenyan communities to create and manage their own digital tokens.
There are many reasons why Africans are beginning to turn to cryptocurrencies rather than traditional currencies. Many nationals fall foul of inflation and hyperinflation, resulting in weak and unstable financial systems. Recently, countries such as Zimbabwe, South Sudan, and oil-rich Nigeria have all suffered, many of these countries with inflation rates well into the hundreds of percentages. In these situations, it is hardly surprising that populations look to a more stable form of monetary solutions in their daily lives.
Africa has huge challenges ahead, but with the help of blockchain technology, businesses can be transformed using more efficient ways of working. Blockchain can move Africa forward, simplifying existing systems and processes to lower costs. Blockchain can help reduce fraud, enable fast transactions, secure supply chains while maintaining transparency. It also removes human error and inefficiencies from a continent which is still developing.
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