Blockchain is a type of distributed ledger for maintaining a permanent and tamper-proof record of transactional data. A Blockchain functions as a decentralised database that is managed by computers belonging to a peer-to-peer (P2P) network. Industry experts share with Intelligent CIO Africa how enterprises are adopting Blockchain technology to drive finance and trade on the continent.
In the past, Blockchains were commonly associated with digital currencies such as Bitcoin or alternate versions of Bitcoin like Bitcoin Cash. Now, Blockchain applications are being explored in many industries as a secure and cost-effective way to create and manage a distributed database and maintain records for digital transactions of all types.
Mervyn George, Innovation Strategy Lead, SAP Africa, said the shared, distributed and decentralised capabilities of Blockchain are finding their way into the mainstream with great potential.
George said ambitious entrepreneurs and innovators are investing long hours and mind-boggling sums of money to rework anything from automating finance and restoring public trust in healthcare to feeding over 10 billion people by 2050 and providing disaster relief to remote villagers.
“Blockchain is a distributed ledger, which involves recording transactions in blocks that are linked and secured by cryptography and then verified and stored across a network, making the ledger resistant to modification,” he said. “The interesting part is that this combination of capabilities in computing, connectivity and cryptography has applications not only in the financial world, but in any transactional environment, including a decentralised personal data management system that ensures users own and control their data.”
He pointed out that this is important because identification provides a foundation for human rights. “An estimated 1.1 billion people worldwide cannot officially prove their identity and we simply don’t know how many of the world’s more than 200 million migrants, 21.3 million refugees, or 10 million stateless persons have some form of identification. Many of these unidentified people are African,” he said.
Hamilton Ratshefola, Country General Manager, IBM, said Blockchain technology is changing the usual course of businesses in every industry. “There are many exciting examples – from food safety, smart contracts, healthcare, education, cross border payments, to luxury goods – where we have seen this technology work and make industries smarter, more efficient, resulting in strengthened trust,” he said.
Ratshefola pointed out that across the continent, Blockchain adoption is rising – and the industry is seeing this from both large enterprises and increasingly, individual entrepreneurs.
He said many business leaders are attracted to Blockchain, for the business model benefits. “CEOs are recognising that Blockchain is useful for their businesses and more than half of mid-sized businesses and considering deploying Blockchain solutions,” he said.
Bernard Bussy, Software Engineer at Andile, saidBlockchain is an enabling technology that leads to other innovations that create the use cases businesses want. “At Andile we currently use Blockchain technologies in building larger platforms. The users of the platform don’t necessarily see the Blockchain in action – it operates behind the scenes while they gain the benefits. There are numerous start-ups and enterprises globally and in South Africa working on Blockchain,” he said.
Busy said the most well-known is probably the Blockchain development being done at major banks such as Singapore Central Bank and JP Morgan. “As for its state in Africa, this isn’t easy to answer. But if we go by cryptocurrencies, the most popular current use-case for Blockchain, most African countries haven’t passed legislation to regulate and guide the industry. South Africa, Senegal, Sierra Leone and Tunisia are the few trailblazers in that regard,” he observed. “The South African Reserve Bank has also been very progressive around Blockchain, cryptocurrency conversations and has launched a number of initiatives in this regard.”
According to George, smart contracts that reside on the Blockchain ledger are a way in which trust in transacting with businesses in Africa can be restored. “For decades, foreign investment in Africa has been jeopardised by corruption, fraud and the misappropriation of funds. The advent of Blockchain – and the adoption of the technology across Africa – will have a significant impact in supporting Africa’s entrepreneurial spirit by providing transparency and accountability for all finance and service level transactions,” he said.
According to Ratshefola, the financial services and telecommunications sectors in Africa have been early adopters of the technology especially in the areas of cross border trace and insurance. “Globally we have more than 500 client engagements globally in Blockchain, touching industries like education, food safety, identity, insurance, luxury goods, supply chain management and trade finance,” he said. “Dozens of live Blockchain networks are currently running on the IBM Blockchain Platform, including IBM Food Trust and TradeLens to name just a couple.”
He said across the African continent the industry is seeing how Blockchain increases economic efficiency, security, transparency and simplicity – leading to less administration, duplication and friction in Africa. “And the applications are endless, since virtually anything of value can be traced and traded without a central point of control – making it a big win for business on the continent as it entices all to participate in it and benefits all,” he said.
Ratshefola said in Agriculture, IBM Research and agtech start-up Hello Tractor have developed an AI and Blockchain-driven platform for Africa’s farmers. This cloud-based service aims to support Hello Tractor’s business of connecting small-scale farmers to equipment and data analytics for better crop production.
“In Kenya, Twiga Foods ran a Blockchain pilot to better process and expand the reach of, microloans to small fruit and vegetable kiosk owners. Credit scores serve as a proxy for trust and loans are issued via smartphone, making them significantly more accessible, secure and efficient than before,” he said. “In Mining, Ford Motor Company, Huayou Cobalt, LG Chem and RCS Global have joined forces with IBM to ensure the responsible sourcing of industrially mined cobalt, by using Blockchain technology to trace and validate ethically sourced minerals. CHO, a Tunisian olive oil producer, uses IBM Blockchain to create a provenance record that traces their Terra Delyssa extra virgin olive oil from retailer back to the tree.”
“What we need to remember when implementing Blockchain is that it’s still relatively new technology and basically described as a ledger of transactions that can’t be corrupted. It should not however, replace the other security checks and balances that still need to take place in a process framework,” added George.
He explained that Blockchain should be implemented in a manner that aligns with the security policies of a business. “Similarly, smart contracts also should not be implemented in isolation. There needs to be facilitation and collaboration between the coders and the legal side of a business to ensure the contracts are compliant with the legislation of the territories in which they will be applied,” he said.
IBM’s Ratshefola explained that the promise of Blockchain is that it enables new means of exchanging business value in a decentralised manner – from facilitating the transfer of assets, to rewiring record-keeping processes, to supporting data sharing and preventing data tampering. “But as with all new technologies, it’s important for businesses to first be clear on the desired outcomes and determine the Blockchain approach from that,” he said.
“The type of Blockchain approach that’s optimal for a business depends on the industry and business goals. Businesses must decide on the right mix that will work for the problem they’re trying to solve and adopt the right type of Blockchain (public or private).”
According Bussy, the most common mistake with all technologies, not just Blockchain, is starting without a goal in mind. He added that technology for the sake of it quickly goes nowhere and that’s doubly true for Blockchain.
“It’s also a complex technology requiring a variety of skill sets, so there are risks and costs associated with Blockchain development. The typical places you encounter Blockchain currently are either as part of a new product, such as the fintech platform Mesh,” he said. “Trade, as part of a sector-wide effort, such as diamond tracking, or as part of long-term innovations emerging from what banks and retailers like Walmarts are doing.”
Looking ahead, George said current factors that will drive Blockchain implementation across the continent include the growth and development of the technical skills pool, along with the expansion of infrastructure to support greater bandwidth availability and decreasing data costs.
“These elements will be vital in setting up the essential processing nodes required by Blockchain networks to make the investment in the technology feasible. The number of use cases are also steadily growing and as they prove the technology benefits and ROI, we can expect to find broader implementation,” he said.
At IBM Ratshefola said Blockchain is doing for new business models what the web did for e-commerce and product-sharing services. “Anywhere you have complex business problems – from tracking shipping details to streamlining payments – Blockchain is a good solution,” he said. “It has the ability to completely transform how businesses operate. Blockchain is an independent and neutral technology that is here and already being used in many ways, well beyond powering new digital currencies – and is effectively helping businesses implement smarter processes and run more effectively by changing how they view and conduct trusted transactions.”Click below to share this article