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Blockchain is one of the pioneer technologies leading the 4th Industrial revolution alongside AI. It has proven its compatibility with Africa’s diverse economy.
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According to Statista, the total economic revenue drawn from E-commerce within Africa exceeded their initial estimate of $16.5 billion and at an all-time high of $37.77 billion.
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Individually blockchain and E-commerce have revolutionized Africa’s digital world. Although combined, they ensure rapid efficiency and improvement in Africa’s digital economy.
Over the past decade, Africa has relatively gone through a slow but steady metamorphosis within its overall economy. The upcoming 4th Industrial Revolution has shifted young African entrepreneurs’ minds. Long gone are the days when Africa is only recognized for its agriculture as the continent steps into a headstrong digital age.
E-commerce has thrived within Africa’s borders, having organizations like Jumia, which achieved its unicorn status simply from its endeavours within Africa. E-commerce is a thriving economy slowly but surely growing to greater heights. However, a massive room for improvement has opened up, especially since blockchain technology stepped into the limelight of Africa’s ecosystem.
Blockchain is one of the pioneer technologies leading the 4th Industrial revolution alongside AI.
Fortunately, its very nature is surprisingly compatible with Africa’s ecosystem. It has revolutionized its financial and agricultural sectors and even stepped into its educational system with plans for improvements. This begs the question, can blockchain propel E-commerce in Africa to newer heights, and if so, what changes are we expecting to see in its growth rate and Africa’s standing point in the global market?
E-commerce thrives in African countries.
It is a fact that E-commerce is significantly disrupting the retail industry in Sub-Saharan Africa. This rapid growth rate caught the eye of The United Nations Conference on Trade and Development. They stated that the number of online shoppers in Africa had surged annually by at least 18% since 2014. These figures are all thanks to the rapid mobile usage within Africa and the high number of unbanked individuals within several countries. According to GSMA Intelligence, an estimated 613 million unique mobile subscribers will emerge by 2025, covering over 50% of most African countries.
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Mobile technologies and services will generate an estimated $154 billion in economic value within the same time. These figures directly represent the vast potential E-commerce has within Africa’s ecosystem. According to Statista, the total economic revenue drawn from E-commerce within Africa exceeded their initial estimate of $16.5 billion and at an all-time high of $37.77 billion. This sheer number represents the vast economic influence e-commerce has within Africa. Many individuals ask how Africa can reach such astounding figures from local markets.
The answer to this question lies in two key factors. The first is the rapid mobile economy within Africa, and the second is that Online businesses stopped focusing on international trade and moved to the more local market. Today E-commerce extends retail services to small towns and rural populations, which comprise most of their sales. From the Covid pandemic going out became an issue for Africa as well. Thus, organizations such as Jumia offered direct delivery of everyday household goods straight from the market. This kept the market flow within Africa, and soon after this “sudden innovation”, a lucrative nature.
The increased penetration of smart devices has significantly added to the rapid growth of e-commerce platforms in Africa. In addition, the hassle-free shopping experience offered by e-commerce has contributed to market growth due to the sparse population of most African countries.
Blockchain technology penetrating Africa’s ecosystem.
Today blockchain technology is widely known for its ability to transform the financial sector. Its ability to provide financial services to the unbanked community in Africa has led to its widespread adoption in Africa. Its initial application in cryptocurrency has aided several African countries, such as Nigeria, to retain their developing economy despite its highly volatile fiat currency.
Chainalaysis revealed a significant review in 2022 claiming that Africa had the highest crypto adoption rate ever recorded, standing at 1200%. As a result, countries such as South Africa, Kenya, Tunisia, Nigeria and Tanzania have stood in the limelight for a steady while. Although developers and entrepreneurs soon discovered that blockchain technology had more functionalities beyond digital currency. Soon after, the agricultural industry began implementing its functionalities to aid farmers.
Blockchain and Agriculture
A project conducted by Etherisc and ACRE Africa created a blockchain-based system that would alert farmers of an impending low harvest and issue the necessary insurance covers even before the rainy seasons. Farmshine, a Kenyan startup, create a blockchain-based platform to establish a collaboration among farmers, buyers and service providers in Kenya. This created a decentralized network between farmers, allowing them to share information on various agricultural techniques, further improving the agricultural sector.
African real estate and land administration have also improved significantly due to the incorporation of blockchain technology. Land grabbing is an unfortunate dilemma within various African counties, but with the immutable nature of blockchain technology, the processing and issuing of land are made transparent and secure.
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Blockchain has also reduced fraud within the supply chain of various industries. The traceable nature of blockchain minimizes the likelihood of any products suddenly going “missing” within the supply chain of several industries.
The healthcare sector is another industry in which blockchain has proven useful. At the moment, centralized healthcare databases are mainly nonexistent. Most African hospitals still use paper to record and maintain patient information. This system had proven insufficient even before blockchain came into the picture. With the decentralized nature of blockchain, a single database is created, uniting the information of various hospital branches within a single country.
This ensures efficiency and reduced cost compared to digitalizing and providing the necessary equipment to each hospital. Blockchain databases can store these medical records without fear of loss or damage. Furthermore, it makes information retrieval much easier regardless of the hospital branch. This increases efficiency since, even though the patient’s location may change, their medical record is universal across all branches. In addition, any form of alteration will reflect on all the branches.
These are a few examples of the uses of blockchain technology in Africa’s ecosystem. Other sectors include the entertainment industry, the educational sector and even governmental functionalities such as voting. All in all, blockchain has repeatedly proven its functional and compatible nature towards Africa, and it has its eyes set on its E-commerce.
The merge between Blockchain and E-commerce
Blockchain technology initially caters to the financial sector. It has numerous attributes that organizations can utilize to ensure consistent improvements. When E-commerce and blockchain merge, there is evidence of improved handling of product services, payment processing, and security.
Below are a few attributes that will significantly improve E-commerce when Blockchain technology is incorporated.
Better supply chain tracking and monitoring
One of the major determining factors of whether or not an e-commerce platform will succeed in Africa lies within its supply chain management. The whole concept of E-commerce is a network of supply chains that involves the movement of goods from one point to another. This makes tracking products and managing stock crucial for all e-commerce platforms. The distributed and decentralized nature of blockchain makes it the perfect candidate for tracking products.
This ensures that each point of the supply chain is recorded and updated within the entire network.
This enables easy inventory management. Any time to a single product is slowly depleting. The overall system can alert the authorized personnel to issue a refill. One of the main issues in the supply chain is the possibility of fraudulent activities. It is common for certain counterfeit products to find their way within the supply chain of significant E-commerce platforms, especially in Africa.
One of the few misconceptions about Africa is that we do not value brand and quality.
Nothing could be further from the truth. When the average African buyer receives a counterfeit or damaged product, even if it was cheap, there is a high chance they will launch a complaint and go as far as spreading the news to other customers. This reflects poorly on the overall business that keeping a tight track of products is a must, but most centralized databases need to be more capable of this feat. Blockchain steps in and takes the place of incompetent intermediaries. The use of smart contracts automates the entire process and flags any inferior products within the entire system.
Transparency within the Marketplace
Most E-commerce platforms in Africa need more means of conveying specific information to users. This fact only exempts top industries such as Jumia, which has a large audience. A sense of transparency is vital in any digital business. This creates a sense of security among its customers. Most people need to realize that Africans are particularly highly influenced by this factor.
Fraud and corruption ran rampant in African countries.
As a result, most Africans are sceptical about the concept of “new” in technology or other factors. Furthermore, it’s often beneficial for any online business to be transparent about its operations. This also leads to a significant decrease in any “inside jobs” with E-commerce platforms. Company workers often are the most likely perpetrators of any crime within an E-commerce. Blockchain ensures that customers receive critical information, generating trust between them and the online platform.
Payment Efficiency
Digital currency has gained significant ground in various African countries. Mpesa, one of the first iterations of digital money, significantly boosted Jumia’s operations within East Africa. Blockchain introduces additional payment methods to e-commerce. This takes advantage of the increased crypto adoption in counties such as Ghana and Nigeria.
In addition, it makes E-commerce more efficient and faster, allowing their services to improve drastically. Blockchain technology removes the need for intermediary companies within the E-commerce supply chain. This ensures that these platforms directly earn from their products, boosting their total revenue.
Secure Platforms
It may be surprising, but Africa has one of the world’s highest cyber attack rates. The increased use of mobile devices and an Internet connection has led to a vast exploration platform for cyber hackers. An IDC report titled impact of Cyber extortion on Africa state that the continent lost $4 billion annually in cybercrime. The rapid growth of E-commerce has also led to the rapid increase of cyber hackers.
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In Q2 2022, attacks related to data loss threats increased by 234% compared to the previous quarter, according to Kaspersky. Fortunately, the incorporation of blockchain technology can significantly reduce this number. Over the years, blockchain security has evolved and now can withstand most, if not all, cyber attacks related to its previous version, Web 2. Incorporating blockchain in E-commerce will ensure that the franchise retains its integrity and secures all transactions with the application of cryptography.
In a nutshell, Africa’s economy is steadily increasing from its E-commerce rate. With the blockchain adoption rate increasing, it is time before we incorporate both aspects to create a more effective and efficient online commerce platform. Blockchain technology has revolutionized various aspects, and it’s only time before E-commerce joins the bandwagon.
