- Creative disruption is predominant in Africa’s orange economy.
- Emerging technologies solve several challenges, even in areas beyond the orange economy.
- Carefully mitigating risks and developing an enabling environment will be key to unlocking the potential of Web 3.0 for Africa’s orange economy.
Recent economic challenges have reminded the world and Africa of the need for economic diversification. The orange economy, otherwise known as the creative industry, is one area that has grown significantly over the last couple of years, presenting endless opportunities for Africans considering the region’s youthful population and wealth of cultural assets.
Nevertheless, comparative advantage alone might not be sufficient to capitalise on the orange economy’s emerging trends fully. It is essential to explore another emerging sector, the Web 3.0 economy, and how it can be leveraged to benefit the orange economy.
The orange economy’s susceptibility to disruptive technology
The orange economy covers various activities that can convert artistic, cultural, and heritage-based ideas into creative goods and services whose value is determined by intellectual property rights.
Pre-pandemic estimates indicated that the orange economy could contribute up to 10 per cent of the global GDP before 2030. Previous estimates also indicated that the orange economy generated 30 million jobs globally, accounting for 3 per cent of the global GDP in 2013, with even more significant contributions in some African economies.
According to UNCTAD figures, the orange economy’s trade growth averaged 7 per cent from 2002 to 2015. This growth was faster and more resilient than other industries, even during the 2008 global financial crisis.
Africa’s orange economy offers a unique opportunity for the continent to leverage its dynamic cultural elements as a comparative advantage to achieve stronger economic growth and diversification while contributing to several Sustainable Development Goals (SDGs).
Creative disruption is predominant in Africa’s orange economy, with digitization significantly cutting costs for creating, accessing and distributing creative goods and replacing the physical embodiment of these goods with digital products.
Many have attributed the growth of the digital creative sector to rapid techno-economic transformation, raising the commercialisation of intellectual property in the digital world, social networking growth, and interlinkages in value-adding activities.
Leveraging Web 3.0 to overcome challenges in Africa’s orange economy
It is hard to fully conceive the potential of such disruptive technologies. However, leveraging areas such as artificial intelligence, big data, distributed ledger technology, and digital identity can create a connected and inclusive environment where individuals, businesses and countries can take part and share resources.
Challenges with Web 3.0 Predecessors
Web 1.0 emerged as the first stage of the internet in 1989 but with very limited capabilities, with information shared in a read-only form and static pages hosted on ISP-run web servers. Web 2.0, emerging in the early 2000s, advanced the read-only format to cover both a read and write environment, allowing users to interact with content.
However, this environment was soon subject to high censorship and centralisation with permission requirements. Participation on multiple platforms required users to share personal data, which could be exchanged or sold to third parties.
Web 3.0 has attempted to remedy these challenges by building a secure, inclusive, permissionless, censorship-resistant, interoperable, and decentralised digital environment. Three Web 3.0 developments have proven beneficial for growing Africa’s orange economy.
Smart Contracts and NFTs
Intellectual property rights protect and promote creativity by allowing creators to earn recognition and financial benefit for their works. However, UNCTAD has previously indicated that some developing countries lack the legal and regulatory frameworks and implementation capacity for organised enforcement, collection, and distribution of royalties. Applying traditional intellectual property regimes in the digital space is also challenging.
Blockchain technology offers a practical solution to patch the gaps in conventional IP regimes with smart contracts. Smart contracts represent self-executing contracts within the blockchain network where a code structures the terms of an agreement to maintain or manage trademarks, copyrights and patents effectively.
For instance, smart contacts power non-fungible tokens (NFTs). NFTs are best understood as unique cryptographic digital tokens linked to creative goods, including music, art and collectables.
Regarding NFTs and intellectual property rights, there are two considerations. The purchase of an NFT offers the right to claim ownership of the purchased item. However, the creator or author of the digital asset owns the actual copyright to their work unless they transfer this right to another party.
Examples show that digital art already has a major presence in Nigeria and across Africa. While the growing popularity of NFTs has puzzled many, it has opened the door for African artists and creators to sell their content to a global audience.
Nigerian artist Osinach became one of Africa’s first NFT artists, using digital means to create and sell his work. Osinachi sold art for $75,000 worth of NFTs in March in 10 days before selling a painting for $80,000 on the crypto-art market in April.
Asset Tokenization
Minting an NFT could cost anywhere from a few dollars to several hundred. The cost depends on gas fees–the fluctuating processing fee for crypto transactions–and the platform on which the digital work is minted.
However, according to The Verge, even initialising an NFT account will cost approximately $60–70 on most platforms. In countries such as Nigeria or Kenya, where the minimum wage is approximately $100–$130 per month, many artists struggle to earn enough to mint their works.
Asset tokenization involves fractionalizing physical assets through digital tokens. Security token offerings (STOs) are a means of asset tokenization combining blockchain technology with the regulatory approval of asset transferability in the securities market. This process offers support for asset liquidity while creating wider availability for finance.
Artists have supported each other, but Africa’s NFT sector needs the same infrastructure as the traditional art world. In this self-sustaining ecosystem, artists create works, gallery owners and art dealers sell and promote them, and collectors purchase the works.
Meanwhile, arts institutions should support, develop, and promote artists and encourage the growth and promotion of the arts. Introducing this high level of organization and capabilities into the field of digital arts will help bring experienced players and more interested people to participate in developing and promoting digital arts across Africa. Additionally, the government can explore tax benefits to attract investors continuously.
The Metaverse
According to UNDP, Africa’s share in the global creative economy remains very low, accounting for only about 2.9 per cent of global creative goods exports, which equates to $58.4 billion and 1 per cent of Africa’s GDP. Further efforts are needed to strengthen the productive capacity of Africa’s orange economy, improve access to global markets, and collect relevant data.
Research shows that creative entrepreneurs often lack the resources and networks to market and build their brands in foreign markets, where they face high barriers to entry.
Metaverse represents a persistent virtual or expanded space supported by blockchain technology that can be used to create a fair market environment. Although the Metaverse is still in its early stages, it is open to anyone who wants to network and socialize in an inclusive environment for entertainment and corporate purposes.
Virtual worlds remove geographical limitations and reduce costs incurred through traditional routes for a nation’s international presence. Consequently, African countries can leverage the Metaverse to establish a global trade presence and showcase cultural and creative assets linked to real-world assets. Privileges can be set at the national level in relation to the real-world utility of these virtual assets outside the metaverse.
South Africa is the most immersed African country in the Metaverse. The country is enthusiastic about and supports this technology. The country has also launched the VR world “Africarare.”
According to SA Social Media, at least 16 per cent of the total adult population in South Africa has participated in VR applications without the constraints of traditional international business.
Conclusion
Emerging technologies solve several challenges, even in areas beyond the orange economy. However, carefully mitigating risks and developing an enabling environment will be key to unlocking the potential of Web 3.0 for Africa’s orange economy and other developing regions.
