Pick n Pay has given crypto payments the green light while the SARB Prudential Authority has paved the way for crypto assets to be regulated. Africa is one of the fastest-growing cryptocurrency consuming continents, with adoption growing by over 1 200% in a single year. All this has implications worth noting, says Simon Swanepoel.
The South African Reserve Bank (SARB) Prudential Authority has announced that our banks will now be able to work with crypto exchanges in South Africa. The SARB will regulate cryptocurrencies by declaring crypto assets as financial products. The regulation includes developing a compliance and regulatory framework for exchange controls and tax laws and ensuring consumers buying crypto assets receive a 'health warning'. With this warning, they know that purchasing crypto assets could cause them to lose money and that it's not the same as a bank-guaranteed deposit.
In light of the announcement, retail giant Pick n Pay has heeded the green light and made cryptocurrency payments available to their customers. Shoppers can purchase groceries with digital tokens like bitcoin at 39 of its supermarkets across South Africa.
The African Blockchain Report 2021 has pegged Africa as an international driver for blockchain technology, specifically in the fintech sector. The fintech sector, using blockchain technology, can create doorways for previously excluded citizens to partake in the digital economy by improving access to financial services.
Blockchain technology is rapidly improving the security, accessibility and reach of financial services to a broader market. This access can build wealth, transforming millions of lives for the good of generations to come. Africa is adding its mix of flavourful tech talent as early adopters embrace and use blockchain technology on the continent.
These payment alternatives overcome sizeable obstacles like sharing information, proving identity (500 million Africans have no legal form of identity), and paying for goods and services previously out of reach.
In Africa, one of the most prominent pain points solved with cryptocurrency is that of remittance payments. Many people are forced to find work away from their families and don't have a cost-effective, almost instantaneous way to send money back home. With blockchain-driven apps like Mazzuma, Bitsika and Xago having developed peer-to-peer payment solutions, users make immediate remittance payments in a fraction of the time, with lower fees and fewer restrictions.
According to Ian Putter from Standard Bank, remittance technology has further potential to facilitate intra-African trade.
The necessity for access to financial infrastructure and the ability to easily transact with various service providers has accelerated Africa's growth trend in adopting crypto and deploying blockchain technology. Africa's flailing socioeconomic and political landscape is catalysing this growth as entrepreneurial spirit, and the necessity to overcome everyday challenges spurs the development of products underpinned by blockchain and crypto tech.
Although lagging behind our overseas counterparts in the volume of users and business start-ups, the hunger in Africa to effect change for good using technology is evident. The Africa Blockchain Report shares excellent insights into venture capital funding in tech startups, with Africa growing in leaps and bounds.
The global forerunner in total blockchain investments is the US securing 56% of total blockchain venture capital funding. Comparatively, Africa secured $4.3 billion to $5 billion of the total global venture capital investments in 2021. Although seemingly small, this is an impressive 239% increase in funding from the previous year. Furthermore, the number of secured deals in Africa grew by 117% compared to the global average of 31%. Lastly, 60% of the investments in Africa were into fintech businesses, three times the global average.
This stark distinction paints a defining picture of the future trajectory of investments in African tech startups.
The trailblazing African nations from the report include three of the 'big four': Nigeria, Kenya, and South Africa, with Seychelles completing the list. Altogether these nations secured 96% of the funding for blockchain investments in Africa. Although this represents only a 0.5% share of the global blockchain investment value, it is 11 times the growth of general venture funding [Q1 2021 to Q1 2022].
On home soil, we actively participate in this growing digital economy, including blockchain development. South Africa has legalised cryptocurrencies and set a standard for adopting these new-age technologies. We also have an emerging blockchain community which is particularly active in the Western Cape, where the provincial government is exploring the opportunity for blockchain technologies to reduce service delivery delays and assist with digital identity verification, like at licensing centres and the deed's office.
Internet, the missing link
Africa seems to have brewed a perfect storm for blockchain and cryptocurrency innovations and investments. The brew includes:
- a massive population,
- high mobile phone penetration [495 million, in sub-Sahara Africa alone, 2020],
- lack of infrastructure necessitating the drive to solve real-world problems, and
- rapid adoption rates.
It's all evident, and the numbers speak for themselves about the tremendous opportunity creating mass excitement.
Besides needs like using self-sovereign identities (SSIs) so that citizens can prove who they are and open bank accounts, we face other apparent challenges.
It's conclusive that the necessity, willingness, and talent to build and innovate new-age technologies are overflowing. However, fundamental foundational issues need attention to ensure that sufficient numbers of users can safely and securely adopt blockchain technology-based businesses. Internet infrastructure and connectivity are essential to unlocking blockchain and crypto opportunities for millions more.
According to the report, internet penetration in Africa is 43%, with broadband a dismal 1%. Although undersea fibre cables are in place and operational along Africa's coastlines, the in-land FTTH infrastructure is wanting.
Maximising the blockchain opportunity requires tapping into population groups currently without fibre internet access as a priority. By providing this access, the continent can cement its part in this incredible new world's rapid development and growth.
*Swanepoel is CEO of RocketNet. News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.