Blockchain Is Changing Lives in Africa
Startups from Cape Town to Nairobi think the budding technology is the future of the continent.
Elsa's father was a businessman. He was always looking for a good deal, and as the owner of a brick factory in the Ethiopian capital of Addis Ababa, he had money to invest. So in 2005, when he learned about a 2,000-square-meter piece of land for sale in a part of town where he expected property values to boom, he bought it. The deal was formal: Elsa's father paid 100,000 birr ($3,641) in cash, signed the contracts in front of witnesses, and got a receipt.
But there was one thing missing: a deed. So when Elsa's father unexpectedly died just after the deal closed, her family was thrown into crisis.
"As soon as [the previous owner] found out my father died, she changed her tune," says Elsa, who asked that her surname not be published while the court case is ongoing. "We've spent the last 10 years going in and out of court."
The long duration of the trials only raised the stakes, since it turned out Elsa's father was right: The property's value did skyrocket. The protracted legal battle has already cost the family more than 50,000 birr ($1,820) in legal fees, and even though courts have ruled in their favor several times already, the series of appeals seems endless. In the meantime, Elsa can't capitalize on her dad's investment: She can't build on the property, sell a portion of it, or even put up a fence.
"If there were a land registration, none of this would have happened. We wouldn't have spent 10 years in court," she says. "But I don't want to give up, because it's my father's land."
Elsa's is not an isolated case. Across the continent, in Ethiopia, Kenya, Ghana, and elsewhere, courts are clogged with land disputes and other crises that could be easily resolved with little more than better platforms for record keeping. But if Africa is a hotbed of questions about how best to store valuable information, it is also rapidly becoming the testing ground for a new answer to this old problem.
Best and Brightest
In July, some of the brightest minds in technology, finance, and law from around the world gathered for ACTAI & Bitfury's fourth annual Blockchain Summit. Rather than meet in a traditional hub like New York, Zurich, or Silicon Valley, they convened in the Atlas Mountains of Morocco to explore a question: How might blockchain technology transform life in Africa?
For some guests, the Morocco summit was a return trip to the continent. Only a few months earlier, the 2018 Blockchain Africa Conference had attracted people from around the world to Johannesburg.
The back-to-back confabs reflect a larger trend: In 2018, Africa emerged as one of the most hospitable climates for blockchain innovation in the world.
Simply put, a blockchain is an incorruptible digital ledger. Originally developed to enable financial transactions and cryptocurrencies such as bitcoin, blockchain technology is now being applied in a huge range of situations. Virtually any valuable information can be stored on a blockchain: transactions, contracts, even your identity. These records are public and easily verifiable, and since the blockchain hosts data on millions of computers simultaneously rather than on any one central platform, it's virtually immune to hackers. The platform is particularly attractive in African nations, where still-developing infrastructure, weak governance, and the lingering effects of destructive colonialism have given citizens little reason to trust their local governments and other institutions.
In the United States and Europe, we don't worry about how to prove we exist. But in sub-Saharan Africa, according to UNICEF, two out of every three infants are not registered with the government at birth, and three out of four kids don't have birth certificates. At that rate, the number of unregistered children in the region will reach nearly 115 million by 2030. This has devastating effects, since people who haven't been registered can't access social services such as health care and education or, later in life, formally own property. But in countries where there is little or no standard system of identity documentation—and where the systems that do exist are subject to corruption and fraud—how can individuals prove and protect their identities in a decentralized and reliable way?
African landowners face a similar challenge. According to World Economic Forum estimates, as much as 90 percent of the continent's land is "completely" undocumented. Tacit understandings of who controls what are often passed through generations without a written trail.
Absent reliable land titles, ownership is very difficult to uphold in court. Disputes are common and often accompanied by physical violence. Resolving them means going through a lengthy and expensive legal process. And the inability to prove ownership hurts more than just individual farmers. According to a 2013 World Bank report, the confusion and resulting conflict is holding the whole continent's development back.
"Despite abundant land and mineral wealth, Africa remains poor," wrote Makhtar Diop, a World Bank vice president. "Improving land governance is vital for achieving rapid economic growth and translating it into significantly less poverty and more opportunity for Africans."
Property and Identity
Blockchain might be the solution. Narigamba Mwinsuubo, the founder and CEO of Bitland, a blockchain-based land registry startup, hopes to help lift Ghanaian farmers out of poverty by making it easier for them to document their ownership. As technology develops rapidly and platforms quickly become obsolete, Mwinsuubo says blockchain's high degree of flexibility appealed to him. Land title documents and other sets of data can be validated by the blockchain, even if the application that originally stored the information there is no longer working.
Mwinsuubo hopes a reliable land registry will launch a national economic boom. "It's a platform to secure properties [but also] open business opportunities in terms of real estate and agribusiness," he says. "People don't have access to loans because they do not have titles, and a lack of trust from banks won't permit that because documents are falsified easily in Ghana. But with our service, they could use their properties for collateral."
Kenyan property holders face similar problems. When criminals collude with corrupt officials to create fraudulent titles for land they want to acquire illegally, legitimate landowners have little power to fight back. Nairobi-based real estate firm Land Layby Group says a land registry that records titles on a blockchain could eliminate this problem. Such a decentralized system "will resurrect dead capital, facilitate economic development, and encourage sustainable investment," founder Peter Tole said in a statement. "It will enhance land ownership rights and formalize land information that has been held in the minds of a chosen few in many communities throughout the continent."
In the United States and Europe, we don't worry about how to prove we exist. But in sub-Saharan Africa, three out of four kids don't have birth certificates.
Blockchain's list of potential applications is endless. Project Amply, a Cape Town–based startup, hopes to replace existing paper-based child registration systems with self-sovereign digital identities based on a blockchain. In Botswana, individual farmers and farming cooperatives can track inventory, livestock, and employee payments on a blockchain-based platform called Plaas. The startup SunExchange is addressing the huge regional demand for renewable energy with a blockchain platform that lets people buy or rent out solar panels on a peer-to-peer, decentralized market.
"When you live in Europe, you don't necessarily distrust your institutions and your politicians and your banks," said Marcel Dietsch, the CEO and co-founder of Covee, a Zurich-based blockchain platform for knowledge workers. "But if you live in a country with weak governance and a low-trust environment, the potential of that technology is even bigger. It's about replacing those centralized trust agents, like a bank or the government, with a technology-driven system that works."
Dietsch thinks blockchain-based "smart contracts" could even transform Africa's migration phenomenon. According to a Pew Research Center analysis of United Nations data, the number of emigrants from sub-Saharan Africa grew by 50 percent over the last decade, much higher than the 17 percent global average for the same period. In 2017, an estimated 25 million sub-Saharan African migrants lived outside their countries of birth—in large part inspired by employment prospects abroad. But blockchain work contracts could change all that by making it easier for knowledge workers to connect with employers around the world. Also known as self-executing contracts, these blockchain-based agreements make it much easier for companies to hire freelancers, regardless of where they are, without using local lawyers. Unlike physical labor, Dietsch says, knowledge work is easy to decentralize, since it only requires expertise and an internet connection. Once the fundamental infrastructure is in place, blockchain-based contracts would allow a company in Zurich to hire a programmer or consultant in Lagos just as easily as one in Geneva.
"People with valued skills can participate in international economies without actually having to move, which might ease the migration pressure," said Dietsch. "This is the wonderful thing about technology: It is borderless and decentralized."
Money and Votes
Blockchain's utility for financial applications has been well-established, and unsurprisingly, African blockchain companies often focus on payment systems and remittances. Inflation and corruption have fomented mistrust in central banks and fiat currency, so many African consumers see blockchain-based cryptocurrencies as a promising alternative: After a military coup d'état last year in Zimbabwe, for example, the local price of bitcoin sky-rocketed to $13,499, nearly double its rate on international markets at the time. African countries also had some of the highest numbers of Google searches in the world for "blockchain" and "bitcoin" in 2017.
Blockchain "is one of the first technologies where Africa can compete globally, because there is such a big demand here for seamless, resistance-free services," says Carel de Jager, a consultant with South Africa–based training and consulting firm Blockchain Academy (no relation to the American company of the same name). "It's driven by frustration most of all—frustration resulting from dysfunctional economies, very high inflation, and financial services that don't function like they should. Blockchain is leapfrogging other technologies because we don't have any other choice."
After years of skepticism, even central banks are coming around to the value of the platform. De Jager says Blockchain Academy has done technology training for financial institutions around Africa, including ones in eSwatini (formerly Swaziland), Lesotho, Namibia, South Africa, and Nigeria. Central banks in Ghana and Kenya both have task teams looking into ways to implement blockchain-enabled payment processing systems, and Uganda Bankers' Association Chairman Patrick Mweheire has announced that Ugandan banks will begin to adopt blockchain technology when possible to lower operational costs and risks.
In Kenya, the change of heart was particularly dramatic. For years, Central Bank of Kenya (CBK) Gov. Patrick Njoroge was vocally opposed to the idea of cryptocurrencies. "CBK reiterates that Bitcoin and similar products are not legal tender nor are they regulated in Kenya," warned a 2015 CBK public notice called "Caution to the Public on Virtual Currencies Such as Bitcoin." "The public should therefore desist from transacting in Bitcoin and similar products."
This year, however, Njoroge changed his tune. "A number of banks are currently working on products hinged on blockchain technology and we think they offer a lot of promise," he said.
One of the most exciting—and controversial—applications for blockchain technology is its potential to register election results. This year, Swiss blockchain startup Agora received permission from Sierra Leone's National Electoral Commission (NEC) to act as an "international observer" at 280 of the country's roughly 11,200 polling stations in its March elections. Agora CEO Leonardo Gammar's interest in election reform on the continent is transgenerational: His mother was an African Union ambassador to the U.N. and his father was a Tunisian military attaché.
If blockchain technology could ensure transparency in cryptocurrency transactions, Gammar reasoned, perhaps it could also ensure transparency in election results. It's a valuable goal in countries such as Sierra Leone, where allegations of electoral fraud are common and voter suspicions sometimes manifest in violence.
"I sincerely believe well-run elections can save lives," Gammar wrote on Agora's website. "In this context, more transparent and secure electoral procedures can directly impact citizens' well-being by contributing to a more peaceful political life." He added that blockchain-verified elections will also save African taxpayers money, since electronic votes are cheaper than print-based ones.
For the 2018 election, Sierra Leone NEC officials manually recorded people's paper votes using their own in-house database, which does not use blockchain. At the same time, Agora observers recorded the votes on their blockchain platform. The results were very similar: For example, the All People's Congress officially won 54.74 percent of votes in one region, compared to 54.71 percent of votes in Agora's test sample.
International media breathlessly reported the results as a milestone. ("The world's first blockchain-supported elections just happened in Sierra Leone," Quartz declared.) But Sierra Leone's election officials bristled at the implication that Agora's test, which covered only 2 percent of polling stations, had an impact. In a tweet, NEC chair Mohamed Conteh emphasized that it had not used blockchain technology in "any part of the electoral process."
Still, the promising outcome of Agora's experiment hints at what might be possible for blockchain-backed elections moving forward. "We believe blockchain is the only technology in existence today that can achieve fully transparent elections," Agora said in a statement. "Using blockchain, all steps and data of the election process can be recorded on a publicly verifiable ledger while maintaining the anonymity of voters. The implications of fully-verifiable elections could be world-changing and impact the global balance of power."
Onward and Upward
As Africa's blockchain hubs gain momentum, a hurdle continues to be infrastructure—internet access and electricity consumption—in addition to public awareness of the platform. But Africa also has a significant advantage over other continents: With few legacy systems in place (and few legacy stakeholders to interfere), African innovators have an opportunity to leapfrog over outdated technologies and jump straight to whatever will come next.
That already happened with phones: African consumers largely skipped cumbersome landlines and accelerated to mobile phones at a rate more than double the global average.
"For the first time, we can innovate permissionlessly—all we need is a smart phone and an internet connection," says Blockchain Academy's de Jager. "There are no barriers to entry. This is where Africa will really show its potential."