The African Continental Free Trade Area (AfCFTA) represents a huge and ground-breaking opportunity for African nations, and the striking of this agreement was undoubtedly a watershed moment in the continent’s history.
In simple terms, it has the potential to lift 30 million people out of extreme poverty in the region, while also raising the average incomes of 68 million others who currently live on less than $5.50 each day.
However, the successful implementation of this agreement is fraught with challenges, and these must be overcome if the AfCFTA is to ultimately reach its full potential. In this post, we’ll ask what role blockchain can play in this endeavour and aiding the post-coronavirus recovery in the region.
Allowing for Effective and Efficient Payments
Blockchain is the technology that underpins a raft of fast-growing cryptocurrencies, which have become increasingly commonplace of late and boast a huge cumulative market capitalisation value.
Given the lack of an official continent-wide currency in Africa, cryptocurrencies and digital tokens therefore offer a viable and flexible means of exchange as internal trade volumes continue to increase. The decentralised nature of cryptocurrency also alleviates the concerns caused by central control, creating a transparent and immutable ledger for all participants.
Not only this, but a recent report also showed that more than half of Nigerians and South Africans said that it took them more than a day to receive funds once they’d been transferred to them..
This is a huge cause for concerns amongst business-owners and entrepreneurs in the region, particularly when you consider its impact on Africa’s two largest economies and their dynamic business hubs. The adoption of cryptocurrency would help to resolve this issue, by allowing for instant and commission-free payments across the continent.
Digital tokens can also tackle the issue of cross-border payments, particularly in terms of reducing the cost of business and increasing speed.
From a wider financial perspective, it’s thought that the African banking industry could house more than $1 trillion in wealth. However, the existing banking industry struggles to serve such holdings and the sector as a whole, with poor record keeping and the prominence of cash-in-hand payments undermining the marketplace.
This simply isn’t sustainable when you consider the cross-border trading opportunities created by the AfCFTA, and in this respect, cryptocurrencies arguably offer a viable alternative that benefits from minimal barriers to entry and a far more inclusive financial system.
What About Mining and the Wider Use of Bitcoin?
Beyond this, the secure and robust structure of blockchain is suitable for a range of wider applications, including Africa’s potent mining industry.
The reason for this is simple; as this industry is riddled with transparency issues and the relative opacity of its individual segments. More specifically, people within the mining community have little knowledge about what happens to the minerals that are taken from their soil, thanks to the lack of accurate record keeping or a clear list of transactions.
This could prove crucial in the near-term, particularly as the region recovers from the Covid-19 outbreak and the nation’s oil sector continues its tentative rebound.
The wider adoption of cryptocurrency would also help to build on Africa’s reputation as one of the fastest-growing crypto spaces in the world, with people from the region sending about $8 billion worth of tokens (which receiving $8.1 trillion) in 2019.
As Bitcoin continues to attract a huge number of African millennials, there’s a clear and timely opportunity to embrace this on a huge scale and leverage cryptocurrencies to make the most of the AfCFTA.