Africa is Rising And Blockchain is a Central Part of it
Why we started Impact Rooms and the Africa Blockchain Center
For those who know me, I love two things: Swiss chocolate (by far Geneva’s Charlie Ganache is the best) and bringing prosperity to Africa (I wrote about this here and here).
So when President Nano Addo announced earlier this year that Ghana will stop exporting their cocoa beans, he did not start a trade war (that is something the US does), but rather stopped a decades-long exploitative deal where Ghana, the exporter of 65% of raw materials in a $200 billion global chocolate industry, received less than $6 billion.
And contrary to Swiss President Simonetta Sommaruga’s declaration that:
“it is quite simple, we need the raw materials and you have the raw materials…”
the long standing exploitation of the African supply chain by the industrialized world is not simple, and is actually responsible for the continent’s stunted economic growth.
Simply stated: the Wealth of Africa has not made Africans Wealthy
This is not only unfair, but also unsustainable and this is why we started ImpactRooms; to support African companies seeking capital to become investor-ready and connect them to global investors.
Investing in post COVID Africa is different
COVID-19 has not skipped over the African continent, however a combination of a youthful population, experience with other acute outbreaks and the early application of public health safeguards (below) has effectively spared Africa a worse fate.
And although waves of COVID are still occurring, Africa is moving towards a digital, science-centric, inter-dependent post-pandemic reality that requires robust investment in technology, and as I will explain later, specifically in decentralized, distributed, open- and crowd-sourced solutions.
Understanding the technology landscape in Africa is important before speaking about investing in it.
First, Africa is not a unified market. With 54 countries and a population of over 1.3 billion people, Africa has been a consistent growing economy for the last 20 years. There are over half a dozen regional trade agreements, including the most recent African Continental Free Trade Area (AfCFTA), all designed to facilitate trade and encourage economic activity.
Second, early and growth stage companies in Africa suffer from perception bias, by global and even local investors. For example, out of $207M that was raised by 37 African health start-ups last year, $125M (82%) went to start-ups that were foreign-owned and only one had an African founder.
Lastly, Silicon Valley-style investment and “unicornization” might not be best for African startups. Africa’s youthful and tech savvy population tends to adopt mobile applications that address social problems in their communities, and therefore can better grow through mentoring done by distributed “labs”, like AdaLabs, applying what is known as the “Camel Theory” approach.
Therefore investing in Africa requires not only working with local investment firms, but also with experts like ImpactRooms, who are familiar with the regulatory, legal and cultural nuances that determine a company’s valuation.
Understanding African Market characteristics, return potential, capital and deal flow availabilities and fund structure are important,
but envisioning how a company will socially impact and leapfrog Africa is key for ensuring a successful investment.
VC investment is growing but not fast enough
Since 2014 the venture capital scene in Africa has consistently grown, and from a meager $400M it has topped $2B in 2020, despite the pandemic (below).
More so, a recent report from AfricArena predicts that VC funding in 2021 will approach $2.8 billion, mostly due to an economic stability that will follow the certain, albeit slow, vaccine rollout.
According to AVCA (Africa Private Equity and Venture Capital Association) East African companies are highly valued, due to the ease of access for foreign investors; whereas West Africa (Nigeria in particular) is attractive due to promising demographics; while South Africa’s ecosystem struggles as it’s not yet foreign investor-friendly and foreign domiciled startups struggle to raise local seed stage capital (below).
Finally, an important factor contributing to investment resilience in Africa is the focus on investing in businesses that provide “essential services” like: healthcare, finance, food production, agriculture, and energy
all primed to adopt Blockchain technology.
That is why we started the Africa Blockchain Center to develop local capabilities in blockchain programming, validation and mining, trading in crypto-currencies, and promote the use of Decentralized Finance (DeFi).
The Blockchain scene in Africa is booming and it is time for investors to pay attention
According to the Brookings Foresight Africa report, the top priorities for Africa in the next decade include: achieving the UN Sustainable Development Goals (SDGs); deepening good governance; leveraging demographic trends for job creation, skills development, and urbanization; combating climate change; becoming a tech exporter; and a being a stronger participant in the global economy.
It is therefore not surprising that the Blockchain marketplace in Africa is booming. The lack of data infrastructure and liquidity, paucity of centralized institutional incumbents, emerging crypto-friendly regulation and
a general cultural appreciation of community and network effects known as Ubuntu (“I am because we are”), lend Africans to be “blockchain-intuitive”.
Dozens of blockchain-based solutions are currently being developed to solve problems of social, financial and health exclusion, inequality, corruption and institutional distrust following Principles of Digital Development (below).
Please check
excellent database at Positive Blockchain and go over his long list of blockchain communities which include, but are not limited to:- West Africa Decentralized Alliance (Ghana, Western Africa);
- Africa Blockchain Institute (Rwanda);
- Blockchain for Good (Paris & Nairobi);
- Blockchain for Africa (Cameroon);
- United Africa Blockchain Association (RSA);
- Great Lakes Blockchain Initiative (Burundi-DR Congo);
- YESS Impact Blockchain Project (Uganda);
- African Blockchain University;
- the Government Blockchain Association (GBA) African Blockchain Alliance;
- as well as our own Africa Blockchain Center (Kenya, Tanzania, Zambia).
Final thoughts:
Across the African continent, there is a relentless spread of technology that is driving a revolution to an unknown destination. Emerging technology is having a powerful impact on the economic vitality, security and stability of African states.
Yet the digital revolution’s ultimate legacy will be determined not by technology, but by how it is used, or as I often say:
“…Technology does nothing, it is what people do with it that matters…”
That is why as we develop, deploy, and disseminate these technologies in Africa we must adhere to intentional, ethical decisions to ensure that it’s potential for transformative change is maximized.
For Africa’s digital revolution to yield peace and prosperity, it is not enough for investors to focus on the rapid and often reactive expectation for return on investment, but rather the need to pay attention to the effects their capital investment will have on people’s lives.
This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.
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