Evidently, the best driver for development in Africa could be intra-continental trading. As a result of promoting trade within Africa, the trade among nations increased to 16% in 2014 from 10% in 2000, echoing the recent economic upsurges. However, African nations can perform better, provided there exists the right infrastructure to facilitate the digitization of assets.
According to the report, Africa’s GDP grew fourfold in two decades, suggesting that intra-African trade is more resilient than trade with other regions of the world. Above all products, manufactured products are less sensitive to price shocks, hence they constitute a majority of trade between African nations, and the rest of the world.
Africa – A Continental Cashless Society?
For the purpose of promoting trade in Africa, blockchain technology can provide a platform to establish and maintain critical infrastructure for cross-border trade. African import and export partners can benefit greatly from the trust provided by distributed ledger technology, which is not subject to central authorities. Eventually, blockchain for Africa can reassure importers of reduced risks, while exporters are assured of on-time payment via smart contracts.
Despite the fact that the risk exposed to importers has been mitigated by escrow services, and buyer protection, e-commerce, and payment platforms do not offer the same guarantees. For example, Alibaba, PayPal, and eBay do not do enough to cover businesses from losses as a result of B2B trade. However, with blockchain-powered systems, a certain degree of trust is guaranteed, replacing the need for third parties, and the costs of using traditional guarantors such as banks and insurance companies.
Moving on from the perspective of private parties, public parties such as customs and border law enforcement agencies can be included in the blockchain information process to monitor the movement of goods. As a result, the platform remains in total compliance with domestic legislation, thereby establishing a legal framework where the system offers greater assurance to all trading parties.
Digital Asset Framework for Intra-Africa Trade
One way Africa can achieve and promote trade outside its borders is through frictionless digital assets. In other words, assets, which are borderless and thus don’t have to adhere to any jurisdictional restrictions. Investors from other jurisdictions can own and trade these assets freely.
In fact, Raise, a Joint Bahamian-Kenyan start-up, is already working on the platform with the support of regional players. Once operational, this platform will be Africa’s first blockchain-based security token platform. In particular, this platform will facilitate digitalizing real-world assets such as real estate and commodities, among others. With the result that individual investors from all over the world will be able to tap into the wealth of Africa.
Also, the African Digital Asset Framework (ADAF), is an initiative aiming to provide secure transactions in digital currencies and assets. The program has received critical support from the African Union and the African Development Bank. The primary goal of the initiative is to boost intra-African trade and is expected both in assets and general trade.