What African firms must consider to navigate the blockchain boom

Last year, African startup companies accumulated an impressive amount of $5 billion, and more than 60% of this profit was concentrated with fintech businesses and initiatives that invested in ideas related to digital payments and modern financial solutions. What has been recently happening since African nations started to open up to new tech-filled ideas amazes each pair of eyes that takes a closer look into the transformative power of the African continent when it is combined with the transformative power of technologies that have revolutionized our surroundings. Since the world underwent a “third revolution”, shutting the door on analog signals and embracing a digital society, Africa warmed up its seat to guarantee it wouldn’t fall behind the steps of a modernized world. Africa’s slow but constant opening up to novel technologies got the continent to this time in history. It made Africa a name to remember amidst the forefront countries of the fourth digital revolution that is transforming our lives even more based on machine and artificial intelligence and complex technologies created to solve lifelong challenges.

Right on the first position of the list of new technologies that came to stay and promote groundbreaking changes to the way we live our lives is blockchain technology. The fact that Africa has always embraced the digital transformation triggered by such technologies explains why the continent has been thriving in the fintech industry and why we cannot stop to talk about it when we discuss the surging popularity of blockchain solutions and crypto-related technologies. Against all the odds, Africa has developed towards mobile technology - and, consequently, mobile money solution - and made considerable progress even if it still faces serious challenges with the lack of an educational system that walks side-by-side with this fast technological uptake. The fact that the fintech and blockchain market in Africa has been thriving and making it to news headlines all over the world sheds light on questions that need to be answered to better understand what is behind this bumpy yet so far successful road. 

Because technology advancement happens at a speed that we cannot really catch up with, one of the major setbacks for blockchain businesses in Africa is workforce shortage. This is a common issue in many sectors and might be teaching a lesson to traditional companies still navigating an old path, trying to keep themselves alive while new technologies keep upgrading the market around us with so many stimuli that might even trigger a headache. Many African nations are starting to pay more attention to the power and skills the youth can offer to the market since they are the ones learning more from new technologies at an early stage. African youngsters are the curious minds looking for answers and new pathways in modern markets that surged with the implementation of blockchain technology, especially the market of cryptocurrencies. 

Africa is an extremely diverse country, and within its territory, 54 countries fight to guarantee their own national identity and economy is at least a little bit up to date with what has been happening in the blockchain market. Cryptocurrencies have been restricted in many of them, but, despite the national bans, they keep bringing more innovations to micro, medium, and large enterprises that, if they are smart, will keep peeking into neighboring industries to learn from them, especially (and ideally) the trending ones like blockchain. Cryptocurrency affects firms of all sizes and purposes, and ignoring the correlation of the rise of a new industry with what has been happening in other sectors of the African economy is ignoring one of the most important financial phenomena of this era. Cryptocurrencies and blockchain solutions are here to stay, and the sooner we understand the effects they may trigger, the sooner we will learn how to use them in our favor.

Statistical data from the first quarter of 2022 showed that for each 10% of growth in the cryptocurrency market cap, traditional African firms would likely become more vulnerable to losing at least 1% of the market value. The fact that businesses that have been building their names inside the African economy for a really long time are completely susceptible to downfalls caused by the expansion of the crypto and blockchain market highlights the importance of understanding how these scenarios are likely to unfold as progress keeps happening inside these industries. The competitive power of crypto is even more threatening to companies in less competitive market sectors like energy, for instance. In other words, it is almost like the existence of a growing crypto market forces African firms to understand and take part in a new scheme to face competition, which is a slap in the face of the cooperative strategies they have been using to survive so far. To guarantee a position in this new market, many businesses will have to (or are already doing it) change their internal policies, and this process won’t be easy, but it will be worth it. 

Since 2009, when the first cryptocurrency hit the market, people have been trying to understand the underlining technology that made this technology possible. Currently, blockchain is the number one industry in the world, and it is a combination of many technologies that benefit from the exclusion of a “wingman” to help parties involved with it. Long before 2009, the Internet became a reality and popularized as a tool for people to exchange information and opinions. We might have thought that nothing could get any better than this, but yet here we are, dealing with even more complex technologies that keep changing the way we perceive our personal, professional, and financial lives. Blockchain technology came to upgrade a reality that has already been boosted with tech novelties in the past two decades and allows users to exchange data, information, and value. Blockchain has the transformational power to enable the convenient exchange of value, and this is what makes it stand out from the rest. To surf this mighty wave, African companies that started their journey before the boom of the blockchain sector will need to promote changes that will also depend on other factors, especially governmental participation. Local authorities will need to pay attention to financial regulations, the stock market, and the capital invested in different sectors of their societies in order to guarantee that the performance and value of traditional African firms do not get completely lost in the power of the crypto environment.