CRYPTOCURRENCY
Worth our serious attention, blockchain could make supply chains more efficient Professor Louis Fourie |
BLOCKCHAIN solutions are currently not easy to implement, but highly desirable for governments and businesses in developing countries that have long been overwhelmed with issues surrounding data collection, organisation and integrity.
Using blockchain technology to digitise, secure and keep track of records will not only avoid the issues around information mismanagement that many institutions struggle with, but could also curb corruption and restore trust in the public sector, which is at an all-time low among many African citizens.
Many companies across the globe are therefore taking a huge interest in the potential Africa has to offer in terms of market growth for blockchain-based products. According to Apollo Eric from AEternity Hub Africa “blockchain technology has the potential to disrupt the current centralised linearly structured systems that typically create bottlenecks and thus a perception of scarcity.”
AEternity Hub Africa is a Kenya-based software company developing decentralised applications on AEternity’s open-source scalable blockchain platform that enables high-speed transacting and functional smart contracts.
“Africa will hugely benefit from a decentralised planning of economic and governance systems, and in doing so, grow the continent out of poverty,” Eric added.
Blockchain could transform supply chains
But perhaps the most exciting application of blockchain that has received very little attention amid the cryptocurrency excitement, is the potential for Digital Ledger Technology (DLT) to transform supply chains all over the world. The operating cost of supply chains has risen immensely as a result of their increased complexity and digitisation. Blockchain is a possible answer to many of the logistical, cost and transparency issues that plague the growth of supply chains.
For example, in July 2018 the International Finance Company made a $3 million (R45m) investment in Twiga Foods, a business-to-business logistics platform that connects small-scale farmers to shopkeepers in East Africa.
The platform through which vendors order and pay for fresh food and vegetables is totally cashless. By eliminating layers of middlemen, Twiga has been able to create more efficient supply chains, eventually benefiting the farmers and vendors. Twiga Foods also partnered with IBM to build a blockchain-enabled financing platform to provide microloans to hundreds of small retailers, enabling them to purchase food from Twiga’s suppliers. Twiga found that the financing service dramatically increased the order size, as well as the profits for each retailer. Obviously, it also provided benefits for those higher up in the supply chain.
The goal was to create an ecosystem whereby individuals can deal with multiple suppliers and permanently record
all transactions on the blockchain. It serves as a single point of truth and assigns each retailer or individual a financial identity that can be accessed by suppliers and financiers. This meant that retailers could get credit even without a bank account.
The mobile-phone-based platform uses simple SMS text messages, rather than requiring an expensive smartphone, while repayments are made using M-Pesa, Africa’s well-known and widely used mobile-money service.
From this example it is apparent that especially two attributes of blockchain may help improve trade facilitation and compliance with specific goals regarding sustainability and inclusion. The two attributes are the reduction of agency costs and the availability of auditable traceability.
Food and agriculture supply chains Further supply chains, where experimentation with blockchain is taking place, are food and agriculture, and pharmaceutical safety.
In food and agriculture, a blockchain-enabled workflow automation (via smart contracts and integration with key machinery and data collection points) and auto-reconciliation for inventory, can reduce costs for both consumers and producers. This is significant, given that about 80 percent of the cost of delivered goods in such traditional supply chains is administrative and procedural of nature.
Pharmaceutical safety
With regard to pharmaceutical safety, DLT, together with the Internet of Things, provides an attractive solution to the tracking of drugs. It is common knowledge that in developing countries an estimated 50 percent of drugs that are consumed are counterfeit.
Blockchain can provide a record of all transactions – including location, origin, data, quality, and price – to all involved entities in real time to minimise record-altering and the distribution of counterfeit medicine.
The maturing of blockchain
Blockchain may still be in its infancy but its potential is enormous, especially in emerging markets.
Blockchain, and DLT more generally, are most beneficial in domains where many stakeholders are involved, such as supply chains, trade finance and real estate. Any industry with a large amount of paperwork involved in the processes runs the risk of error and fraud. Due to the smart-contract functionality, which can function as a digital equivalent of legal written contracts, DLT can promote trust in transactions between parties with contradictory interests.
There are, without doubt, examples of African governments, brands and institutions that are harnessing blockchain technology, to provide citizens with complete control, total transparency, and lower prices. Blockchain is therefore worth our serious attention.