29 JUNE 2021
BLOCKCHAIN TECHNOLOGY COULD FINALLY GIVE INTRA-AFRICAN TRADE A LIFT OFF
The use of blockchain technology for intra-African trade could finally provide the boost needed to drive trade towards levels of other successful trading blocs despite years of false starts and the COVID setback.
Blockchain is a shared, distributed, and immutable ledger that records all process steps in trade transactions. As it is decentralised it establishes trust, accountability, and transparency and is therefore well placed to facilitate trade transactions which requires real-time, accurate records for counterparties.
Louis du Plessis, Head of Trade Finance at RMB, said that Africa trade makes up just 3% of global trade and of that, only 17% is intra-regional trade - despite Africa being the world’s biggest trading bloc.
“In Europe and Asia, intra-regional trade is well above 50%. It lays bare the enormous potential for much higher volumes of trade on the African continent.
“There is no reason to think intra-African trade couldn’t rise 20 to 30% within the next five years with the use of digitisation and blockchain. It will help circumvent the long-running factors which have held trade back such as costly processes, a lack of finance, and a lack of trustworthy systems that those trading with other countries can rely on.”
He noted that the growing adoption of blockchain in Africa trade could make a material difference to the economic growth of many African countries especially as they emerge from the pandemic setback.
“Over the last two years we have seen a significant growth in blockchain projects across the whole trade value-chain, including trade finance, supply chain, shipping and freight as well as digitisation of trade documents,” du Plessis said.
Du Plessis noted that the African Continental Free Trade Area (AfCFTA) was founded in 2018, with trade commencing on 1 January 2021. It created a single market for goods and services across the continent.
“Despite the laudable ambitions of AfCFTA, intra-African trade has yet to gain momentum. But the low base creates a chance to jump-start trade by using the latest technologies. While COVID has reduced the world trade volumes, it has also emphasised the urgency of digitisation efforts in trade finance to ensure business continuity.”
Encouragingly there are also a number of significant moves from a regulatory point of view to harmonise digital blockchain standards which will assist in adoption and uptake of the technology.
“Uniform rules have been and still are a key missing component,” du Plessis said. “The G7 (consisting of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) recently approved a framework to advance the digitisation of transferable documents used in trade, shows we are making progress but the full standardisation in Africa is still a long way off.”
Another success factor for supporting trade in Africa is the collaborative supporting role of participating banks across the globe to help facilitate trade.
Recently RMB joined the Marco Polo Network, which provides an open enterprise software platform for trade and working capital finance to banks and corporates using blockchain that allows for the secure exchange of data and assets between participants.
RMB will participate in the further development of the Marco Polo trade finance network alongside financial institutions such as BNP Paribas, Commerzbank, IsBank or LBBW, Bank of America and SMBC.
About the Marco Polo Network:
The Marco Polo Network is the largest and fastest-growing trade and working capital finance network leveraging blockchain technology in the world.
It provides an open enterprise software platform for trade and working capital finance to banks and corporates driving innovation and change in facilitating the flow of goods, money and credit in global trade.
For more information on Marco Polo visit: marcopolo.finance
Kate Kelly l Rand Merchant Bank l email@example.com l 079 637 4663