Startup Failures in Africa: A Downside of Most Blockchain Projects

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The application of blockchain technology across multiple industries, both globally and in Africa, is emerging quite rapidly. As Fintech & Blockchain Lead for PwC South Africa, Paul Mitchell, expresses, 

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The speed at which blockchain technology is being adopted is unprecedented. There is a growing recognition that this technology has profound implications in many areas, and we are watching it move from a startup idea to an established technology, in a fraction of the time it took for the Internet to be accepted as a standard tool.” 

So far, the most popular application of blockchain technology in Africa is in the area of financial services. In spite of this, other industries are also being innovatively disrupted with blockchain, with startups like Agrikore and RideSafe penetrating the agricultural and logistics sector with blockchain. 

However, in recent years, quite a  number of African blockchain projects and startups have experienced tragic failure. These failures could be attributed to several factors. South African blockchain startup, Dala, was almost a perfect example of a disruptive and innovative blockchain startup until its failure in 2019. 

In a medium post by its founder, Tricia Martinez, she expressed her views on the main issues that led to the abrupt failure of the project. 

The biggest problem we ran into was infrastructure. Our partners’ systems (products and services like airtime, data, and electricity) would regularly turn off due to internet problems and/or their own poor infrastructure which meant our users were unable to transact, which was the biggest use case for Dala,” she wrote. 

Just about 31.2% of Africa’s populace have access to internet connection.  Considering the fact that blockchain  startups, like Dala, require users to have a secure internet connection in order to use their services, their growth is immensely limited in Africa. 

The African continent records an alarmingly growing level of scams. Renowned economist, Dr Desné Masie, opines that the series of scams in Africa, often stimulate a great deal of scepticism about blockchain in Africa. A lot of people are unaware of the validity of the services which are offered by blockchain startups. The prevalence of scams in the region has worsened the growth of blockchain startups in Africa, as most people are too careful to avoid falling victim of a perceived ponzi scheme.

African Skepticism Towards Crypto & Blockchain

Skepticism of Africans towards blockchain services could be rectified with proper legislations and government backing. Unfortunately, government policies are not encouraging the growth of these startups either. Although some African countries like South Africa have government policies that foster the growth of blockchain startups, countries like Nigeria, Ghana and Zambia have taken a neutral stance without explicitly validating the activities of blockchain startups. Countries like Algeria, Libya and Morocco have taken very rancorous positions, and some have gone as far as issuing bans against the use of cryptocurrencies. 

Some blockchain enthusiasts and developers think African governments do not clearly understand the power of blockchain technology. According to Asiimwe Benson Mugisha, founder of RideSafe, many African governments still see blockchain as a threat, primarily as a result of its ability to move money without government control. Unfavorable government positions like this, often threaten the survival of blockchain startups in many African nations.

As much as blockchain appears to be a buzzing technology that can address problems in any field, many still don’t understand its use beyond cryptocurrency and the financial market. Key stakeholders in the blockchain industry like Akin Sawyer, Decred Lead for Strategy and  Governance, have expressed concerns against the lack of understanding, especially from governments, on the use of blockchain. 

Governments should first of all avoid being too quick to enact legislation and policies that could stifle adoption and innovation. They should first deploy time and resources to understand the technology and support civil organizations and companies that are investing in the space,” Sawyer says. 

The lack of widespread innovative deployment of blockchain across other industries outside finance, also has a measure of impact on the failure of existing blockchain startups. Most blockchain projects in Africa are cluttered around cryptocurrencies. Africa needs more unique and novel blockchain solutions. As with any industry, innovation and uniqueness are key factors for the growth and survival of any startup. Expanding the frontiers of African blockchain projects beyond cryptocurrencies and the scope of finance will enable the government and potential customers to clearly see how powerful this tool can be. The continent needs blockchain  to revolutionise many sectors but the usage of this powerful technology is being crippled by the many obstacles experienced in scaling a blockchain project within the continent.

Image Credit: Peace Adesola

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About Kehinde Ojewale 11 Articles
Kehinde is a driven human, machine learning engineer and data scientist who is passionate about leveraging technology to transform the future of humanity and the way we all live. His interest lies in constantly getting valuable information and being part of a mission that seeks to create a transformative radical shift.