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December 1, 2023
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CV VC Updates

CV VC Africa - Africa, the World's new Tech Frontier

Interview with Gideon Greaves, Managing Director of CVVC Africa

Gideon Greaves is the first Managing Director of CV VC Africa, based in Cape Town. In the following interview, he reveals why Africa is the new tech frontier.

What is the most surprising result in the CV VC Africa Report?

A resounding surprise was the quickening pace at which funding for blockchain tech is happening.  The fact that funding for blockchain startups outpaces all other types of startup funding places Africa in a truly unique global position - Africa is likely the first region in the world where blockchain VC is bigger than other sectoral types.
When comparing Q1 2021 vs. Q1 2022, we found that venture funding for African blockchain startups far outpaces the growth seen in general African venture funding - 1,668% vs. 149% -  showing 11 times the level of growth on a YoY basis. 

Already in 2022, funding has surpassed the total of 2021 funding which is only set to continue as investors discover the uniqueness of the African tech scene.

Why do you think Africa is so relevant for blockchain and new tech?

One of the more significant reasons for the rampant growth of the sector - is pure necessity. Many Africans cannot rely on vast, centralized, regulated infrastructural systems. They are often riddled with inefficiencies and red tape in the cases where they exist. As a result, innovation is blessed with a clean slate on which to paint, and progressive advances seem to follow. These advances sometimes improve existing systems, but, more often than not, they leapfrog the entire legacy system and that is what is happening in Africa right now.

There is also the fact that Africa is rich in human capital. Africa has one of the youngest populations globally, and the continent itself is one of the most populated. It is a common theme in life where circumstance advances evolution. In terms of financial infrastructure, personal identification, record keeping, and lack of access to individual financial independence, Africa's current state of affairs has created the ideal conditions to accelerate the adoption of blockchain technology, solving real-world problems in the process. This is what makes the African tech scene so fertile, it solves real-world challenges faced by its people daily.

I believe that the words from one of the companies in which we have invested sum up very well what blockchains' relevance is for Africa. “For the first time, there is a technology - blockchain, which allows us to unite our people, economies, and countries in ways that we have yet to experience.” Kofi Genfi, of Mazzuma, Ghana

A hotbed for blockchain adoption with around 1.3 billion people, Africa is the second most populated continent globally. In the past year, Cryptocurrency adoption in Africa has grown by over 1200%. And, 57% of the people in Africa do not have a bank account. It is a common theme in life where circumstance advances evolution. Years of issues from many contributing factors have caused Africa to suffer from basic infrastructure problems. As a result, it has inadvertently created the perfect environment for blockchain technologies and cryptocurrencies to thrive because of their many applications and the many problems they solve.

What are Blockchain and DLT-specific developments in Africa?

The systems that are being impacted the most by blockchain and cryptocurrency technologies are the older legacy systems fraught with red tape and inefficiencies. One of the main reasons for the success of new technologies such as blockchain is that they either allow these legacy systems to be bypassed in their entirety or create the means to reduce overarching frictions. Africa is riddled with these types of case studies where entrepreneurs have had a fertile starting ground as a result.

There are some industries that are ahead of the curve in utilizing blockchain technology to improve, transform, and scale - paving the way for a more digitally robust and inclusive future. Remittances, payments, and financial inclusion are core examples. Industries such as mining and agriculture, assets such as real estate, and personal identification.

Where are the main hubs, and what is the reason why?

The continent is embracing the tech, particularly its first inning - crypto. Africa is the third fastest-growing crypto market globally. Regulation is only in place in 6 nations, and these are not necessarily the most active in terms of the broader use of the tech itself. With an implicit crypto ban, Nigeria has long since been a tech powerhouse among developing nations. Testament to this is that it is home to the majority of the African continent’s Unicorns. The populace’s thorough understanding of tech and the availability of mobile internet have made it one of the leading countries in the world when it comes to crypto adoption. 

The tremendous uptick in the use and trade of cryptocurrency is despite regulation, not because of it. Nigerian regulators have made no secret of expressing their disdain for cryptocurrencies since 2017, and the technology continues to be faced with headwinds in this regard. The primary headwind is confusion over the official regulatory stance on crypto assets. As in many African nations, a lack of faith in government and the national currency has pushed citizens towards alternative financial systems. Understandably, like many of its peers, Nigeria has become a hive of cryptocurrency activity.

Frontrunner countries like South Africa and Mauritius have demonstrated how a progressive stance toward cryptocurrency can be beneficial. This is the type of regulatory approach that inspires others to follow suit. Considering South Africa is one of the most progressive and transparent countries in Africa when it comes to regulation, there is plenty of activity in the country relevant to blockchain technology and cryptocurrencies. 

South Africa is home to numerous successful exchanges that enable South Africans to buy and sell cryptocurrencies. With easy access to trading, banks allowing a fiat on and off-ramp, and clear tax rules and regulations, South Africa has embraced the movement of cryptocurrencies and created a transparent landscape that encourages public participation.

CV VC and the Swiss Government launched an Africa Initiative. What can we expect from it?

Switzerland has a long tradition of government, industrial partners, and research institutions setting a conducive framework for the African economy to grow or push for innovation. Such as that which CV VC does as a leading initiator of blockchain developments. In South Africa, these same actors are not only realizing the value of blockchain to address economic and social challenges, but they are actively pursuing new knowledge and innovation for its realization not only in South Africa but the entire continent.

The Embassy of Switzerland in South Africa has been pivotal in opening doors and fostering partnerships across sectors to develop a vibrant ecosystem of blockchain startups from Africa. This was made possible by combining the already-existing intense collaboration initiatives between Switzerland and South Africa. Initiatives in education, research and innovation, and economic development have assisted with recognizing the exciting business opportunities for blockchain solutions in African Markets. 

In 2019, the Embassy’s Swiss Business Hub organized different events to share Switzerland’s interest in finding partners on the African continent to create businesses based on blockchain technology. It was followed by a visit from the Swiss Blockchain Federation and CV VC. This spurred further events in the Fintech space in Mauritius at the Africa Blockchain Conference and the Artificial Intelligence Africa Expo.

In mid-2021, the State Secretariat for Economic Affairs, SECO, through its economic cooperation office at the Embassy, started a public-private partnership program with CV VC to support the development of a blockchain ecosystem in South Africa and kick-start a blockchain incubation program for African startups. As a public good, the South African ecosystem's promotion aims to assist blockchain actors on the ground and attract investors that support and invest in startups either from Africa or provide solutions for problems faced in Africa.

And so here we are, building a riveting ecosystem that intends to realize public good!

What does CV VC expect from its presence in South Africa?

As Africans ourselves, the CV VC African team is excited to merge the learnings from the CV VC central hub in Switzerland with those of our majestic continent. We are humbled and honored to work here with many other leading tech ambassadors, most notably with the brilliant minds of the indigenous blockchain tech pioneers. Already we have conducted 47 workshops and invested in twelve African startups. We are here to work with these enterprises and share our Swiss heritage of working within an encompassing regulatory landscape, and we are here to learn from the brilliant talents in Africa. We see it as a mutually beneficial presence!

What can others learn from Africa and the African Blockchain Ecosystem?

Resilience and determination to transform: Globally, the world is transitioning as it rebuilds from a pandemic, endures geopolitical wars, and survives a climate crisis. Humanity seeks trust and transparency, the democratization of institutions, and a better way of interacting and doing business. African resilience and determination to find better ways are exemplary. Each day here in Africa, we observe companies becoming more relevant to their customer bases and finding more transparent ways to transact and interact using blockchain technology. Communities are building businesses and micro-economies using the transformative capacity of blockchain from the ground up. 

Markets are evolving rapidly, and nowhere more so than in Africa. The centralized, over-regulated infrastructure in the developed world cannot provide the solutions needed for this new, rapidly evolving landscape. Conversely, Africa's lack of legacy infrastructure offers an opportunity to transform or leapfrog outdated systems and respond with more innovation, speed, and agility.  This kind of out-of-the-box approach is endemic to Africa and is the reason it has become so sought after in the world of blockchain investment. I believe that other nations and regions globally can learn from our ‘out-of-the-box’ approach and apply it to new frontiers, industries, and new markets. 

Take, for example, a Ghanaian fintech Mazzuma, initially a mobile money-based payments app, it has integrated blockchain technology and artificial intelligence to enable immediate payments and remittances that incur low fees. At an industrial and end to end supply chain level, look toward what blockchain has accomplished here such as in the African diamond mining industry, where a prominent player De Beers, the diamond unit of Anglo America, has launched the world's first blockchain network dedicated to monitoring the origin and quality of its diamonds. Tracr is the name of the platform, and it creates an inclusive ecosystem of large producers, artisanal and small-scale miners, grading laboratories, and retailers. The transparency of the logistics process, from the point of mining to the point of purchase, will ensure an accurate register of provenance and authenticity.

As De Beers leads by example and illustrates a perfect use case for blockchain technology, other players and industries are taking learnings and will soon follow suit here in Africa.

What do you think the African blockchain industry will look like in 5-10 years? 

Africa has the tools, the will, and the population to deliver large companies serving millions of people. More African companies are joining the global unicorn club, and we anticipate that many of those new unicorns will be blockchain unicorns. Within 5 years, I expect Africa to become the leading region globally for capitalizing on businesses using blockchain.

Africa is openly embracing the mindset of blockchain technology. The results speak for themselves.   It is rapidly building a reputation as the hotspot of the crypto-tech world. Our report shows that we are already at the front of the wave, but in order to sustain that momentum, we must continue to provide practical solutions that work, regardless of location. The African blockchain industry is driving change globally, from the bottom up. It is being driven more by enterprises and industry than by crypto players alone. Its tech responds to unique conditions that are the ideal springboard to the rest of the globe.

For example, HouseAfrica from Nigeria is pioneering a modern-day property record system that uses blockchain to help home buyers and financial companies verify and value properties. 

The beef industry in South Africa is using blockchain to create digital livestock records. BeefLedger SA is a ‘farm to fork’ verification and traceability system. It validates the providence and authenticity of its beef products, including credible sale history and consumer feedback. 

What can Africa learn from Swiss Blockchain entrepreneurs?

I believe that the learnings are mutual. The unique learning that CV VC brings to our continent is simple - it represents the most mature global hub for blockchain and as such the pillars of its success, namely regulation, infrastructure, and openness to creating new economies will be a great guiding light for Africa. Crypto Valley is home to 14 blockchain Unicorns and its entrepreneurial spirit is both illuminating and confidence enhancing for the emerging African ecosystem. I believe we will see African blockchain Unicorns join the global herd in the very near future and it is my intention at CV VC Africa to enable them!

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