The growing adoption of blockchain in African trade could make a material difference to the economic growth of many African countries, especially as they emerge from the pandemic.

Intra-African trade could rise by 20% to 30% within the next five years with the use of digitisation and blockchain, says investment bank RMB trade finance head Louis du Plessis.

Blockchain 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.

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 require real-time, accurate records for counter-parties, he explains.

“Over the past 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 notes.

Africa trade makes up 3% of global trade and, of that, 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%.

“This lays bare the enormous potential for much higher volumes of trade on the African continent.

“Intra-African trade has yet to gain momentum following the formation of the African Continental Free Trade Area.

"However, the low base creates a chance to jump-start trade by using the latest technologies. While Covid-19 has reduced world trade volumes, it has also emphasised the urgency of digitisation efforts in trade finance to ensure business continuity,” Du Plessis says.

“Uniform rules have been and still are a key missing component. That the Group of 7, consisting of Canada, France, Germany, Italy, Japan, the UK and the US, 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.”

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, says Du Plessis.