Blockchain at the Grassroots: Early-stage Web3 Usecases in Africa
In Africa, the adoption of blockchain is less about theoretical possibilities and more about tangible use cases. As a continent driven by practicality and utility, new technologies cannot operate any differently. Across Adaverse’s work in Africa, we’ve placed consistent emphasis on practical applications of Web3 to the benefit of the average consumer. Our portfolio reflects this, constituting a variety of innovative companies implementing solutions to common pain points in a variety of regions, sectors and verticals.
A unifying factor across these companies is the integration of Web3 to pre-existing consumer habits and trends. The necessity of this approach is reflected in the success of Web2 technologies such as mobile money. There is no reason mobile money should be viewed as any simpler, easier or more straightforward than blockchain: it’s simply been packaged, rolled out and integrated far more effectively. There can be no reinvention of the wheel with respect to successful African blockchain projects.
This report aims to conduct an in-depth analysis of fundamental Web3 use cases in Africa and their effectiveness. The findings will illuminate that the cornerstone for blockchain success on the continent hinges on straightforward B2C engagement: adoption by the mainstream consumer.
I. Use cases
When developing any product within the context of the African market, founders must not understate the importance of tangible use-cases. The continent’s numerous and diverse pain-points make practicality both a great opportunity and an important consideration.
The World Bank estimates that average GDP per capita across Sub-Saharan Africa is approximately $1600, with median annual income at around $760. Coinciding with high rates of poverty and variable levels of financial, social and environmental infrastructure, there is little room for solutions which don’t acutely solve an issue or otherwise have a reason for use.
Gaming as a Case Study
This is exemplified by the patchy adoption of Web3 gaming platforms across the continent. Whereas markets such as South and South East Asia have seen rapid and widespread growth of GameFi, Africa has had little progress despite seemingly ideal demographics. This is at least partly explained by the two consistent requirements for almost all Web3 games: time and money. Assuming both that the average floor price of a gaming NFT is $120 and that full usage of this NFT requires a substantial amount of time spent playing for advancement, a vast majority of the African market is instantly excluded. Put simply, there is no room in the market for products which require time and money for no obvious outcome.
Despite this, Web3 gaming also demonstrates the way in which market sensitivity can yield interesting results. The importance of use-cases does not totally exclude a sector which revolves around entertainment. Taking into account the issues presented by time and money, the rise of gaming guilds across Africa presents an accessible and affordable way for local players to participate in internationally developed P2E games. Awujo, formerly known as AfriGuild, is one such company: by allowing African players to pool resources and play collaboratively in NFT based games, earning an income as they do so. This works in two respects: not only are African players given the opportunity to play otherwise inaccessible games, but they can directly earn money. Hence, in regions where time and money are urgent concerns, there is suddenly a good reason to play games that elsewhere are simply objects of occasional entertainment.
Put simply, Web3 projects looking at Africa must place themselves in the shoes of the average consumer. In doing so the question ‘what’s the point?’, must be seriously considered. Taking Nigeria as an example, 27.4mil citizens earn less than $200 yearly and 99.4% of bank accounts contain less than $1000. Why would any of this number want to bother with a product which doesn’t tangibly add something productive to their socio-economic situation?
II. Not just fintech
With respect to this latter fact, it is often tempting to look to fintech as the quintessential use case for African blockchain. This is true to an extent, insofar as everyone needs to send, store and receive money. Hence, facilitating this will always be important. However, we cannot reduce the African market to simple processors of cash. In the same way that blockchain is more than just crypto trading, so too is African Web3 more than just fintech.
When considering the continent’s non-financial pain points, this becomes clear. A recurring issue across Africa is that of land rights and verification. From Nigeria to Kenya, land disputes are a perennial issue stoked by incomplete and incorrect registry records. This is a problem that can be solved by blockchain: companies such as HouseAfrica and Seso Global work directly with real-estate developers to bring land records on-chain, thereby producing a transparent and immutable record of who owns what. Just as people always need to be able to pay for things, so too do they always need to be able to own things. Again, there is a clear use case: ‘what’s the point?’ is answered directly.
Even amongst the more conceptual projects in the African Web3 space, we see perpetual return to this question. Companies such as Cassava Network and Versus exist to provide a link between multinational brands and the African consumer, primarily through incentive loyalty programs and the opportunity to earn through engagement. Beyond the technological benefits both platforms’ use of blockchain bring to African brand strategy, their earning and user participation aspects give a clear reason to use them. There is no such thing as a free lunch when it comes to product ideation in Africa.
This latter point links well to an equally fundamental consideration when considering Web3 within the context of Africa: integration and go-to market strategy. Despite the above emphasis on ‘what’s the point?’, this is not to say the African consumer cannot enjoy or make use of products which are recreational, innovative or experimental. Instead, it is a question of how they are presented and packaged.
As mentioned in the introduction, mobile money has enjoyed incredible success across East Africa. Yet, mobile money is not any simpler or technologically straight-forward than blockchain. Instead, it has been packaged and presented in a way which is palatable, useful and relevant to the average consumer. In doing so, it has been rapidly adopted and developed. There is no reason blockchain cannot do the same.
An interesting case-study for this point is the company Fonbnk. Founded in 2021 to address the limited opportunities to trade airtime in Kenya, the platform has integrated crypto to allow users to buy and sell airtime for dollar stablecoins. To date, Fonbnk has 250k users and $10mil GMV across 12 countries and is in the process of integrating USSD technology for a full end-to-end mobile<>crypto value chain.
Arguably, whilst Fonbnk’s use of crypto and blockchain is interesting to many consumers, this is not the reason for its success. Instead, it is the way it has managed to normalise the process of buying and selling digital assets with a familiar and popular pan-African technology: airtime. Cemented with USSD integration, the ability to buy and trade crypto is suddenly exponentially more accessible to the average consumer than platforms which deal with seed phrases and wallet addresses outright. The daily user does not have to spend time, money and energy on new technology or learning new information.
This is also reflected in Kenyan platform Kotani Pay. Specialising in blockchain infrastructure, Kotani Pay provides an African USSD off-ramp for crypto, thereby allowing non-smartphone owners to receive, send and hold digital assets. Users simply dial *483*354#, which generates a wallet linked to their phone number. This is no different to M-Pesa, Airtel Money or any other mobile oriented digital wallet. As a result, crypto is reduced and re-packaged to an accessible, normalised technology the average consumer feels comfortable using.
Whilst the lack of traditional financial infrastructure in Africa presents interesting opportunities for new technology such as blockchain, one cannot expect instant adoption. Instead, integration and gradual advancement is essential.
This is also demonstrated from a statistical perspective. Further considering the importance of non-smartphone solutions, we must remember an estimated 57% of African mobile phones do not have internet access. In Ghana, Senegal, Nigeria and Kenya for example, only 30% of adults own smartphones. Tanzania’s smartphone ownership is as low as 13%. Across these countries is a market of approximately 100mil non-smartphone enabled consumers. Hence, solutions which address this reality are essential to any successful product launch. Expecting the average person to understand staking, hash addresses and liquidity pools is an unrealistic ask.
Though this paper has frequently used the term ‘Africa’, it is important to consider the diversity of the continent’s markets. Whilst everything discussed so far is almost universally true across the continent, a common mistake of Web3 founders is expecting easy and instant scaling from one African country to another. In other words, companies must be certain and purposeful about where they’re deploying and subsequently how they’re deploying.
Much like integration, a primary consideration amidst Africa’s market diversity is consumer habits. Whereas more advanced tech ecosystems such as Kenya present an increased appetite for saving, investment and more complex financial products, other earlier stage regions are increasingly focused on more basic transactions and P2P flows. As a result, companies must be aware of this and tailor their products to it.
Returning to mobile-money as an example, we see this has achieved 94% market penetration in Kenya and the EAC. In Nigeria, however, this figure is 7%. Hence, companies such as Kotani Pay will naturally work much better in the former than the latter. Despite this, we see Nigeria having a strong preference for bank transfers with transactions surging 150% over the past year; many Nigerians use their banking apps to buy airtime, and pay bills and subscriptions. Hence, solutions building on this basis will have greater adoption in the Nigerian market. Taking platforms such as BoundlessPay or BitMama as examples, we see their UI and value added services closely reflecting that of conventional banking apps. In their cases, however, they simply use crypto on the back end to fulfill these services.
Between these East and West African markets are a variety of outliers in terms of local consumer trends and preferences. In the DRC, for example, there is a strong preference for physical cash. Though difficult to quantify, local ecosystem players ascribe the slow adoption of mobile money and banks largely due to the fact Congolese consumers like to see, touch and hold their money: it must be tangible. Where mobile money has been adopted, it works largely for domestic spot transfers. In a country where it can take over a day to move between major cities, technological integration is required to an extent (but only where absolutely necessary). Hence, whilst the Web3 market is underdeveloped we see mobile money and agency networks taking a different shape in the DRC. There is a heavy emphasis on off-ramping, with companies such as Flash focusing their efforts on more agents and pre-funded agent accounts for guaranteed roadside liquidity. Unlike M-Pesa, there cannot be charges for withdrawals. Similarly, any crypto project must consider such consumer preferences equally for any chance of success.
This short study has been written largely on the assumption that the future of African Web3 will come from the grassroots. Put simply, there cannot be mass-adoption of blockchain technology without consideration of the mass-consumer. As has been demonstrated, there are a number of distinct but overlapping considerations in this respect: use-cases (why), integration (how), and appreciation of Africa’s diverse markets (where).
Viewed in light of the future of the continent’s market, I would argue founders and companies must have a distinctly local focus. It is estimated that by 2100 ⅓ of people will be African; the vast majority of which being that average consumer which is currently excluded from the sort of tech advancements blockchain presents. Taking into account the importance of this average, local consumer: I would argue Web3 companies must be led and strategically positioned either by local founders or those with a strong understanding and appreciation for the markets in which they operate. In doing this, Web3 platforms will far more easily be able to bridge the gap between what is currently a distant, complex and seemingly untrustworthy technology to mass-adoption and usability.