Blockchain adoption is expanding in Africa, particularly within financial services, to address the exclusion of many from the financial system. This technology shows promise in tackling such systemic issues, but the continent is facing a significant connectivity challenge. Despite areas with available service, the costs are prohibitive—Sub-Saharan Africa's average mobile internet cost was $4.47 per gigabyte in 2022, ranking among the highest globally.
Although connectivity has seen notable improvements since 2014, by 2021, only 22% of Sub-Saharan Africans had used mobile internet, indicating a continued digital divide driven by affordability, literacy, and digital skills issues. Blockchain's importance transcends its novelty and is a pivotal tool for broader socio-economic objectives. The International Telecommunication Union (ITU) estimates a formidable $428 billion is needed to connect the remaining 3 billion individuals globally by 2030. With Africa at the heart of this challenge, the capabilities of Mobile Network Operators (MNOs) are under scrutiny; despite their combined market cap of $64.88 billion and a CAPEX of $143.74 billion over the last decade, they have been unable to address this connectivity gap unaided.
Innovative solutions are imperative in the face of insufficient current methods to bridge the connectivity gap in rural and semi-urban areas of Sub-Saharan Africa. This is where Decentralized Physical Infrastructure Networks (DePIN) enter the picture. DePIN utilises blockchain to incentivise community-driven development of infrastructure networks, including telecommunications.
How DePINs Can Bridge the Digital Divide in Africa
DePINs have the potential to bridge the digital divide in Africa in several ways:
The potential of DePIN has moved from theory to practice. Notably, 2023 saw the IEEE World Forum on IoT host a dedicated DePIN workshop, marking a significant step towards standardisation. Real-world applications are exemplified by The Helium Network, launched in 2020, which now boasts over 960,148 hotspots. Despite Helium's success in network expansion, it has struggled to generate sufficient demand. Notably, Africa, a region that stands to benefit immensely, has seen minimal adoption of such networks.
Drawing on Africa's history of innovative mobile money solutions, DePIN's adoption could transform the continent's connectivity landscape. The University of Cape Town Financial Innovation Hub is at the forefront of this transformation, focusing on rigorous research, skills development, and outreach. DePIN is a central research theme, tackling Africa's pressing connectivity issues.
An example of this innovation is one of our Master's in Financial Technology candidates, Tatenda Muvhu. He is exploring blockchain-enabled weather index crop insurance for smallholder farmers. This affordable insurance reduces transaction costs, mitigating risks like adverse selection and moral hazard. The candidate's thesis revolves around creating a weather index crop insurance platform on the Algorand blockchain. This platform aims for cost-effective, secure, transparent, and efficient transactions between weather data providers, insurers, and farmers. It addresses traditional challenges smallholder farmers face, such as long claim cycles and paper-based policies, by utilising blockchain for transparency and automating pay-outs when conditions are met.
This project indicates how the Financial Innovation Hub incorporates DePIN in its research, particularly in the agricultural sector, to bridge the digital divide.
The mission is comprehensive: to tackle Africa's challenges through a funnel approach that integrates research, skill-building, and innovation. This synergy of pillars—merging research, teaching, and thought leadership—fuels effective innovation. By bridging the gap, we convert thorough research into practical solutions. We empower startups with the necessary tools, insights, and support to address financial challenges and develop transformative products. Our innovation funnel is a methodical strategy that ensures startups are carefully cultivated from their inception to become leaders in innovation.
Closing the connectivity gap by 2030 will require a collective effort across all sectors, not just educational programs, to address the skills gap. DePIN is not the sole answer to Africa's connectivity issues, but it marks a significant step toward a more connected and resilient continent. By facilitating access to connectivity, DePIN empowers the utilisation of the full range of blockchain services, democratising both financial and digital realms. The path is complex, but a connected Africa by 2030 is an achievable vision with collaborative efforts.