As blockchain continues to gain momentum, Africa stands poised to leapfrog into a new era of technological advancement and economic empowerment, according to the third edition of the ‘African Blockchain’ report, by private venture capital company Crypto Valley Venture Capital (CV VC) and Absa Corporate Investment Banking (CIB).

During a media roundtable on July 30, CV VC principal and head of growth Brenton Naicker explained that there had been a deeper proliferation of blockchain across industries, adding that there had been significant growth and adoption in key markets across Africa from a startup and innovation perspective, as well as at corporate, institutional and government level.

He noted that there had been a significant uptake of this technology in emerging markets, particularly in Africa and Latin America.

“We’ve seen the industry develop tremendously where now there's a very strong foundation that has been laid from a multifaceted approach, both from a regulatory perspective, from the ability to go in and out of the asset class and what we call exchanges and on and off ramps in different jurisdictions.

“And as you build this foundational layer out, the ability to build more complex use cases on top of that becomes present.

“From a global perspective, what we see is the technology itself has developed quite significantly over the past few years. So, the ability to facilitate transactions much faster and at much lower cost has enabled a plethora of use cases that previously weren't feasible,” he said.

Naicker pointed out that Africa represented about 1% of global venture funding across all sectors in 2024, while blockchain in Africa represented about 2% of overall funding.

He noted that blockchain-based deals represented over 7% of all African venture funding deals last year, increasing exponentially.

“Overall, what we're starting to see is emerging markets, and particularly Africa, are showing us the real world use cases with technology, and that's manifesting itself in terms of increased funding patterns, both relative to global venture funding, but also as a function of the funding in Africa overall”.

The report noted that 2023 marked the low point of a global downturn in private markets, with overall startup funding declining to $351.4-billion, a 34% drop from 2022, and a 54% decline from the 2021 peak, noting that this funding level had not been seen since pre-Covid-19 times in 2019.

The impact was even more pronounced in Web 3.0 startups and African equity startup funding, which fell by 73% and 57%, respectively, it explained.

However, the report indicated that Africa saw a “silver lining” with the emergence of venture debt, which grew by 47% to $1.1-billion, mitigating the overall decline in total funding raised by startups.

The report noted that African startups raised $780-million in the first half of 2024, a third of which was venture debt. This continued the trend of decline with the first half of 2024 funding coming in 57% lower than the first half of 2023.

Regarding the African Web 3.0 startup space, however, the first half of 2024 yielded the highest-ever share of African blockchain VC deals, coming in at 1.8% of global deal count, up from 1.3% in 2023. Sector-wise, fintech, logistics, mobility and cleantech led in funding, it noted.

The most positive forward-looking ecosystem developments, however, came in the form of regulatory developments, it explained.

The report also pointed out that South Africa issued its first 100-plus crypto asset service provider licences, with Kenya expected to follow shortly after establishing a preliminary framework and announcing a 3% tax on digital asset trading.

Additionally, Nigeria also announced plans in May 2024 to roll out additional rules to combat illegal digital asset trading and ensure proper registration with the country's regulatory authorities.

“These moves toward regulatory clarity and stable frameworks will significantly benefit the region's three largest startup and Web 3.0 ecosystems in the years to come.

“Blockchain technology is set to transform various industries in Africa, driving environmental, social and corporate goals and leveraging the continent’s demographic dividend to achieve accelerated scale,” the report says.

Speaking at the roundtable, Absa CIB digital assets head Rob Downes emphasised the importance of regulatory clarity and certainty as well as education, awareness and access to talent.

“Over and above regulatory clarity, the capital deficit that exists to fund some of these initiatives is really around education and awareness. I think those are the biggest foundational pillars that are missing at the moment,” he said.

In 2023, the report notes, African blockchain ventures raised $135.4-million across 17 deals, marking a significant downturn from the previous year.

Yet, even amid these challenges, the sector's average deal size in Africa remained only marginally lower than the global average, underscoring the sustained investor interest and confidence in the region's blockchain startups, it explained.

Th report indicatesd that Africa’s contribution to global blockchain and deals rose to 1.3% in 2023 and even further to an all-time high of 1.8% during the first half of 2024. Despite this growth in deals, the continent's share of venture funding decreased from 1.6% to 1.3% compared with 2022.

It explained that African blockchain businesses raised $34.7-million across 12 deals in the first half of 2024.

Looking ahead, the report said the adaptability and resilience of Africa's blockchain sector boded well for its future.

“The continent's innovative spirit, coupled with strategic investments in foundational technologies and financial innovations, promises a dynamic and thriving ecosystem for investors, entrepreneurs, and policymakers alike.

“As the global economic landscape evolves, Africa’s blockchain sector is poised to not only navigate these changes but to emerge stronger, underscoring its critical role in the global blockchain narrative.”