Feature: How Blockchain could curb corruption and instill trust in African governments.

11 months ago

Corruption remains the number one hindrance to underdevelopment in Africa. All the proceeds from agriculture, mining, tourism, industry and other industries end up mismanaged by greedy leaders through corrupt processes.

Africa is a major recipient of foreign aid from developed countries. The continent remains the most underdeveloped in the world. Most countries in Africa have been unable to manage their wealth well enough to stand on themselves and have therefore settled as perpetual recipients of monetary aid from developed countries. Different schools of thought have come out with the causes of underdevelopment in Africa. For instance, the modernist school believes that Africa needs to follow the development part of the industrialized nations before it can develop. As of 2018, corruption still remains the bane of Africa's development. 

Reports show that the continent loses $148 billion (25% of Africa’s average GDP,) every year to corruption. In the 2017 Open Budget Index (OBI) survey released in February, Nigeria scored 17%, ranking 90th out of 115 countries globally, and 23rd out of 38 African countries. The United Nations said in 1999 that over $200 billion was stolen by African leaders and this amount was more than half of the continent debts of $300 billion (George Ayitte, 2002). And this amount also “exceeds what comes into Africa as foreign aid” (ibid).

Blockchain to address Corruption

Corrosive effect of corruption needs urgent and sustained action, which demands that Africa urgently adapts technology as a way of curbing systematic corruption. To address budget-related corruption, blockchain technology should be applied in the development of budget-tracking mechanisms. A blockchain-based application will save all transactions and expenditures and everyone in the network will be alerted at every update. This will eliminate corruption and embezzlement of funds as the transaction data including the transaction amount, time, account number(s), and receiver(s) will all be under public scrutiny.

Blockchain is particularly suited to fight corruption in the registry of assets and the tracking of transactions such as procurement processes. By leveraging a shared and distributed database of ledgers, it eliminates the need for intermediaries, cutting red-tape and reducing discretionality. 

 Blockchain is also being tested to create tamper-proof company registries, making it a potentially powerful tool to ascertain a company’s shareholders. These blockchain-based company registries can make “know-your-customer” regulations easier to comply with and provide reliable information on the ultimate beneficial ownership of companies. They also allow for more effective oversight by financial regulators, law enforcement, and tax administrations. 

Technology-driven solutions now provide end-to-end transparency in public contracting, allowing one to detect red flags, bid rigging, phantom vendors, and price fixing using advanced analytics. Blockchain could straighten public contracting up to the delivery of the goods and services, by locking in critical information at every step of the procurement chain that can be monitored, tracked, and audited. In addition, “smart contracts,” would allow the automatic exchange of real assets to be programmed into an inalterable blockchain, that would execute itself autonomously based on programmed conditions. This will reduce the opportunities for fiddling with the process and increase the speed of transactions.

 Government payment systems and cash transfers are particularly vulnerable to corruption. They have multiple points of human discretion that make them vulnerable to fraud and falsification and create opportunities for bribery. Limiting the physical interaction between citizens and officials will reduce opportunities for corruption. Moreover, too many governments distribute benefits without appropriate controls or verification mechanisms, and often recipients falsify claims. Examples are conditional cash transfers and aid flows.

Countries using blockchain to eliminate corruption 

In Jordan, the UN world food programme recently conducted a pilot project using blockchain to manage cash-based transfers to Syrian refugees so as to increase transparency, eliminate leakages, and reduce transfer costs. The British Government is also eyeing blockchain to store and manage all the database of grants, student’s loans and also tracking the spending of public money. It will foster a culture of trust amongst the citizen. The Ukrainian government is considering blockchain as a probable solution to end corruption. They plan to sell government property via Auction3.0 which is a blockchain based auction trade system. In the United States, Delaware launched an initiative in 2016 that will enable corporations to utilize blockchain for the registration and transfer of ownership of stock.


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