Mineral Rich But Still Struggling! Why Africa's Mining Sector Needs Blockchain

In 1980, African leaders convened in Lagos to establish the Lagos Plan of Action for Economic Development of Africa, 1980–2000. The plan’s major goal was to boost Africa’s self-sufficiency and resolve the unprofitable mining and mineral industry for socio-economic development.

Today, we still grapple with similar characteristics, such as a lack of information on mineral endowments, poor value-addition and low development.

Due to the absence of tangible advantages to African nations despite rising mining operations and foreign direct investment (FDI), countries with mining industries have dysfunctional internal systems. A World Bank analysis shows that African oil and mineral-rich countries’ economic expansion has not decreased poverty. The reduction in poverty rates in countries (Angola, Congo-Brazzaville, and Gabon) with abundant resources has been slower than in poorer countries. 

Another research article stated that African areas with unstable geopolitics pose significant challenges to the mining industry’s supply chain. For instance, the mining sector has issues such as human rights violations, supply chain management, traceability, exploitation of children, and environmental degradation.

In what has been termed as ‘Blood Diamonds,’ the diamond trade reportedly funds African wars in countries like Botswana. 

And so it goes, blockchain-facilitated mining will facilitate tracking of health and safety documentation, child labor, environmental deterioration, and environmental reparation programs. The European Union (EU) denoted that the adoption of digital identities enables employees to be recorded on the blockchain, assuring fair pay and working conditions. This phenomenon increases price transparency, minimises human rights breaches, and encourages responsible sourcing.

The key takeaway from the abovementioned is that the influence of mining on economic growth will improve with adequate governance reforms.

The big question is, what does proper governance look like in Africa’s mining sector?

Picture this: implementing a blockchain network, standardising protocols, assuring system compatibility, and preserving data privacy will always be challenging. Blockchain requires risk evaluation and management or remediation. Thus, blockchain-enabled projects should ensure transparency of mining sites, diamond enterprises, pricing, provenance, and property history. Within the continuum of blockchain and decentralised ledger technology (DLT) design protocols, upstream actors, especially artisanal and small-scale miners, need to be included.  This will expand potential benefits for these marginalised groups.

Let’s now delve into use cases of blockchain in Africa’s mining industry and its potential implications.