Blockchain for Trade in Africa: TradeXchange Might Position Uganda as East Africa’s Economic Giant
Jul 30, 2024
Key Insights
Uganda is partnering with CargoX to implement a blockchain-based TradeXchange using Blockchain Document Transfer (BDT) technology to streamline trade, reduce delays and costs, and ensure adherence to global trade guidelines.
- The adoption of blockchain technology by Uganda aims to enhance trade facilitation within the East Africa Community (EAC), promoting intra-Africa trade and improving cross-border trade efficiency, similar to Egypt’s success with the CargoX Platform.
- Uganda seeks to overcome its challenges as a landlocked country by adopting blockchain to improve its trade infrastructure, aiming to increase export volumes and secure a stronger position in the regional trade landscape.
Primer
In Uganda, a partnership with CargoX aims to develop a blockchain-based TradeXchange – an example use case of blockchain for trade in Africa.
Africa’s trade performance has been rather average, despite massive domestic efforts and policy improvements over the previous three decades.
According to the World Trade Organization, weak trade performance arises from inadequate access to global markets and supply chain restrictions.
Uganda has discovered the key solution to this challenge.
The solution will be on CargoX’s Blockchain Document Transfer (BDT).
BDT enables the creation and transfer of over 65 document types, including structured and unstructured formats, between business partners and government agencies. It leverages neutral, public Ethereum and Polygon/Matic layer 2 blockchain technology, as well as ERC-721 NFT token technology.
In this case, the platform will support exporters to overcome trade bottlenecks and ensure that businesses adhere to global trade guidelines.
The goal is to unify trade practices and enhance production, packaging, information flow, quality control, and export volumes.
Facing significant trade challenges, Uganda has chosen this solution, already adopted by over 115,000 companies globally.
Why is CargoX’s BDT is the Effective Blockchain for Trade Solution in Africa?
The BDT uses electronic bills of lading (eBLs) to eliminate delays, reduce costs, and avoid demurrage costs. Its distributed processing enables control over global trade documents. Thus, Uganda has adopted an EBL-enabled platform, which is rapidly becoming a standard in global trade and trade finance. As a result, it has processed millions of electronic trade documents without any significant downtime or operational issues.
CargoX also offers tools for integration into government processes for customs management and compliance verification. By using digital signatures, Uganda will reduce its trade facilitation time and costs. There will be minimal manual paperwork. This further reduces administrative burdens, improves efficiency, and enables faster clearance times.
TradeXchange Facilitating Trade within the East Africa Community (EAC)
In November 2009, the EAC Partner States signed the Common Market Protocol, cementing the area as Africa’s first single market. It promotes the free movement of products, people, services, labor, and capital while protecting the rights to residency and establishment. The member states include the Democratic Republic of Congo, the Federal Republic of Somalia, the Republics of Burundi, Kenya, Rwanda, South Sudan, Uganda, and Tanzania. However, Uganda is leading the race to facilitate its trade on the blockchain.
Why is this move crucial?
EAC member states are more focused on intra-Africa trade. From a statistical standpoint, EAC’s trade with the rest of Africa climbed by 14% in Q4 2023, reaching $4.3 billion, compared to the same period in 2022. Cross-border trade within the region also increased by 12%, from $2.6 billion to $2.9 billion in the fourth quarter.
In the wake of COVID-19 and its impact on economic activities in the EAC, Uganda is eyeing a tool that has already taken advantage of blockchain for trade Africa. This way, it aims to replicate Egypt’s success, which, after integrating the CargoX Platform with the NAFEZA single window for international trade facilitation in 2021, experienced a 13% increase in revenue collection and the successful transfer of over 5 million documents.
A Wake-Up Call for Regional Trade Leaders
Tanzania boasts of large trade volumes and ranks 96th globally. It offers a large market for merchandise and services with 186.9 million consumers. It has experienced an export growth rate of 3.3%.
On the other hand, Kenya, another trade rival, has witnessed the biggest trade surplus in 12 years with its African counterparts. This phenomenon is underlined by the rising trade with Uganda, notwithstanding a dip with Tanzania.
The race is tight. New alliances are being formed, but suspicions still linger.
Uganda recognized its disadvantage as a landlocked country with slightly lower trade volumes. It couldn’t lag behind and has strived to be a strong trade influencer amidst the high demand from inter-regional trade. The EAC is the top destination for Uganda’s exports, which constitute 37.6% of the total market share. Its exports to EAC member countries scaled to $231.47 million, while imports remained at $209.17 million.
By replacing its traditional trade infrastructure with a blockchain-based system, Uganda aims to enhance its performance and secure a prominent position on the EAC’s strategic trade map.
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