Can African Blockchain-Based Anti-Counterfeiting Innovation Startups Improve Supply Chain Transparency?

Counterfeiting is a massive global problem affecting many industries, from high-end goods to medicines. It costs both businesses and consumers a lot of money. In recent years, a lot has been done to stop counterfeiting, but the rise of Blockchain technology innovation has developed a new way to deal with this problem.

By using Blockchain Innovations, it may be possible to track the authenticity of products throughout the supply chain safely and transparently, making it harder for counterfeiters to do business. In this article, we’ll talk about how Blockchain technology innovation could help fight counterfeiting and how it could change how we deal with this problem. 

What is Blockchain Technology? 

Blockchain technology might sound complicated but trust me. It is not; let us simplify. A Blockchain is basically a digital bookkeeping system that keeps track of transactions. See it as a distributed database shared among a network of computers instead of being kept in one place. Each computer on the network has a copy of the blockchain, and they all work together to confirm and record new transactions.

Still don’t understand? Let us look at it this way, once upon a time, there was a village where everyone kept track of their transactions using a paper ledger. But one day, a stranger arrived and introduced them to a new technology called the Blockchain. Instead of one central ledger, every villager now had a copy of the ledger. When a transaction occurred, everyone verified it before it was added to the chain. As everyone was watching, this made it much harder for anyone to cheat or manipulate the ledger.

The Current State of Counterfeiting and Supply Chain Transparency in Africa 

Many African countries are at war with counterfeiting and keeping the supply chain open. According to the International Chamber of Commerce (ICC), counterfeiting in Africa represents an estimated 40% of the total value of trade in the region. In Nigeria, the problem is even more pronounced, with the International Trademark Association (INTA) estimating that counterfeit trade accounts for up to 70% of the market.

The World Customs Organization (WCO) has also reported that the most counterfeited goods seized in Africa include pharmaceuticals, textiles, and electronics. We would discuss the impact, challenges, existing solutions and limitations on the current state of counterfeiting and supply chain transparency in Africa. 

Impact and Challenges  

Counterfeit goods hurt legitimate businesses by cutting into their sales and profits. 

Fake goods can hurt legitimate businesses in Africa by cutting their sales and profits. For example, a Nigerian company that makes high-quality clothes may see a drop in sales if fake versions of their products flood the market. When cheaper fake products are available, customers may buy them instead of the real thing. This action can hurt sales and profits for the real business. 

Fake goods can hurt consumers because they may not meet safety standards. 

In Africa, fake goods can be hazardous because they may not meet safety standards. For instance, fake drugs are a big problem in Africa, where fake antimalarial and antibiotic drugs are sold in many markets. People who take these fake drugs may not get better or may even get sicker, which can lead to more health problems or even death. 

Buying fake goods can cause job losses in real industries. 

Buying fake goods can also cause job losses in industries doing things right in Africa. For example, making fake goods takes a lot of work, often unregulated and low-paid. This can make legitimate businesses lose market share, which can lead to the loss of jobs. 

Counterfeit goods can cause governments to lose tax money. 

Governments in Africa also lose tax money because of fake goods. For example, many fake goods are sold in informal markets, where they are not taxed. This can mean big tax revenue losses for governments that rely on taxes to pay for public services like healthcare, education, and infrastructure. 

Goods that aren’t real can be used to fund organized crime. 

In Africa, counterfeit goods can also be used to fund organized crime. For example, organized crime groups often make and sell fake goods and use the money from these activities to pay for other illegal activities like drug trafficking or human trafficking. This can lead to various social problems, including violence and instability. 

Existing Solutions and Their Limitations 

Legal steps: 

One way to stop counterfeiting is to bring the people who do it to court. This means making counterfeiting a crime and setting up agencies to find and prosecute people who break the law. This method can stop some offenders, but it has its limits. For example, In Nigeria, it is not common for people who make or sell fake medicines to be convicted. However, there was a case in 2009 that made the news. It was called the “My Pikin syrup tragedy,” and it involved a teething syrup that was contaminated with a toxic chemical called diethylene glycol, which is found in things like antifreeze and brake fluid. Sadly, 84 children died after taking the syrup. Two workers from the company that made the syrup were found guilty by a court.

Technology:  

Technology can make packaging and products that are hard to copy. For example, adding holograms, RFID tags, and other security features can make products harder to copy. Putting these technologies into place can be expensive and impossible for all products. Also, some fakers have learned how to copy even the most advanced security features, which makes this method less effective. 

Education and awareness:  

Another way to reduce the number of fake goods is to teach consumers and businesses about the risks of counterfeiting. For example, In Kenya, an anti-counterfeiting campaign focused on educating the public about the dangers of counterfeit products. This led to increased awareness among consumers, which in turn helped law enforcement agencies crack down on illegal manufacturers and distributors. The reduction in counterfeit goods has positively impacted the economy, boosting legitimate businesses and tax revenues. 

Partnerships and working together:  

Governments, businesses, and other groups can also work together to stop counterfeiting. For example, The “Medicines We Can Trust” campaign launched by the African Union and the IFPMA in 2019 brought together stakeholders to combat the counterfeiting of medicines in Africa. They focused on strengthening regulatory systems, promoting quality assurance, enhancing supply chain management, and raising public awareness. The campaign has led to significant progress in the fight against African counterfeiting. But making these partnerships can be challenging, especially when stakeholders need to trust each other or have different goals. 

How Blockchain Technology Can Improve Supply Chain Transparency 

Blockchain technology can make the supply chain much more transparent by creating an immutable and transparent ledger that everyone can use to track the movement of goods from the point of origin to the point of consumption. Here are a few ways that blockchain can improve supply chain transparency: 

Provenance tracking:  

Blockchain can track where goods come from, which can help stop fake goods from entering the supply chain. Using blockchain, stakeholders can track a product from the raw materials used to make it to the point of sale. 

Smart contracts:  

Smart contracts can automate supply chain processes, like payment and delivery, eliminating intermediaries and lowering transaction costs. This can improve transparency by ensuring that all parties understand the terms and conditions of a transaction. 

Real-time tracking: 

Blockchain can track goods in real time, which can help make the supply chain more efficient and reduce the risk of delays and disruptions. Using blockchain, stakeholders can track the movement of goods at every stage of the supply chain, from manufacturing to delivery. 

Sharing data:  

Blockchain can be used to safely share data between parties in the supply chain, which can help improve collaboration and reduce the risk of data breaches. Using blockchain, stakeholders can share data clearly and safely, which can help improve supply chain efficiency and cut costs. 

Blockchain-Based Anti-Counterfeiting Innovation Startups in Africa 

Blockchain technology is being used by startups to create innovative solutions for preventing and detecting counterfeit products in Africa. This section explores one of the most promising blockchain-based anti-counterfeiting startups that operate in Africa from Africa, Chekkit 

Who is Chekkit? 

Chekkit is a Nigerian anti-counterfeiting startup that was formed at the Meltwater Entrepreneurial School of Technology (MEST) in Accra, Ghana back in 2018. With its blockchain technology, Chekkit is able to monitor premium packaged goods and products through the unique tamper-proof ID it gives to individual products. Chekkit has built a platform that tracks product movement and the parties involved in the transfer of products from warehouse to distributor, and on to the final consumer. Chekkit’s blockchain technology allows consumers to verify the authenticity of products by scanning a QR code on the product. Chekkit has raised $500,000 in pre-seed funding as it looks to expand its team and technological infrastructure.

Read Also: Nigerian Blockchain-Powered Anti-Counterfeiting Innovation Chekkit Receives Funding

Benefits and Limitations of Blockchain-Based Anti-Counterfeiting Startups 

Benefits:

Financial benefits:  

Businesses that use blockchain to authenticate their products could see financial benefits of 2% to 5% of their sales. This is because blockchain technology can help stop counterfeiting and protect the product’s brand value, which can lead to more sales and revenue. 

Adequate protection against counterfeiting:  

Blockchain technology provides a safe and transparent way to track and verify products throughout the supply chain. Storing data on a decentralized and unchangeable ledger makes it easier for counterfeiters to change or manipulate product information. This makes finding and stopping fake goods from getting on the market more accessible. 

Reduced risk of fake spare parts and accessories: 

Using blockchain technology in the automotive industry can help reduce the risk of fake spare parts and accessories. Recording each transaction in the blockchain supply chain makes it easier to track the origin and authenticity of parts. This makes it less likely that fake parts will be sold to consumers. 

Limitations: 

High costs: 

Blockchain technology can be expensive, especially for small startups. Creating a blockchain-based system requires a lot of resources, such as technical knowledge, hardware, and software. Also, the cost of maintaining and updating the system can be high. 

Scalability Issues: 

Blockchain technology is still in its early stages, and scaling a blockchain-based system can be challenging. As more people join the network, the speed and efficiency of the system can slow down, leading to slower transaction times and higher fees. This can be a barrier to entry for smaller startups that need help to afford to invest in the infrastructure needed to run a scalable blockchain-based system. 

Adoption challenges: Getting businesses to use blockchain-based anti-counterfeiting solutions can be challenging. Many businesses are still learning about blockchain technology, so they may hesitate to invest in a new system. Also, some businesses may resist change and prefer to stick with their current systems, even if they are less secure. 

Recommendations for Startups, Policymakers, and other Stakeholders 

• Raise people’s awareness and understanding of blockchain technology and what it can do for them through education and training programs. 

• Make grants and loans available to small and medium-sized businesses (SMBs) to help them adopt blockchain technology. 

• Set up partnerships between new and older businesses so people can work together and share their knowledge. 

• Work with policymakers and regulators to set up rules that make it easier to use blockchain technology. 

• Invest in developing your technical skills and knowledge of creating, implementing, and maintaining blockchains. 

• Fix the problems with infrastructure that make it hard to get electricity and internet connections that are both reliable and cheap. These things are needed for blockchain technology to work. 

Conclusion

So back to the question, Can Blockchain-Based Anti-Counterfeiting Innovation Startups Effectively Combat Counterfeiting and Improve Supply Chain Transparency in Africa?  The answer is yes.

Blockchain has benefits like being open, unchangeable, and easy to track. It can also be used to make a supply chain system that can’t be changed, improving efficiency and building consumer trust. Adoption is still in its early stages, and some technical and infrastructure issues remain to work out. Chekkit is the only African blockchain startup currently focusing on this niche from Africa, showing room for more innovation. Blockchain technology could change how Africa works to make supply chains more transparent and stop counterfeiting. 

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