The Eastern and Southern African Trade and Development Bank (TDB) and OCP Group, the world’s largest phosphate mining and leading fertiliser company, are pleased to announce $400m-worth of fertiliser trade finance transactions executed via blockchain technology, $270m of which have already been completed, and the remainder to be executed in upcoming months.
These transactions make OCP Group the first African company to execute an intra-African trade transaction using blockchain. Through dltledgers’ blockchain platform, OCP Group delivered phosphate fertilisers from Morocco to Ethiopia. The intra-African transaction initiative, as part of OCP’s digitalisation strategy, aims to reduce the trade finance gap in Africa and boost trade between African countries, particularly in the fertiliser sector, through digital inclusion.
dtledger’s blockchain technology makes it possible for all parties to carry out these import-export trades digitally and in under two hours. Traditional transactions typically take over three weeks to complete due to the need to move physical documents from suppliers, through the banking system, to the buyer. This lengthy process was disrupted further by the Covid-19 pandemic, taking up to six weeks to complete, as border and airport closures continue to create additional delays.
Through the blockchain platform, stakeholders are able to upload, view, edit, and validate the documentation in one private blockchain, simultaneously and in real time. Moreover, blockchain transactions have a lower carbon footprint, and are more secure due to encryption and verification technologies. They also allow for greater transparency and traceability, and reduce risks by eliminating potential errors and ambiguities in the exchange and amendment of documents.
These transactions come as total global trade for 2020 contracted by 5 to 10% as compared to the previous year, alongside reduced demand for trade finance.
TDB has facilitated over half a billion dollars’ worth of trade finance in Ethiopia in 2020 alone and supported close to $1bn of fertiliser imports from OCP Group to Ethiopia in the past three years. TDB has provided solutions that help address forex needs and enable the importation of vital agricultural and energy commodities including fertilisers, wheat, sugar and others. Importing fertilisers boosts crop yields and productivity levels, enhances food security, increases foreign exchange earnings from commercial crops, and supports employment.
TDB became the first African DFI to complete a live end-to-end trade finance transaction using blockchain in October 2019, when it financed the import of 50,000 tons of white sugar from India into the region it serves. This innovative transaction served as an example for the trade finance industry globally, as well as a template, which TDB has since then been able to replicate for further transactions such as this intra-African trade.
OCP Group has always emphasised the need for intra-African collaboration to meet the challenge of a structured, efficient and sustainable agriculture. Likewise, it is aligned with TDB’s mandate to drive intra- and inter-regional trade, and regional integration in the region it serves and on the continent, in the spirit of the AfCFTA (African Continental Free Trade Area).
Agriculture plays a critical role in Ethiopia’s economy, representing 31% of the country’s GDP and 66% of its total employment. Fertilisers are fundamental to the sector, with about half being imported from the OCP Group in Morocco.