Can Tokenisation Unlock SA’s Economic Potential?

What happened

Tokenisation, a digital process that converts ownership of assets into secure, tradable digital tokens, is gaining traction globally as a way to unlock value trapped in illiquid or frozen assets. In South Africa, leaders like Shiven Moodley, CEO of Novaque, are exploring how this technology might help revive the country’s economy by unfreezing assets that are currently hard to access or trade.

Tokenisation works by representing real-world assets such as property, shares, or commodities as tokens on a blockchain. This process simplifies buying, selling, and transferring ownership with more transparency and speed compared to traditional methods.

Why it matters

South Africa's economy faces structural challenges including high unemployment, limited access to capital for small businesses, and a market where many valuable assets remain underutilised. For example, properties that are tangled in legal disputes, stock that isn't liquid, or investments that are locked in long-term contracts—all represent ‘frozen’ value.

By digitising ownership of these assets, tokenisation could create a new marketplace for investors and entrepreneurs alike. This can mean better access to funding for small businesses, more investment opportunities for average South Africans, and a smoother flow of capital through the economy.

What this means for South Africans

For everyday South Africans, tokenisation could lower barriers to investment. Right now, many people are excluded from owning shares in property or businesses because the entry costs are too high or processes are too complex.

With tokenised assets, you could own a fraction of a property or business, making investment accessible even with a smaller budget. This democratization of investment can create pathways to wealth that were previously closed off, especially important in a country with stark economic inequality.

For government and regulators, embracing tokenisation means finding ways to ensure these digital assets are safe and compliant with existing laws. South Africa’s financial sector already uses tech innovations in digital payments and banking, so expanding into tokenised securities could fit naturally into this evolving landscape.

Impact on consumers, jobs and small businesses

Tokenisation has the potential to impact the economy on multiple levels:

• Consumers: Access to a broader range of investment opportunities can help individuals grow their savings and plan better for the future. It also increases transparency since blockchain records ownership and transactions publicly.

• Jobs: By unlocking capital trapped in frozen assets, businesses might find it easier to raise funds for expansion or new projects, creating more job opportunities.

• Small businesses: These often struggle to secure traditional loans. Tokenisation could open new funding channels by allowing businesses to issue tokens representing shares or future revenues, attracting a wider pool of investors.

Given South Africa’s high unemployment rate, especially among the youth, innovations that stimulate investment and business growth are vital.

Risks and limitations

Despite its promising benefits, tokenisation is not without challenges.

• Regulatory uncertainty: South Africa’s financial and legal frameworks may need updating to handle tokenised assets, especially regarding ownership rights and dispute resolution.

• Technology access and literacy: Not everyone has reliable internet access or understands how to use digital wallets and platforms, potentially excluding those most in need.

• Market volatility and scams: As an emerging market, tokenised assets could be subject to price swings and fraudulent schemes, which requires strong consumer protection.

• Infrastructure costs: Setting up tokenisation platforms requires technical expertise and investment, which might be costly for smaller players initially.

Overall, tokenisation offers exciting possibilities to unlock economic value in South Africa, but it must be approached carefully and inclusively to ensure it benefits ordinary citizens and the broader economy.

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