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Blood Diamonds To Blockchain Diamonds?

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From the mine to your finger, this is how blockchain is helping stop conflict diamonds minimizing its presence in the supply chain.

Do you know where your diamonds come from? Ethically-sourced minerals and gems have gained a lot of traction of late. And increasingly, globally, consumers want to ensure that what they are buying is conflict-free.

In 2003, the Kimberley Process (KP) was established to increase transparency in the diamond trade while eliminating trade in conflict diamonds. Two years later, Everledger created the Diamond Time-Lapse Protocol, a high-tech traceability initiative built on a blockchain-based platform for the diamond and jewelry industry.

And in January, the De Beers Group announced that it would be developing the first blockchain technology initiative (called Tracr) which will be made available to the rest of the industry at the end of the year.

If you’re unfamiliar with the term, blockchain refers to a chain of transactions grouped into ‘blocks’ that are not editable by anyone – it’s an incorruptible digital ledger where every transaction is linked to the next. What is revolutionary about blockchain technology is that both people and organizations can transact in the form of smart contracts.

Why use blockchain to track diamonds through supply chains?

“Unlike other commodities – such as oil, copper or gold – individual diamond cuts have unique elements, these can be turned into data attributes that reinforce the immutability of every transaction on the blockchain,” explains Melina Mutambaie Katende, a blockchain researcher from the Democratic Republic of the Congo, currently studying at the University of Johannesburg’s department of Applied Information Systems.

“In computer science, the word ‘immutable’ comes from object-oriented programming. It means that the state of any object recorded in a piece of code cannot be modified once it has been created. Blockchain is a prime example of immutable records.”

IBM’s TrustChain initiative has already been up and running for a year. TrustChain is a consortium which uses blockchain technology to track and authenticate diamonds, precious metals and jewelry at all stages of the global supply chain, from mine to retailer. With this kind of blockchain, everything is decentralised, which means anyone can go into a ledger and see the movement of a particular stone or set of stones. It’s about transparency, proving to consumers that their purchases don’t include conflict metals or blood diamonds, and are ethically-sourced.

“Richline Group, whose head office is in South Africa, is the manufacturer. Then there’s Helzberg, a jewelry retailer, and Leach Garner, a precious metals supplier, as well as Asahi Refinery, who also do precious metals. It’s from [the] ground to wearing it on your finger,” explains Bridget van Kralingen, a Senior Vice President at IBM who heads up Global Industries, Platforms and Blockchain.

Bridget van Kralingen, SVP, IBM Global Business Services.

But this level of transparency isn’t free. Will consumers be willing to pay extra for a digital copy verifying the provenance of the materials used in their engagement rings?

The answer is yes: according to Van Kralingen, 66% of people are willing to pay more for something that’s sustainably and ethically sourced – this number goes up to 73% where millennials are concerned.

“One company can lie. Eight companies are scarcely likely to lie to you. Business is an exchange but you need proof for trust. Blockchain brings proof. With TrustChain – you can prove it and you have an ecosystem which puts its name behind it. It makes your product superior from a sustainability point of view,” she says.

A tamper-proof system, like TrustChain, is needed to track minerals in order for producers to legally obtain them, yet blockchain does have its faults – as a system, it will need to find a way to accommodate small scale and artisanal miners, for one.

According to Nicolaas C Steenkamp, a well-known independent mining consultant, blockchain cannot fully ensure that conflict minerals don’t make it into the market – it just makes it harder for them to enter the market.

“The sad reality is also that if products such as minerals and gemstones are worth enough, syndicates will find a way to influence the system. As the verification of blockchain platforms currently run on a 51% basis, employing ‘boiler rooms’ could be used to manipulate the provenance records,” he says.

Blockchain will only have value for the entire supply chain when you have a majority buy-in from the industry. Considering how often the minerals or gemstones physically change hands, the blockchains will also become increasingly complex.

“There are already rumblings around the increasingly long time the verification of a transaction takes. Mines based in remote areas with limited connectivity may struggle to connect and run these platforms if it takes several hours of even days,” explains Steenkamp.

Nicolaas Steenkamp. Photo provided.

TrustChain is an enterprise blockchain, which means it is secure, scalable and fast. It’s also private and permissioned. Currently, IBM is running 400 blockchain networks across various industries around the world.

 

“Technology is not the issue, it’s already good enough for many exchanges and transactions. It’s not going to be as fast as doing high-speed trading in an investment bank, but you wouldn’t want to put that on a blockchain,” says Van Kralingen.

From food safety to trade finance, blockchain is an engine that will change the way the world does business. Its potential to eliminate paperwork, enable new business models and improve transparency and traceability is unmatched.

“The world that we’re going into is one where people want people to be treated fairly… We’ve come a long way from pure convenience. In the supply chain, convenience is a key factor, closely followed by personalization. But then you get sustainability and ethics. Blockchain is made for that,” says Van Kralingen.

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The Fight of a Bot Named Madiba

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For one of the biggest robotics competitions on earth, a team of Generation Z-ers from South Africa made their way to Mexico accompanied by a robot with the fists and fury to fight.

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MultiChoice, Africa’s Biggest TV Operator, To Be Listed By Naspers, Africa’s Largest Public Company

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Koos Bekker, billionaire and chairman of Naspers Ltd., reacts during an interview at his office in Cape Town, South Africa, on Thursday, May 7, 2015. South Africa lacks a coherent economic policy and government departments are failing to work together, said Bekker, chairman of Africa's biggest company. Photographer: Halden Krog/Bloomberg via Getty Images

 

Naspers, the emerging markets internet and media giant which is the largest public company in Africa, will list its satellite television subsidiary MultiChoice, it has announced.

MultiChoice’s DStv service is the biggest TV operation in Africa, broadcasting to some 50 countries, and was one of the first satellite companies to pioneer the then newly-minted digital broadcasting when it began in 1996.

The spun-off company will be listed on the Johannesburg Stock Exchange (JSE) and will be known as MultiChoice Group. It will include MultiChoice South Africa, MultiChoice Africa, Showmax Africa, and Irdeto. Naspers will retain its primary listing on the JSE.

“This marks a significant step for the Naspers Group as we continue our evolution into a global consumer internet company,” said Naspers CEO Bob van Dijk. “Listing MultiChoice Group via an unbundling aims to unlock value for Naspers shareholders and at the same time create an empowered, top-40 JSE-listed African entertainment company.”

MultiChoice has been part of Naspers’ Video Entertainment division, which had revenue of ZAR47.1-billion ($3.1-billion), a trading profit of R6.1-billion ($401.6-million) and added 1.5-million subscribers in the last financial year, according to Naspers figures. It “is one of the fastest growing pay-TV operators globally. Its multi-platform business entertains 13.5-million households across Africa.. and employs more than 9,000 people in Africa,” it said. A further 20,000 people are employed by its partners and suppliers on the continent.

MultiChoice offers online streaming services called ShowMax (which offers a pure-play service in Poland) and DStv Now.

“The Video Entertainment business is an African success story. This unbundling and listing is expected to deliver value to the South African economy as well as to Naspers and Phuthuma Nathi shareholders. Naspers will continue to invest in South Africa through our interest in e-commerce business such as Takealot, Mr. D Food, PayU, OLX, Property24, and AutoTrader, amongst others,” Van Dijk added.

Phuthuma Nathi is a Black Economic Empowerment (BEE) scheme in South Africa, BEE is government policy designed to redress the injustices of Apartheid. The unbundling is subject to regulatory approval in various African countries.

“Listing and unbundling MultiChoice Group is intended to create a  leading entertainment business listed on the JSE that is profitable and cash generative. WE offer an unmatched selection of local and original content, as well as a world-class sports offering. Our leadership team is diverse, experienced and well-positioned to take the company forward,” said Video Entertainment chief executive Imtiaz Patel. “There are growth opportunities for MultiChoice Group in Africa. The combination of MultiChoice’s reach, Showmax and DStv Now’s cutting-edge internet television service, alongside Irdeto’s 360-security suite will provide a unique offering. Our customer focus, international and local content, and pioneering technology places MultiChoice Group at the forefront of African digital transformation.”

Earlier this year Naspers sold a 2% stake in Tencent for nearly $10-billion to fund its internet growth and offloaded its share in Indian e-commerce business Flipkart to Walmart. In mid-2016, Naspers became the first South African company to reach the magical R1-trillion valuation.

For decades MultiChoice was the crown jewel of the Naspers stable, until its internet interest – especially Tencent – became the group’s focus. The first channel, called M-Net, was the brainchild of Koos Bekker, now Naspers chairman, who was studying for an MBA at Columbia University. At the time it launches in 1986 M-Net was one of only two pay-TV channels in the world.

Bekker told me that he had seen the success of HBO during his studies and approached Ton Vosloo, then CEO of Nationale Pers (Naspers), a large newspaper group with Afrikaans-language publications, with his idea. Vosloo was keen to find another revenue stream for Naspers which had been awarded a broadcast license by the South African government to compensate them because significant advertising revenue was being spent with the state-owned South African Broadcasting Corporation (SABC).

DStv’s first broadcast in October 1986 was the final of a provincial rugby competition, called the Currie Cup, between provinces then known as Western Province and Transvaal.

But, with massive capital investment and huge overheads, within a year it faced severe financial pressures as it struggled to attract customers.

“By Feb [19]87 our viewing audience was so pathetic we had to give make-good ads to advertisers on the basis of one-paid, two-free,” Bekker told me at the 30th anniversary of M-Net in 2016, where a holographic depiction of Trevor Noah reminisced how integral and influential the channel had been to South African culture.

“By March [19]87 our trading results were turnover of half a million Rand, loss of ZAR3,5m for the month. Since our backers were newspaper groups of small to moderate size, they couldn’t bear that sort of bleeding. We were a few weeks away from the end.”

MultiChoice’s strategic advantage was its choice of new technology (well-made decoders) and a clever change in strategy (from selling to apartment complexes and to single homes), something Bekker would prove adept at doing when he bought a one-third stake in 2000 for $30-million in a then-unknown Chinese messaging company called Tencent, whose QQ instant messaging service now has over 1-billion customers.

The decoders “sold sweetly, since we now needed to persuade only a single guy and it didn’t matter what his neighbors thought”.

M-Net “scraped through by the skin of our teeth, and by the end of [19]88 were breaking even on a monthly basis” and became profitable in 1990. It was listed a year later and Bekker took over as Naspers CEO in 1996, a decade after his big gamble on the nascent digital television market had become a roaring success.

Bekker is now one of South Africa’s best – and best-known – businessman. His gamble on Tencent has made Naspers the most valued listed company in Africa, after AB InBev bought South African Breweries. It is the most valuable media company outside of the US and China and the seventh largest internet company in the world.

Naspers growth and status, as well as its entrepreneurial culture, is because of Bekker, who also brought “equality to this business right in the beginning, thanks to Koos. He set the pace for how the public company in the new coming South Africa would have to look. No discrimination whatsoever.”

He added: “The outlook of being together and all being equal, and no discrimination, set the pace and the scene like no other public company had done up to that time. So in that sense, M-Net is the great pioneer that led us into the new South Africa.”

Vosloo repeated a mantra that has defined both Naspers’ risk taking and Bekker’s first-name leadership style: “Of course he was known as Koos, and everybody says Koos Says So.”

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The Third Economy?

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South African inventor and investor Stafford Masie on the economy that will unfold as a result of bitcoin offering greater capability than cash.

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