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SA’s NFT market falls behind as buoyant counterparts cash in

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 24 Nov 2021

South Africans are less likely to own non-fungible tokens (NFTs) compared to their global counterparts, with only 8.3% of surveyed South African internet users currently owning NFTs.

This is one of the key findings of research conducted by fintech firm Finder, based on an analysis of the NFT uptake in 20 markets across the globe.

Finder’s survey of more than 28 000 internet users over 18 years of age across the globe reveals the number of surveyed South Africans who own NFTs is just below the global average of 11.7%.

This puts SA at 12th place out of 20 countries, falling behind Nigeria, United Arab Emirates (UAE) and Vietnam, but ahead of Argentina, Singapore and Canada.

An NFT is a secure digital file which validates ownership, and is stored on the blockchain system, where each NFT can represent a unique digital item, and thus is not interchangeable.

NFTs have become hugely popular across the globe in recent months, with expensive items such as real estate, digital artwork and music being ‘tokenised’ and sold online at exorbitant prices, leading to a huge jump in shares of companies linked to NFTs.

The blockchain-based cryptographic trend is increasingly drawing the interest of South African companies, with further developments unfolding locally this year.

While SA is still in the infancy stages of adoption, Finder notes an additional 9.4% of surveyed respondents plan to own NFTs in the future, with forecasts showing the adoption rate is likely to double over the next few years.

“It’s still very early days for NFTs in South Africa. Just about a third of surveyed South Africans currently know what NFTs are and we expect adoption to grow with awareness,” says crypto-currency content creator Keegan Francis.

“Men are currently the biggest adopters, with 10.5% of men saying they own NFTs, compared to 6.3% of women.”

The report reveals the Philippines has the most NFT owners (32%), followed by Thailand (27%), Malaysia (24%), UAE (23%) and Vietnam (17%).

While western countries are known to be trend-setters in this space, Finder’s research found the UK, US and Japan were the lowest adopters of NFTs.

Francis notes NFT adoption is much higher in countries with a lower average wage.

“In some of these countries, people are quitting their jobs because they can make money trading NFTs or earning them in games. NFTs can be a great gateway to crypto-currency ownership, especially because many NFT games don’t require IDs. If you want to buy NFTs directly, then you’ll need to set up a wallet, purchase crypto-currency, and choose an NFT marketplace.

But is it art?

Although NFTs have been around for some years, the market for digital art pieces and commemorative items has exploded this year, attracting soaring interest from major investors, like payments giant Visa.

While the trend has proven to be big business in art, entertainment and gaming, several other industries − such as finance, healthcare and real estate − are increasingly buying into the NFT sphere, according to GlobalData.

NFT investors also see long-term value and growth in NFT-based marketplaces.

In SA, the first independent South African NFT platform − Momint − made its debut in April, launching a website and app. The platform sells all manner of NFTs via a social media-like approach, to allow users to buy and curate their own collections.

Momint’s launch came a few weeks after Cape Town-based Worldart became the first local art gallery to put up artwork for auction as an NFT. The Jpeg-file piece, which depicts a masked, superhero-styled woman titled Timekeeper 151, was created by Cape Town artist Norman O’Flynn.

A few weeks later, SA’s first NFT of a media article was put up for auction by online publication Gadget. “Gadget1998” is a digital image of Africa’s oldest surviving online game review, which appeared in May 1998.

The local activity in the NFT space followed Jack Dorsey, co-founder and CEO of Twitter, making headlines in March, when he sold his first tweet as an NFT for $2.9 million, via the Valuebles online platform.

Tesla founder Elon Musk later sold a new electronic music track, produced as an NFT.

Momint CEO and co-founder Ahren Posthumus.
Momint CEO and co-founder Ahren Posthumus.

Momint CEO and co-founder Ahren Posthumus tells ITWeb there are two strong factors that slow down the growth of the local NFT space.

“Firstly, there is a misconception that NFTs are only for art. The reality is that this technology is an incredible tool for the disintermediation of power and finance. NFTs will most certainly disrupt many other fields, including alternative investments, property management and even publishing in the next decade.”

Secondly, Posthumus believes there is a false assumption that all NFTs are worth millions. This is far from the truth and data already shows that over 50% of NFT sales are for less than $200, he adds.

“People pay for value (or perceived value). If you are releasing an artwork or a derivative asset as an NFT, expect it to fetch fair value. Relying on disproportionately high values is exclusionary in nature, and misaligned with the fundamentals of Web 3.0 technology, not to mention a poor fit for our economy and citizens.”

While the potential in NFT’s future growth and popularity is incalculable in SA, Posthumus says the local market will grow steadily, as blockchain and NFT technology continue to drive varied business cases, influenced by Web 3.0.

Momint is working with companies in banking, gaming and e-commerce − all powered by NFT technology, but solving different problems.

According to Posthumus, for SA to become a market leader and capture fiscal benefit, NFT adoption should be approached from two key angles.

“All South Africans should make it their mission to learn as much as possible about this space. Education and awareness will drive valuable skill sets in a globalised world.

“From a government perspective, it would be an incredibly intelligent move right now to align regulation to being more crypto-friendly. This will attract direct foreign investment and aid in the recovery of a limping economy.”