South Africa DeFi users to reach about 380,000 this year: Study
A recent study conducted by South Africa’s financial industry watchdog revealed that South Africa’s decentralised finance (DeFi) market is set to reach 378,000 users by the end of 2024. The study also projects that the market will grow to $180.7 million by 2028.
The Financial Sector Conduct Authority conducted the study, ‘Market Study: Decentralised Finance in South Africa,” which found that the DeFi market in South Africa has been expanding rapidly and explored the opportunities and risks consumers face. The study involved 21 DeFi services operating in South Africa, it found that the market hit $116 million in 2024.
The watchdog has also projected a compounded annual growth rate (CAGR) of 11.82 percent, with the market is expected to surpass $180 million by 2028. Retail investors dominate the DeFi space in South Africa, with 71 percent of all DeFi transactions coming from them, according to FSCA. In contrast, Small and Medium Enterprises (SMEs) contribute 19 percent. This is almost twice as much as bigger enterprises. Since DeFi is loosely regulated, larger enterprises are cautious due to regulatory uncertainty and have steered clear.
Mirroring the global boom
DeFi in South Africa has mirrored the global DeFi boom, which benefitted from a two-phased bull market last year. The period between October 2023 and May 2024 saw the total value locked (TVL) in DeFi smart contracts rise sharply, tripling to reach $107 billion. Although there was a dip afterward, a renewed “crypto” bull rally propelled the TVL to $138 billion by mid-December. The record was set in 2021 at $180 billion.
Non-custodial Web3 wallets are emerging as the fastest-growing trend in South Africa’s DeFi space, FSCA has revealed. These wallets allow users to maintain full control of their crypto assets without relying on centralised exchanges. FSCA said, “This innovation has now made it simpler for South African customers to purchase crypto assets from fiat into their wallet and vice versa, through local banking infrastructure. It also allows individual customers to swap their fungible tokens, such as crypto assets, for other fungible tokens.”
DeFi’s contribution still low
However, despite the rapid growth, DeFi remains but a minute part of South Africa’s financial sector. The 378,000 DeFi users only account for 0.59 percent of the country’s population, which stands at 64.4 million. DeFi’s contribution of $2.9 million in revenue generation barely compares to the $6.2 billion generated by the country’s four largest banks alone in 2023.
One of the most significant benefits of DeFi in South Africa is its potential for financial inclusion. A large portion of the population remains underbanked, with millions lacking access to traditional financial services. FSCA revealed that South Africans rely on DeFi, which allows them to bypass legacy financial institutions and access essential services like credit, lending, and savings.
Tokenisation, the fourth-highest DeFi use case on the FSCA study, is another vital aspect of DeFi that has the potential to transform South Africa’s financial landscape. Tokenised assets, such as real estate or commodities, allow retail investors to purchase fractionalised assets that would otherwise be unaffordable. For example, a multi-million-dollar real estate project can be tokenised to make it more accessible, allowing everyday investors to participate.
South Africa regulators must implement enabling policies to capitalise these benefits, the report stated. The regulator noted “If South African DeFi evolves in a way that protects consumers and builds trust, it could support competition and financial inclusion, decreasing dependence on traditional financial intermediaries.”
