Pushing the Boundaries of Economic Change: Bitcoin as a Medium of Exchange in Africa
Bitcoin is pushing the boundaries of economic change in Africa. In East Africa, a new deal between digital currency exchange Bitpesa and a Japanese firm shows Kenyans are using bitcoin to pay for used Japanese cars, cosmetics and electrical gadgets. In Nigeria, Sure Remit is helping make cash transfers cheaper and in Zimbabwe, TV subscriptions, university fees, and second-hand car imports.
Bitcoin as A Cure for Africa’s Cash Addiction
When Elisha Owusu Akyam bought his Macbook Pro laptop using bitcoin (BTC) earlier this year, he wasn’t just fulfilling a long-time desire – he was making a statement of change in a continent hooked on cash.
Elisha Owusu Akyam
“Making payments in bitcoin is easier than existing methods,” the 17 year-old cryptocurrency investor from Accra, Ghana, told news.Bitcoin.com.
“Barriers exist for financial inclusion on the continent. Bitcoin eradicates these barriers,” said Owusu Akyam, founder and chief executive of Token Media, a startup that has helped other emerging businesses raise millions of dollars in token sales through its marketing services.
“For instance, the purchase I made in just one payment would not have been possible without bitcoin. I would have had to make payments in parts for a couple of days. This wastes time and costs money,” he said.
Although Africa has been touted as the cradle of mobile money payments, mobile is effectively only widely used in a few countries like Kenya and Zimbabwe, where about 30 million people combined use cell phones to pay for goods and services. In most countries, cash is still king.
But bitcoin and other cryptocurrencies are starting to catch on, not only as a means of payment, but also for remittances and as a store of value.
Ghana is one of a number of countries in Africa whose economies are currently being reshaped by cryptocurrency. In the West African country, the crypto market is still very small, with issues around regulation casting a shadow over the market’s future, but it “has seen a lot of growth lately,” according to Elisha Owusu Akyam.
Adoption, Regulation, Fraud
Some small businesses have started to accept payment in bitcoin, Owusu Akyam says, while digital currency exchanges are flourishing, with about 15 different platforms, mainly over-the-counter exchanges, allowing Ghanians to buy and sell cryptocurrency.
Basic services like buying mobile phone airtime and data can also be done with the use of bitcoin, he added. At some point in 2016, the highest number of bitcoin searches on Google originated from Ghana, though that in itself didn’t mean much.
“This awareness doesn’t translate into the understanding of bitcoin and other cryptocurrencies as many think it is a scam or fraud,” explained Owusu Akyam, via email. And then there are the issues around regulation.
“The closest we have come to [regulation] is a statement by the Bank of Ghana, cautioning the public on the use of bitcoin as an unregulated activity,” he said. “This unregulated environment has led to the spread of several scams and fake investment schemes that are hurting the image of the cryptocurrency industry as a whole in Ghana.”
Kenyans Use Bitcoin to Import Beauty Products
In Kenya, a new deal agreed between local digital currency exchange and payments platform Bitpesa and Japanese firm SBI Remit shows that Kenyans are using bitcoin for a number of things, including to make payment for beauty products from overseas, through the exchange, at lower cost and faster.
Elizabeth Rossiello, co-founder and chief executive of Bitpesa, says payments will also include used Japanese cars – a multi-million-dollar industry in Africa – and electrical gadgets. Kenyans intending to make a purchase overseas deposit their local Shillings into Bitpesa’s Kenya bank account before payments are facilitated on the bitcoin blockchain to SBI Remit, which in turn makes the final payment in Japan.
The entire process is completed within a matter of hours, at half the cost in transfer fees, compared to about two weeks that it usually takes when payment is made via conventional banking methods, for around 7% in fees of the total amount involved, she said.
“If it makes sense for us to settle using cryptocurrency or fiat currencies, then we do. And in this case, we’re happy that SBI feels the same way, so we’re open to using digital or fiat currencies to settle between us,” Rossiello was quoted as saying.
The new service will be available to people in all eight of the African countries where Bitpesa has operations: Democratic Republic of Congo, Ghana, Kenya, Morocco, Nigeria, Senegal, Tanzania and Uganda.
A Store Of Value
In Nigeria, Sure Remit is helping people send money through bitcoin after the startup earlier this year raised $7 million in an initial coin offering that reached its hard cap within a matter of days. The remittance business is a common feature across all African countries where bitcoin has gained traction, from South Africa to Nigeria, Kenya to Angola.
Even though the number of Africans in the diaspora sending money home continues to swell, with the continent accounting for just 6.4% of the more than $620 billion global remittances market, according to the World Bank, the remittance business in Africa should only grow from here. The World Bank estimates that growth to reach about 7%m to over $40 billion this year.
In Zimbabwe, bitcoin is being used to pay for TV subscriptions and accommodation rentals. But above all, it is looked at more as a store of value against fiat currency devaluation, rising inflation and policy uncertainty, as indeed is the case is across much of Africa, including Owusu Akyam’s Ghana.
“The major use of bitcoin is as a store of value or investment. Bitcoin protects Ghanaians against inflation since the Ghana cedi depreciates in value against the US dollar,” said Owusu Akyam, who in many ways represents the face of bitcoin and cryptocurrency entrepreneurship in Africa – youth.