Why Africa’s Policy Makers Should be Worried About Virtual Platforms and Virtual Currencies

In a lot of ways, Facebook is more like a government than a traditional company. What does this mean for Africa’s Governments, fintech industry and policy makers?

“In a lot of ways, Facebook is more like a government than a traditional company” – Mark Zuckerburg

The rise of virtual internet platforms such as Facebook, Whatsapp, Telegram, Kakao is challenging established regimes of state and sovereignty, monetary policy and issuance of currency, control, ownership and governance of virtual resources in developing countries in Africa.

Billions of users, including Africans are spending more time on virtual networked platforms that command the attention of far greater audiences than the populations of individual nation states. WhatsApp has 1 billion, Telegram 200 million users and Facebook has 2.3 billion users worldwide.

Now, these virtual platforms are all getting into the business of  issuing currencies using ‘blockchains’ or shared ledgers to monetize all the possibilities of economic activity within the confines of their platforms. 

Out of all of them, Facebook’s Libra coin drew the most attention. No surprise at all considering the sheer size of its 2.3 billion people user base.

What does this mean for Africa’s fintech industry and policies, that tech giants from overseas can monetize the digital economy of Africa through non-sovereign means including issuance of digital currencies?

What follows is a transcript of conversations between Michael Kimani  and Andile Masuku, about the current shift to internet virtual platforms, and currencies, and what lies ahead for Africa’s Fintech policy.

Michael Kimani is Head of Business Development East Africa at Zippie, a mobile blockchain platform, a Fintech Innovation Advisor for Visa and Secretary General of the Blockchain Association of Kenya. He is one of East Africa’s renowned digital money analysts.

Andile Masaku is a Co-founder and Executive Producer at Africa Tech RoundUp.

Some parts of this Q&A were pulled from a podcast with Andile, while some of it are from phone discussions with Malak Gharib of NPR and Ronit Ghose of Citi Bank.

The structure is presented in the format of a Question and Answer. Enjoy!

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5 Reasons Why Facebook’s New Cryptocurrency ‘Libra’ is Bad News for Africa

For many emerging ‘mobile first’ consumers from East Africa the internet is indistinguishable from Facebook and the internet does not exist outside of this singular social network.

Facebook is plotting a new cryptocurrency dubbed ‘Libra’ for its vast social network scheduled for release in 2020. Libra coin, a virtual currency, will be governed by Libra association, a conglomerate of 28 American and European corporations who will decide everything from who can join the network, process transactions and how much currency will circulate.

As an African, it is my opinion that the peoples of Africa, its governments and central banks should be concerned, because we risk ceding more control, from the little we have now, to a digital colonial version of the internet.

That is because, for many emerging ‘mobile first’ consumers from East Africa the internet is indistinguishable from Facebook and the internet does not exist outside of this singular social network.

In a future post, I will write on how Africa can redress this imbalance. 

But today, I have 5 Reasons Why Facebook’s New Cryptocurrency ‘Libra’ is Bad News for Africa.

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Why Facebook’s New Cryptocurrency Is a threat to Mpesa and Safaricom

Using blockchain and cryptocurrencies, popular internet platforms, are about to disrupt Mpesa in East Africa, the same way Mpesa disrupted banks.

According to sources, Facebook Is Developing a Cryptocurrency for WhatsApp Transfers known a Facebookcoin. If true, this spells doom for Mpesa and Safaricom as they will soon end up as a commodified dumb pipe, like a utility company resigned to a passive role in the medium to long term future.

Popular internet platforms in East Africa have grown beyond social, and now support value exchange within their closed environments – for example Facebook  and whatsapp, both social platforms where people engage in online trade and biashara.

By adding a US dollar pegged coin known as a stablecoin within its virtual network, more value can be captured and retained within the network until it is absolutely necessary to cash out into local currency.

Facebookcoin, platform based currencies and network cryptocurrencies pose a threat to Mpesa just because of the sheer size of the networks they command and everything that goes on within them. This is great news for Fintech startups and banks in East Africa who can reinvent themselves in a post Mpesa world.

Here is how I see it.

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How Digital Platforms are Shaping Africa’s Informal Economy

A new digital generation of informal African entrepreneurs have adopted and adapted gig economy tools and digital platforms to meet their needs for a flexible and negotiable digital marketplace. Apps that can drive demand and scale reach affordably are transforming African markets, opening up new opportunities for young Africans.

With contribution from Niti Bhan

When people think about the informal economy, this is the picture that often comes to mind.

What is often forgotten, is that the next generation of informal economy actors – mama mbogas, boda boda okada riders, wakulima farmers, traders, taxi drivers, matatu touts, drivers et cetera in Kenya and East Africa will be vastly different from the women depicted here.

The coming generation of Africa’s informal economy are today’s millennial digital natives – hungry, educated, exposed to global trends, with all the tools available to them like everyone else anywhere in the world. Only with no prospects of formal employment on the horizon.

‘Informal’ is no longer synonymous to the streets, associated with the roadside, automatically defaulting to the marginalized or vulnerable – it is not a disease to recover from. The informal economy is an equal opportunity, organized and commercial operating environment offering Africans the chance to achieve their aspirations.

Africa’s prosperous future will only be realized by embracing the informal. This is not a choice.

While my thoughts are presented in the context of East Africa, I believe it resonates with the broader, global ‘gig’ economy. So perhaps my 60,000 ft view from Nairobi, East Africa rings true for the rest of the world.

Allow me to paint a picture for you using one of the sectors of the informal economy – trade.

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How The Chinese, Africa’s Most Popular Browser , And A Bitcoin Mining Company Are About To Change African Payments

Africa’s most popular mobile browser, Opera is about to radically change the payments landscape in Africa.

China Loves Africa 2 by Michael Soi
Michael Soi’s China Loves Africa Collection

I think before this blog and thread, the global cryptocurrency community will not appreciate the strategic relevance of Bitmain’s $50 million investment round into one of Africa’s most popular Chinese owned mobile browser, Opera. What they will not see is the Fintech connection at play in East Africa, where the wildly successful mobile browser is creeping into digital financial services like mobile payments. For the payment professionals of East Africa, the pertinence of this investment on the future of their industry will not dawn on them perhaps until it is too late.

Last week’s SEC’s disclosure on Opera’s newest investor for their $115 million IPO, was the best strategic news on cryptocurrency ‘adoption’ in Africa I have seen in the last 5 years with far reaching implications on e-commerce, trade and payments for the region than appears at first glance.

My choice of a header image above accurately captures increasing Chinese influence on Kenya and Africa, at both state and commercial level.

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