Fintech & Development in African Context

In its bid to be the next EU, the African continent has completed the world’s largest free trade deal, by number of nations. For a nation that trades with itself less than 20% of the time this may be a good step. Quite instinctively though I am forced to question the efficacy of following in the footsteps, not just of the old colonial powers, but of a group of nations already regretting their actions. Africa does not need old ideas, that just puts us behind. What Africa needs are ideas that embrace a world learning based on indigenous systems. Think of the South Korean ‘chaebol’ system, or the ‘socialism with chinese characteristics’. Rather than copying the west we need to innovate ourselves.

Living in a dichotomy of Chinese state led development and American business led development hides the truth of the social sciences, that nothing ever got done copying anyone. The choice of business or state define groups that never existed as they do in Africa before colonialism. Even a Marxist ideal of ownership by ‘the people’ supposes identification under a class system, yet in Africa we notice identification mainly by familial groups like tribes and family, followed by a larger national identity (although I’d argue Pan African may be larger). The reality we do find is more dynamic as Africans can identify with the nation, class or tribe. 

What this looks like in our current economic system is a confluence of rights in land, labour and capital. For example, the Maasai of eastern Africa have grazing rights that territorially go through multiple nation states. Without much procedure the Maasai can go back and forth from Tanzania and Kenya, their rightful homeland. A more nuanced case is South Africa, the most developed state in Africa. Mines are regularly owned by companies, the land by certain tribal groups, and minerals by the national government. These examples prove that Africa, that ceremoniously embraces westernism over Pan Africanism cannot escape the historical truth of indigenous forms of politik. Economic hegemony has by far been the most dramatic shift for Africa from about the seventeenth century. 

The relational aspect between Africa and the world has been set since then. Much of the continent still concedes the same economic activity they did as french or british colonies. Resource capital thus must be the major source of capital accumulation. Nationalisation of resources as a policy is detrimental, just ask Iran or Venezuela. Both politically and economically nationalisation cannot provide the capital and confidence needed to develop in such a system. Not to mention on a continental level each of the fifty five nations would not all agree to such an idea. What Africa needs is a way to centrally modulate the economic relationship its resources have with the world. 

The advent of cryptocurrency has the potential to transform the continent. The creation of a centralized Pan African cryptocurrency quickly creates authority over the means of exchange for resources, while keeping ownership in the conflating tribe/state/business relation so rife in Africa. An organisation like the African Union could store and distribute a cryptocurrency tied to all the natural resources of Africa, making it a stablecoin. Like petrodollars this would make the currency (lets call it PAC) the medium of exchange for all of Africa’s resources. Looking at the commodity super cycle the AU could release more of these PACs as prices rise. This stability is good for importing nations, and the method of release could be developmentally beneficial such as infrastructure. Not to mention the transaction fees from PAC exchanges would be useful as well. For Africans themselves the ability to exchange without fee would increase trade among themselves and other nations. This would solve the persistently high inflation in Africa, but unlike places like Greece, still provide monetary room in their own currencies. In a nation like Zimbabwe regularly switching to US dollars, a move to the PAC would allow them to continue trading with the world under an African banner. 

The creation of such a system would line well with many indigenous African institutions. While the PAC would place incredible economic clout in the AU it would not allow it to directly make policy. The African would then live in a social polity of tribes and family ties largely, a political polity of the nation state and a specifically financial/economic polity at the supranational level. With the power of cryptocurrency ledgers would also go a long way to reducing corruption. Seeing as it is the national leaders largely enriched from corruption the political task of such a currency seems difficult, but the assurance of a stable currency they can play with, as well as free money and infrastructure means African leaders would have no choice but follow. With such a young and connected population citizens are more in line with a Pan Africanist vision, and fintech may be a step towards that.

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