Benjamin Rameau
Aug 31, 2018 · 5 min read
  1. CONTRARIAN TRADE: The most profitable investment ideas tend to be the most contrarian. In 1960, very few people believed in the coming Asian economic miracle. GDP per capita and urbanization rates across both continents was roughly equal. China was going through the Great Leap Forward, President Kennedy was sending troops to Vietnam and the Republic of Korea’s GDP per capita was inferior to Ghana’s. The odds seemed to favor the “African Lions” versus the “Asian Tigers” in the race towards industrialization. Yet the opposite happened. Come 2018, the consensus view holds that the 21st century belongs to Asia; yet we believe that it will be Africa’s turn to surprise. Investing today in Africa could be the best trade of the century.
  2. BUILDING A FINANCIAL BACKBONE: In developed markets, crypto has the potential to disrupt a flawed financial system. That is significant, but not necessarily transformative. In emerging and frontier markets, it has the potential to create a financial system when none existed before. This will form the backbone to a strong economy. In Sub-Saharan Africa, only 43% of people aged 15+ own a bank account versus a global average of 69%. In some areas such as South Sudan the ratio is as low as 9%. Access to financial services for saving, borrowing and protection will provide the capital to fund entrepreneurs, provide a safety net for retirement planning and provide disaster relief. Renewed optimism about the future will arise when people are given the freedom to take on risk. Households will have fewer children and invest more per child on education when parents can pre-finance their retirements. This will form the backbone to the modernization of African econmies.
  3. INDUSTRIALIZATION: Historically, most industrial revolutions required concerted efforts by governments to draw in foreign capital, mobilize masses of workers and create vast industrial parks. Sub-Saharan Africa was at an immediate disadvantage when it inherited European labor laws and had to compete with highly centralized government authorities in Asia. Fortunately for Africa, the industrial landscapes in a decentralized world will look very different. There will no longer be the need for industrial parks. Manufacturing will occur on premise and on demand with 3D printers. Design and engineering will be crowdsourced and fully decentralized communities will cooperate thanks to aligned economic incentives derived from tokenization. In the future, a bicycle may have its derailleur designed by a freelancer in Munich, the frame designed in Dakar and the manufacturing done on premise with a 3D printer at Addis Ababa. The large industrial parks of the twentieth century will become relics of the past. This will level the playing field for African nations.
  4. SCALABILITY: Africa is a large yet highly fragmented market with 55 member to the African Union and roughly 2000 languages. What works in one part of Africa may fail in another and achieving scalability has been an impediment to industrialization and economic development. Here again, decentralization will lend a hand. Cross border scalability is extremely difficult to achieve when companies rely on the legacy banking system. Every time that they enter a new market, they must register a new bank account, which in turn necessitates company registration, bureaucracy and hiring local staff. Achieving this feat in 55 countries, some of which have inefficient public sectors, will be disparagingly difficult. Fortunately, decentralized autonomous organizations (DAOs) will be powered by tokens and will not need to rely on banks. As long as there is demand for their services, DAOs instantly scale across borders. Binance Labs itself is a kind of decentralized organization and we are think globally, not locally. In a similar vein, Africa’s geography will no longer be an impediment to economic progress.
  5. JOB CREATION: Many decentralized applications will rely on crowdsourced data libraries. For example, cyber threat intelligence systems will crowdsource public addresses for blacklisting. Alternatively, wealthy game players will outsource the creation of digital items to those with lower opportunity costs. Blockchain technology is open to all and it will suited for micro-payments, so the playing field will be flat regardless of location and competitive forces will push wages down. If screening through scams on Twitter and registering fake accounts pays $3/hour, developed market contributors will face high opportunity costs and be pushed out of the labor pool, but this rate could be a handsome reward for someone working out of Somalia. Many parts of Africa have very competitive wages and blockchain will harness the ability to arbitrage and make use of the underused labor pool.
  6. WEALTH PRESERVATION: Inflation is a tax on the poor. They proportionately own fewer hard assets, their wages are adjusted with a lag and they are heavily reliant on a depreciating fiat currency. Currency mismanagement has been devastative in Zimbabwe. There are still 11 African nations with double digit inflation rates. Even the CFA Franc has suffered severe devaluations in the past. Stable coins could provide an inflation hedge. When the value of money stops being eroded through government printing, savings rate should rise and so should investments and economic growth.
  7. GOVERNANCE: Inefficient public services have at times been blamed for Africa’s stagnating growth. Blockchain technology can allow large people to work together through aligned economic incentives where they can participate in their own governance codes. The parameters controlling a DAO can be decided by the token holders, for the token holders. These organizations will no longer be dependent on the whims of a politician.
  8. PROPERTY RIGHTS: These are generally associated with an increase in incentives to invest, superior household welfare and better management of natural resources. Blockchain technology could guarantee that these rights are upheld, forever and for all.
  9. YOUTH: Technological change tends to be embraced by younger people. The median age is Ethiopia is 17.9 years old and more than 64% of the population is under the age of 24. Africa has hundreds of millions of young people, eager to work and ready to embrace the blockchain revolution.
  10. WE ARE AFRICAN: Binance Labs is a decentralized organization. We have no headquarters, no office and no geographical boundaries. We are just as African as we are Asian or European. The blockchain revolution will be a global one and Binance Labs will consider investments in all non-sanctioned countries. In Africa, we feel very much at home and we want to deploy our capital there.

If you are aware of an African projects with excellent founders that are ready to make the world a better place, please send details to labs@binance.com

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