Is Africa Prepared For Libra-Lization From Facebook?
By Ebenezer Ghanney on ALTCOIN MAGAZINE
June 2019, Facebook the social media monopoly launched its blockchain (Calibra) and cryptocurrency (Libra) projects. After the announcement, Facebook has faced various backlash from the media and the US senate mainly because of its recent issues with data breaches. The use of about 50 million US voters data to “rig” the US elections.
Among the backlash was also a push to break up Facebook because it has become a monopoly of social media. No matter how creative they tell their story as to why they are not a monopoly, I strongly believe they are. They seem not to be troubled by the treat of breaking them up at all if they did I’m not sure they will turn up the heat by venturing into finance (a heavily regulated market).
Here’s the background of what they are doing…
Calibra
Calibra is a digital wallet built on the blockchain network. A blockchain network is simply a peer to peer communication between computers. The Calibra is going to be integrated into the current Facebook Apps you use, Instagram, WhatsApp & Facebook itself. I know you might be wondering why I mentioned Facebook Apps and mentioned Facebook again. They’re rebranding all their apps to be called …. by Facebook (eg. Instagram by Facebook). I know it f***** sucks.
Let’s get back on track. Calibra is simply a platform to allow you to convert your local currency to Libra coin and store it.
Libra
Libra is a cryptocurrency which is backed by various major currencies like dollars, euros & pounds. This kind of cryptocurrency is referred to as a stable coin, so no huge price fluctuations. Facebook set up Libra Association, a non-profit organization which is based in Switzerland (Pro crypto nation and the financial heaven of our universe) to manage Libra. A very wise decision by Facebook😉
Facebook has projected to launch Libra mid-2020.
Watch this Video to see How Libra Works
I know you must be asking yourself by now, “but Eben, what has all these got to do with Africa?”
If you read their problem statement you see that their target market for this is Africa and India (simply put it 3rd world countries).
They’ve also started looking for African Blockchain Developers, Public Policy Managers, Local Community Partnership Managers to hire, etc.
As I indicated in the first paragraph, Facebook is facing serious backlash from the U.S Senate. There is the possibility that the Senate won’t allow them to launch in the U.S next year. I believe they already knew they wouldn’t be able to breakthrough U.S market easily and had always been after the African and Indian market. For this article, I will double click just on Africa.
Facebook alone had over 139 million users a month in Africa in 2018, 98% of whom connected via mobile. This is just Facebook numbers, imagine the numbers if you add WhatsApp and Instagram. Yes, I know an individual can be on all 3 platforms. I want you to also picture the number of people in your network you aren’t on Facebook but use WhatsApp and/or Instagram.
With this kind of mobile penetration on the continent, it would be very easy to launch and gain high usage numbers.
African Regulators Vs Libra
Ghana just launched the minimum capital requirement for its Payment System & Services Act, 2019 (Act 987). Your company will need to cough out GH¢20,000,000 ($3,600,000) to be able to build a similar service to Libra (in terms of electronic money issuance). Currently, it’s just telecommunication companies that this applies to since there is no independent company in this space.
The question I ask myself is, would Facebook or Libra Association be made to pay this capital requirement once they start operating here? A lot of African countries also have their own capital requirements, would Facebook pay there also?
I feel they might sail through the African market without paying a dime. Because I don’t see the need for them to register in all the markets they operate in. In fact, they aren’t doing it with their current Apps anyways.
The Big Question For Me Is, Will Libra Be Backed By Any Of Africa’s Local Currencies?
It doesn’t look like a possibility. According to Bloomberg, Facebook provided a list of possible currencies that are included in the Libra reserve. They are U.S. dollar, euro, Japanese yen, British pound and the Singapore dollar.
David Marcus, Facebook’s blockchain lead, previously told the U.S. House Financial Services Committee that 50 percent of the basket backing Libra would be U.S. dollars, with the other half in stable sovereign currencies and low-risk assets.
This implies that it is very likely that the U.S dollar is going to serve as the base currency for Libra.
What Happens To Our Dear MoMo?
Mobile Money (MoMo) has played a vital role in financial inclusion in Africa. MoMo is the first digital currency that broke through the Africa market and has been able to scale to 395.7 million users across Sub-Saharan Africa. Out of that 145.8 million are active which is 48.8% of the total world active users. MoMo is been operated by several telecommunication companies in Africa with M Pesa and MTN being the largest operators.
In my view, MoMo has not seen any significant improvement apart from cross-network/bank interoperability. Same 20th century UI & UX, Yes I know you are saying to yourself the market is largely dominated by lower-class individuals who can’t afford smartphones so we don’t need to build an app. You are right, but we also don’t have to wait for everyone to start using smartphones before you pay attention to them. Stats show huge continuous growth of access to smartphones. Thankful, I know 2 startups who are innovating in this sector, read my first blog I talked about them.
A major problem MoMo has not been able to solve is cross border transaction. I don’t totally blame them because of how the African market is structured. A lot of different currencies are at play here. But this doesn’t stop them from innovating around how to build a forex exchange feature to allow this. Again, I guess you can’t build this kind of solution on USSD😬
Impact of Libra on Trade
One Facebook product I haven't mentioned yet is WhatsApp Business. This is the version of WhatsApp for businesses, it comes with a lot of pecks to help businesses communicate easily with their customers. Recently I do see a lot of ads online about this product.
I see a future where Libra is integrated into WhatsApp Business to allow businesses (SMEs) accept payments. Here comes the big problem, all prices are likely to be quoted in U.S dollars since that’s the main currency backing Libra. We think we have a forex exchange problem now but the future with a currency which is not backed by our local currency is even worse. Businesses can quote prices in Libra, which will be equivalent to U.S.dollar. Example, A phone seller can tell you pay 500 Libra for a phone, which is equivalent to saying pay $500 for the phone.
The recent push for the implementation of the African Continental Free Trade Agreement (AfCFTA) will improve trade among the member countries. But have we paused to reflect the role currencies play in trade and how we are going to deal with the complexity that exists at the moment.
Currently, the easiest way to pay for something in another African country is to convert your local currency to dollars. Upon receipt, the other person now has to convert the dollars back to his or her local currency.
Take a look at the top valuable currencies in Africa. We have DOLLARS😂
If we don’t look for a way to come together and get a common currency under the AfCFTA, we will end up using Libra as our common currency for cross border trade. I believe it’s time we skip conventional steps and jump to creating an African cryptocurrency backed by our local currencies. Afterall we jumped into mobile money before the 1st world countries. MoMo started before all these Venmo, Square cash, etc.
These are the thoughts of a dumb millennial, who passionate about finance and technology
Now, Should we sit back with some popcorn and watch the smackdown of our economy, because we refuse to learn from past mistakes and afraid of taking risks, Or do we fight…
Hit the comment section with your views on how you think Libra will impact Africa.
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WhatsApp in Africa: https://www.messengerpeople.com/whatsapp-in-africa/
WhatsApp usage, revenue & other stats: https://www.digitalinformationworld.com/2019/02/whatsapp-facts-stats.html
