There have been a lot of talk in the block industry that the Blockchain and crypto currency will solve many African problems.
If we look a little wider, it is actually a very good solution for developing countries problems. This will be the first in a series of articles which will highlight the actual problems in Africa.
I have not posted on Steemit for a while, due to a heavy workload at the office for the past few weeks. (As well as research on how to apply the blockchain technology to solve African problems) Those of you in the ITC industry, will know that this time of the year there are generally a hefty spike in requirements from both corporate and government sectors . There are a few reasons for this mainly due to government departments wanting to spend the annual budget before the year end (March) and a lot of companies goes into freeze periods during December, where no changes can be made to any of their systems.
In a new series of posts I will highlight the problems, which most Africans face on a day to day basis. We can then look into ways / solutions to address these problems.
Real world problems in Africa - Cross Border Transacting
In today's post we will look at the issue of cross border transacting.
Disclaimer: I am not stating all the below as fact and I might have made a few incorrect assumptions. Please feel free to leave a comment
If we look at the USA, we have 50 states using one currency. Similar tax laws, same exchange control.
If we looked at Europe, we have many countries, mostly using the Euro, with a few others.
If we look at Africa, we have 54 countries, using many different currencies. More than 50 to be exact. Each country has its own legal system, own governments, own tax systems, own exchange controls, own constitution, own regulatory systems, well basically their own everything actually.
This is the source of a major dilemma, which are faced by most of the citizens of the countries in Africa. To be honest, it is probably easier to do a cross border transaction between any specific African country and a European or USA company vs doing a transaction between two neighboring African countries.
Migrant Labor
Image Source
Let's look at just one real world example. The discovery of gold in South Africa, way back in the 19th century, started the practice of migrant labour, which is still used and practiced today. When we look at the mining industry in South Africa, Zambia, DRC or any mining country today, it is not unusual, to find South African, Kenyan, Zambian and Mozambique residents, working the same shift. Miners, go where the work is.
Now if we look at a Zambian, working in South Africa, we are speaking about a few hundred kilometres drive, but the Zambian resident, will need to go through a multitude of applications which includes Visa's, work permits . I do not have any problem with this, as each country for their own. The problem however is that it is very difficult for the migrant worker to send money back to his home country without massive issues.
Unbanked individuals
I will cover this aspect in a separate post, but most of the migrant workers, are being paid fortnightly in cash. They now need to send the money to their families. What do they do? Well various things:
1. They pay a taxi driver 30% of the money being transferred in a brown envelope, and hope for the best that the taxi driver is not robbed, or dishonest.
2. There are informal money exchanges in the various countries, where the brown envelopes are exchanged.
3. There are the formal money exchanges, like Moneygram, Western Union only to mention a few.
4. Those whom are lucky enough to be banked, can also do the normal transfers through a bank as all of us are used to.
Regulations
Each country has its own financial regulations, which makes it very complicated to transact across border. This results in the opportunity for corruption as there is currently no transparency.
Image Credit
Travelling between two countries
If you drive across the border between Uganda and Kenya, you will pay with Kenya Shillings on the one side, and pay with Uganda Shillings on the Uganda side. For us travelling across borders on holiday, it is not really an issue, as we do not have to face it every day of our lives. There are people living in Uganda and working in Kenya on a daily basis. Yes sure, you can use US Dollar in most African Countries, but you really lose out in the long term, as when you pay with USD, you will get you change in the local currency, because the USD is high demand for that specific reason.
Senegal,a Western African country, just announced that they are introducing a national digital currency which will be pegged to the CFA Franc, The new currency called eCFA, and will be accepted across a few countries.
You can view the full article here: Senegal to create national digital currency
I will discuss more of the Cross border transacting issue, as I highlight other problems in upcoming posts, these issues are relevant to the specific issue as well as other issues.
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