Cryptocurrency advocates have long held that developing nations present the strongest use case for mass adoption. Among these, South Africa is emerging as one of the most interesting examples of how blockchain assets are becoming integrated into an established financial system. The country holds enormous potential, and continues to have the strongest economy on the continent, yet much of the progress promised by the fall of Apartheid has yet to be realized. The crypto revolution is now introducing significant opportunity as well as new challenges for Africa’s most diverse state.
Present affairs in South Africa are disconcerting, to say the least. Unemployment is at 26 percent, having not been much lower for more than twenty years. Economic growth has been flat for over a decade, and endemic problems such as high crime and low literacy rates show no signs of improvement. Perhaps most frustrating is the fact that the nation’s leadership seems incapable of putting any true solutions on the table.
Underpinning all of South Africa’s challenges is the fact that for over a generation affluent South Africans have been emigrating, taking their talent and wealth with them. The vast majority of these expats are Whites who have come to believe that greener pastures await them in more developed nations. The South African government has long sought to curb this outflow, yet the phenomenon has increased in recent years.
This environment has spurred a wave of crypto adoption across the country. One recent study found that more than ten percent of South Africa’s Internet users own cryptocurrency, twice the global average. Twenty-five percent of young South Africans own crypto, the highest rate in the world. As in most economically stressed countries, the affluent do not trust the national fiat, although it is worth noting that inflation has been relatively low for quite some time.
Perhaps more troubling to these crypto adopters is the call by some leaders to redistribute wealth by seizing assets from the wealthier classes. In fact, the National Assembly is considering a constitutional amendment that will empower the government to take land from White farmers without compensation. President Cyril Ramaphosa supports the amendment as does his party, the African National Congress. The response has been a surge in crypto adoption by affluent South Africans.
Cryptocurrency is also finding use cases for the nation’s poor. As with the rest of the continent, the vast numbers of unbanked are increasingly using mobile phone wallets to conduct business. Remissions are an especially significant area of growth, as South Africa employs large numbers of foreign workers, particularly in its vast mining industry.
For its part, the South African government has been receptive to crypto use. The central bank is known to be exploring use cases, and finance minister Tito Mboweni has stated that a regulatory framework for blockchain assets should be released by the end of the year. South African exchanges, such as DoshEx, appear to be thriving with little government interference, and acceptance of cryptocurrencies by businesses is on the rise.
The crypto space in South Africa is thus full of contradictions and many use cases. There is no doubt that blockchain assets are now viewed as a means to protect wealth from potential economic collapse, or government pilferage. They are also a tool to help those seeking to climb the economic ladder. Notably, however, is the fact that cryptocurrency is enabling money to be pulled from an economic system that desperately needs to retain it.
As crypto moves into the mainstream, the South Africa is likely to become a test bed for how the new asset class affects both the rich and the poor. Regardless of what one thinks about blockchain assets, they cannot be ignored. For now the government appears to respect this fact, and is enabling adoption to move forward.
Featured Image via BigStock.
