Will Facebook's digital money Libra be good for Africa?

From early next year, Facebook will allow it’s users, more than 139 million of whom are in Africa - make digital payments through its apps and popular messaging service WhatsApp using a new crypto-currency called Libra. Many are worried It could have profound implications for a continent which receives a huge amount of remittances and is one of the least-banked regions of the world, something that has allowed for other innovations like mobile cash payments to take hold in Africa.

Andile Masuku a Zimbabwean technology journalist living in South Africa, describes he has become numb to the daylight robbery that ensues whenever he receives money from abroad or has to send cash to my family back home. As such, like many other cautious pragmatists, he relishes the prospect of a network like Libra permanently disrupting the lucrative cash remittance businesses of large banks and money transfer services like Western Union and MoneyGram.

Last year the World Bank published a report on the cost of sending cash in sub-Saharan Africa. Stating it was was at least 20% higher than any other region in the world. The report revealed that sending $200 to and from the region in the first quarter of 2018 cost a whopping $19.

However we must not be naive to the myriad factors responsible for maintaining market inefficiencies and actively engineering economic complexities which corporations like Western Union exploit to great effect. The fact is, many governments in Africa have enabled the remittance industry status quo and have come to rely on lining their coffers with remittance-related revenue.

What are the security risks of Libra?

African governments have become deeply suspicious of crypto-currencies, like Bitcoin. The long list of countries which have, in some way or another, prohibited the use of crypto-currencies include Nigeria, Kenya, Ethiopia and even my native Zimbabwe, which is well on its way to being a cashless society thanks to the growing adoption of mobile money services.

Zimbabwe abandoned its own currency for 10 years as a result of hyperinflation, and it is currently in the throes of trying to reassure a sceptical nation that the newly introduced Zimbabwean dollar has value. Policy makers in Zimbabwe have argued that the idealised notion of a crypto-currency does not adequately take into account some of the very real limitations and security risks.

Think challenges in levying taxes, the risk of unwittingly enabling illicit activity and money-laundering, and of course the potential susceptibility to crypto-hackers. And these are things that African leaders will need to address with Facebook up front. In the US, lawmakers have already proposed a moratorium on the Libra rollout until Facebook assures Congress that Libra will not exacerbate money-laundering and the funding of terror groups among other issues.

Facebook's Libra white paper outlines the tech giant's plans to re-imagine global finance. This shows that unlike completely decentralised digital currencies such as Bitcoin which operate outside the oversight of central authorities or banks, Libra is set to be backed by a reserve of actual currencies and assets.

Facebook is using this difference to convince policy-makers that Libra is a bankable bet. It has the high-powered backing of the likes of Visa, MasterCard, Uber, Spotify and even South Africa's PayU.