Africa is on the cusp of advanced economies pushing for a cashless economy. And there is no turning back. China and several powerful Western countries are pushing ahead into a cashless society. They are creating digital currencies to replace paper money and coins. It will also give these countries total knowledge of how businesses and populations are spending their money, opening the door for total government control over everything financial. Chinese were the premier to invent paper money in the 7th century. Now more than 1400 years later, powerful economies are on the cusp of creating a new form of government currency that many experts declare that it could pose a serious economic threat to the US-led liberal international order.
In this article, we explore how a cashless society is taking form in Africa.
What is a Cashless Society?
A cashless society is one where all physical money (cash and coins) is totally replaced by a digital currency. In a cashless society, you can’t spend or save paper dollars, because they aren’t accepted as payment. And the money in your bank account only exists in digital form—no driving through an ATM to withdraw a fresh stack of Andrew Jacksons.
Actors pushing the project in Africa.
- Central banks
Central banks play a crucial role in pushing digital payment systems. Central banks and other financial institutions would undoubtedly benefit from a cashless society. They could continue earning transaction fees and could do away with ATMs and their constant need for service. One of the notable advantages of central banks is their capacity to facilitate and protect financial transactions, financial technology transfer and promote innovation in the financial sector. Central banks that participate in the development of a cashless economy in Africa include the Central Bank of Nigeria, Central Bank of Guinea, Central Bank of Sierra Leone, Central Bank of Liberia, Central Bank of Ghana, Central Bank of Gambia, Central Bank of Djibouti, Central Bank of Egypt, National Bank of Ethiopia, and many more. To date, central banks are lead promoters of a productive cashless business environment across Africa.
- Afreximbank and the cashless society in Africa
The African Export–Import Bank is advancing a cashless economic environment in Africa through Pan-African Payment and Settlement System – PAPSS. The Pan-African Payment and Settlement System – PAPSS – enables the efficient flow of money securely across African borders, minimizing risk and contributing to financial integration across the regions. PAPSS works in collaboration with Africa’s central banks to provide a payment and settlement service to which commercial banks, payment service providers and fintechs across the region can connect as ‘Participants’. PAPSS is the brainchild of Afreximbank, Africa’s pre-eminent trade finance institution, whose mission includes stimulating the expansion, diversification and development of African trade.
- Fintech corporations and associations
Increasingly, we are seeing traditional banks, financial institutions and physical cash losing out to big fintech companies, with a deep impact on society – particularly the breakout of the coronavirus (COVID-19) pandemic – advancing significant transformations and changes in how citizens handle and regulate money.
- International nonprofit organizations
The World Economic Forum, since 2012, has played a tremendous role in pushing financial technology business across the globe, especially on the African continent. In ‘’The benefits of a cashless society’’, a wide read article published on January 07, 2020, Mehul Desai, Chief Technology Officer at Finablr, wrote ‘’And if the private and public sector can work together to harness the latest technology and realize the full potential of a cashless society, there will be enormous benefits.
The Benefits of a Cashless Society for African Economies
Such a transformation of the financial landscape will of course have profound implications for business, society and government. “With bank branch and automated teller machine (ATM) numbers falling, access to cash is reducing,” says Ewen Fleming, financial services advisory partner at Johnston Carmichael. “Digital payments are commonplace and the numerous wallets that existed a number of years ago have now consolidated, with the likes of Apple, Google and PayPal dominating.”
- A tool to fight corruption in Africa.
Cashless technologies could be some of our greatest assets in the fight against corruption and organized crime, too. Corruption remains one of the most significant political challenges all countries face in Africa. There are over 1.6 billion people in the world who have to make do with less than $1.25 a day. At the same time, over 500 billion dollars are lost every year evaporated in public fund embezzlement in Africa. At the same time, around $1.26 trillion is effectively stolen from developing countries, due to corruption, bribery, theft, and tax evasion. If we could reclaim that money for those countries, we could lift those 1.4 billion people above the poverty threshold and keep them there for at least six years.
It finds that corruption discourages investment, limits economic growth, and alters the composition of government spending, often to the detriment of future economic growth.
- A tool to advance multinational corporations.
Several foreign multinational corporations are already more powerful than some African nations in the global economy. Evidence is clear that multinational corporations infuse direct financial investment in African countries and job growth in their local economies and communities. Multinational corporations have become key players in the global economy, wielding significant influence and impact on various aspects of economic development worldwide. These corporations, with their extensive resources and global reach, have the ability to shape economies, create jobs, spur innovation, and contribute to overall economic growth. Digital payment platforms will help these corporations grow their revenues, improve their overall performance, and achieve long-term objectives.
The Disadvantages of a Cashless Society in Africa.
- Small and Medium-Sized Enterprises demise
The cashless society, despite having tremendous potential opportunities for economic growth, will penalize millions of small and medium enterprises in various developing areas including competitiveness, capital investment, and international expansion for most sophisticated businesses. “Furthermore, despite increasingly accessible online payment platforms, restricted access to cash still penalizes some of the most vulnerable in our society,” he continues. “Research by Pockit in April 2019 estimated that the 1.2 million ‘unbanked’ adults in the UK pay an average £485 premium to make payments like gas, electricity and mobile phone contracts when compared to those with bank accounts who are able to pay by direct debit.”
- Less Privacy
Cash allows us to make purchases anonymously in Africa. Without cash, individuals and businesses would be forced to leave a record of everything they buy. While this may not bother some, there are many who worry that governments and/or corporations could use our purchasing histories as a way to track us, monitor us, and even intimidate us.
- Decreased Monetary Security
When you have cash in hand, you know it’s safe from everything except direct robbery or physical destruction. But when your money is in digital form, it’s vulnerable to hackers and system malfunctions. Plus, any sort of power outage or network problem can make it impossible for you to retrieve your money. In many ways, cash offers a level of monetary security that a cashless system cannot.
Final Thoughts
Africa is on the cusp of advanced economies pushing for a cashless economy. And there is no turning back. This agenda is being pushed in various parts of the world, using financial and human phrases such as promoting financial inclusion, small and medium enterprises, or closing gender equality. The question remains how Africa does not fall victim to this project? Action is needed now.
Author The Author
Jean Narcisse Djaha, Ph.D., is the Founding President and Chairman of the African Council on Foreign Relations. He is guided by Romans 8:30” And those he predestined, he also called; those he called, he also justified; those he justified, he also glorified”.
