Nairobi-based APA Insurance is seeking to expand its business to micro insurance, which targets low-income people and has been largely under-penetrated ... in Kenya where two-thirds of its nearly 55 million population is mired in poverty.
On August 11, the Bank of Ghana said it is partnering with German payment-services provider Giesecke+Devrient to pilot Africa’s first general-purpose central-bank digital currency. The ‘e-cedi’ is intended to complement rather than replace physical cash.
Ghana accounts for 20% of the $9b global cocoa bean market. About 80% of the country’s exported cocoa is sold in raw form to be processed elsewhere, meaning that Ghana takes only a small slice of the value generated by the $150bn global chocolate industry. In June, the country’s cocoa board signed an agreement with Swiss equipment and systems business Bühler to increase local cocoa processing capacity.
- Cocoa beans do not create enough value for Ghana and pulling in international payments for higher value-added products will require a digital model, Szelenyi says in Dubai.
- “Every central bank wants to increase value creation” and digital currencies are “the easiest way to build new businesses.”
It will be technically possible to carry out a pilot of the e-cedi next year, says Wolfram Seidemann, the company’s currency technology CEO in Munich. Whereas crypto-currencies are often associated with a single niche business model, the e-cedi will be delinked from the success or failure of a specific application, he adds.
- Ghana has about 15 million active users of mobile payments and one aim of the project is to bring them into a regulated environment.
- Larger payments will be registered, but for smaller payments, the central bank won’t know who is paying or receiving value.
- “We want to have an omni-purpose currency which will reach the unbanked,” Seidemann says.
Most e-cedi transactions are expected to be online, but it will be possible to use the currency via a smartcard without the internet or a mobile phone, Szelenyi says. Users will be able to smoothly switch between on and offline transactions, he adds.
The central bank has set up an expert committee to review possible unintended consequences of the project, Seidemann says. These include the possibility that giving the public direct access to a central bank digital currency may lead to a loss of confidence in commercial banks and the withdrawal of assets in times of financial crisis.
- Commercial banks will “eventually” be part of the project, Seidemann says.
Security is high on Giesecke+Devrient’s agenda given the risk that the digital currency could become a target of hackers. The system will be fully distributed with no single point of attack. Seidemann points to the dangers posed by quantum computers, which have vastly greater capacity than conventional computers. Quantum computers in the wrong hands could render many existing crypto-currency security systems ineffective, he says.
- Giesecke+Devrient is designing a roadmap to ensure that algorithms are constantly updated to take account of the latest threats. “We always need to be two steps ahead,” Seidemann says.
Proof that the e-cedi can help push Ghana up the cocoa value chain would be a big win for digital currencies.
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