This is an opinion piece by Alexandria, a citizen of Zimbabwe and a second-year business administration student at Liaoning Shuhua University in China.
Have the majority of Africans ever had access to wealth like Bitcoin?
If the question were to be asked, “Do many people in Africa have shares in Google, Amazon or Microsoft?” or “Have many people, from Africa, created wealth from any of the public companies listed above?” The answer, for the majority of people in Africa, would be a resounding “No”.
The main reason why many Africans cannot participate in the New York Stock Exchange (NYSE) is to have a bank that is interoperable with American systems. Within this American system, individuals operate and transact either with American brokers or with American banks which are all part of a closed, exclusive and impenetrable monetary network. These financial institutions and bodies almost always demand large sums from foreigners for deposits or minimum account opening balances.
In recent years, another crippling stipulation posed to non-US applicants is that their country of citizenship must currently have good bilateral relations with the United States of America. If, like me, you were born in a sanctioned country, you will face unilateral illegal sanctions imposed by the United States Office of Foreign Assets Control (“OFAC”) that will block all access to the NYSE and many other markets and financial services.
“I was born in 1930, the odds were probably 40/1 against me being born in the United States. I won the ovary lottery that first day and besides I was a man and if I had been a woman my life would have been very different. So put that as 50/50 and it’s 80/1 against being born a male in the United States and that was hugely important in my whole life.” – warren buffet
warren buffet States that it was extremely important that he was born in the United States. That’s true because if you were to Google Warren Buffett’s annual report, you’d see that his returns, over the past 57 years, have averaged 20% on compound interest alone. This resulted in Warren Buffett earning a compound return of 3,641,613% on his investments.
Warren Buffet demonstrates the numerical importance of accessibility and the importance of participation in financial markets, especially markets as liquid as the NYSE. This, for the most part, excludes Africans.
Accessibility to wealth through credit for Africans and African Americans
The Great Depression may have started with a stock market crash, but what hit the general economy was a credit breach — every citizen was unable to borrow money, which made him unable to do anything. Credit has the ability to build a modern economy, but lack of credit has the ability to destroy them, quickly and absolutely.
Let’s start with the subject of discrimination that has led to some of the impoverishment of my people.
African American Access to Credit:
redlining: The term originated when the government created color-coded maps showing banks where they could provide housing loans. Green sections were a green light and red sections populated by blacks were deemed too risky. Redlining blocked entire black neighborhoods from access to public and private investment. Banks and insurance companies have used these cards for decades to deny black people access to loans and other services based solely on race. Home ownership is the main driver of wealth, but African Americans in their neighborhood paid higher insurance premiums, higher interest rates and were denied mortgages more often.
“You can’t get a loan, you can’t own a house, you can’t start a business. Which means you can’t build wealth. You are excluded from the American dream. Why is it so important to you to exclude an entire race of people from the American dream?” – Anthony Mackie in “The Banker”
African access to credit:
In 1930 land distribution in Rhodesia (now known as Zimbabwe) made it illegal for indigenous Africans to buy land outside established indigenous lands. The native African population was over 1 million while that of the Europeans was less than 50,000. This put the European population at only 5% of the population, but they owned over 51% of the land while 95% of the population n got only 28% of the dry rocky lands called “reservations”.
In 1980 Zimbabwe becomes independent, after a long war. They then began negotiations for a settlement at the end of the war which led to an agreement called The Lancaster House Agreement. The Lancaster House agreement stated that the new government could not write legislation to compulsorily take land for the next 10 years. The only way landless black people could be resettled is if they bought from white people who wanted to sell. Only a few white farmers sold. Until the 1990s less than a million hectares of land were ceded solely for resettlement.
“Only 19% of the approximately 3.5 million hectares of resettled land was considered prime or cultivable. 75% of the best land was still about 4500 white farmers.” -Human Rights Watch
In 2000 land reform programs began, white farmers were forcibly removed from the farms and were replaced by new black farmers. This was a massive international and historic agreement. This had never been attempted before. Zimbabwe has also defied the imperialist powers by joining the fight for a South Africa without apartheid. Zimbabwe has also joined the fight against imperialism in the Congo. Thus, in 2001, the United States of America reacted by decreeing two types of sanctions.
The first were congestion penalties: ZIDERA , Zimbabwe Democracy and Economic Recovery Act Prevents Zimbabweans from getting loans from multilateral lending institutions. In particular restructuring and development loans.
The second are the sanctions of the executive decree. America tried to call it targeted sanctions, but when you look at the list of targeted sanctions, you see a ban on any company in the world doing business with Zimbabwe. Otherwise, these companies will be penalized or risk prison terms according to the International Economic Emergency Powers Act.
These were unilateral sanctions imposed by the United States of America. These unilateral sanctions have only been possible because the currency of the United States dominates global payment systems and much of the world’s trade is done in America. So anyone who wants to do business often has to do business with America and has to cooperate with America. They must have a bilateral agreement and relationship with America. Yet these bilateral relationships are the ones that America uses to enforce its sanctions or what we call executive order sanctions and these ensure that other countries around the world enforce those sanctions or suffer secondary sanctions.
The sanctions by decree actually state that if any country or company helps the government of Zimbabwe with software, finance, logistics, machinery, business equipment, that company may also face sanctions because the Americas try to make the sanctions effective. However, those who impose international sanctions argue that our sanctions are in fact self-imposed sanctions due to the fact that even before the ZIDERA sanctions of 2001 – in 1999 Zimbabwe failed to pay its debts at the International Monetary Fund and the World Bank, which means that Zimbabwe has been denied access to credit from these two multilateral institutions. Again there is a misconception that the sanctions in Zimbabwe did not start in 2001 but rather in 1980 when we gained independence. At independence, Zimbabwe found itself in debt with Rhodesia. Moreover, Zimbabweans have not received reparations for the destruction caused by the Rhodesians that cost the nation more than a trillion dollars.
Another case of self-imposed sanctions
In Zimbabwe, the interest rate is 30% per month. In just four months, the interest paid on the loan would exceed the principal. Indeed, Zimbabwe’s interest rates must be continually readjusted to offset hyperinflation which has peaked at 600%. Additionally, Zimbabwe does not have a sovereign credit rating from the three international credit rating agencies. The government has not yet requested a rating from the three major rating agencies. It is one of the African countries that have not yet requested an international sovereign rating. A favorable rating enables governments and companies to raise capital in the international financial market. Institutional investors, in both the developed and developing worlds, rely heavily on rating agencies to make their investment decisions.
Not being rated makes it more difficult for the government to get funds for big debt projects or get debt relief. This makes it difficult for entrepreneurs who find it difficult to grow their business due to a lack of funding. People who lack finance cannot get mortgages and therefore cannot own their own homes. The end result is that, under these circumstances, one cannot create wealth.
Can Bitcoin finally grant Africans fair and free access to wealth?
For centuries, Africans and African Americans have suffered from harshly discriminatory policies regarding access to credit through guidelines and penalties that prohibited credit or increased the cost of credit. Bitcoin’s innovation was imperative for Africa and African Americans because it allowed anyone on earth to access it, and this time, that includes Africans. It’s no surprise at all that Sub-Saharan Africa leads in Bitcoin adoption.
This time, Africans and African Americans don’t have to worry about discrimination. Thanks in large part to the innovation of DeFi on bitcointhis is the long-awaited innovation and crucial step in the scalability and utility of Bitcoin in Africa.