At present intra-African trade is very low, making up only 14.4% of the continent’s total exports.
This pact aims to create a new borderless market that connects 1.3 billion people across 55 different nations with a combined gross domestic product (GDP) of $3.4 trillion.
This article will explore how the AfCFTA could benefit from Bitcoin adoption.
Cross-border payments within Africa are very slow and costly. This is partly due to the fact that 80% of African cross-border transactions originating from African banks are routed offshore for clearing and settlement through correspondent banking relationships.
Most mobile money wallets are closed systems that aren’t interoperable and only work within certain jurisdictions. Bitcoin wallets, on the other hand, are interoperable and are not limited by geography or regional monetary systems. Merchants are able to transact with each other via their bitcoin wallets at a much faster and cheaper rate than traditional fiat payments.
PAPSS in its current form does not incentivize financial inclusion on the part of traditional financial institutions in any way. This results in financially excluded informal sector traders being unable to reap the full benefits of the AfCFTA.
Like El Salvador, Africa also has a huge financial exclusion problem with around 65% of adults being unbanked. The majority of these people are employed in the informal sector and the informal sector in Africa accounts for over 85% of all employment.
Cash is the only means of transacting in the informal sector. In a local context, this is fine; however, it’s a huge drawback for taking advantage of the cross-border trading opportunities that are opened up by the AfCFTA.
Bitcoin adoption would instantly grant informal businesses access to an open, permissionless and geographically agnostic monetary network that they can start using immediately.
Armed with an international currency and the ability to seamlessly transact across borders, more informal sector businesses will be better positioned to export their goods, grow their businesses, and thus increase the rate of intra-African trade.
While this article was only able to highlight a few areas that Bitcoin adoption would optimize, there are numerous other opportunities that can be unlocked by this.