East African countries are joining the world in exploring digital currencies, i.e. d-cash and blockchain technology. East Africa is one of the fastest-growing economies in the world, and this is a much-needed move. The countries that make up East Africa include Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Mozambique, Rwanda, Seychelles, Somalia, South Sudan, Tanzania, Uganda, Zambia, and Zimbabwe. With a projected economic growth of 4.1% for 2021-2022, the step to having digital currencies is a move in the right direction. It’s good to note that the East African countries are members of other economic regional groups, E.g. ECOWAS, COMESA, ECCAS and IGAD etc. Regional grouping is important to Africa as it’s a way to regain its footing in the global economy.
The East African Community, an intergovernmental organisation, was formed in 1967, collapsed in 1977 but was revived in 2000 and is made up of 6 member countries, Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda. Its main aim is to widen and deepen cooperation among its members for mutual benefit. The EAC is one of the world’s fastest-growing regional economic blocks. Approximately 177 Million citizens, of whom 22% are urban dwellers, has a combined GDP of USD193 Billion and a land area of 2.5 Million Square kilometres.
In 2010, the East African Community established a common market and implemented an East African Monetary Union Protocol. The East African Monetary Union Protocol is an important stage in the integration process as it lays the groundwork for partner states to converge their currencies into a single currency. In this article, we will explore Digital cash (d-cash) and its future as an important integrating factor to the East Africa Community (EAC).
Digital cash can best be defined as real cash, except that it’s not on paper. Money in your bank account is converted to a digital code. This digital code may then be stored on a microchip, Smart Card, or your computer’s hard drive. Under the East Africa Monetary Union (EAMU) Protocol, Digital cash will fall under the financial sector.
A digital currency will foster and hasten economic integration and plug the region into a new era of economic progression. An integration program is already underway to integrate the stock exchange and develop common automated trading and clearing platforms. Digital cash will ensure that investors have more options for buying stocks without necessarily having to carry physical cash or transact through their banks.
As the EU seeks to develop a single currency for the region, A digital cash option should top its agenda as it presents many opportunities for the partner countries. Some of the opportunities include but are not limited to: the development of a coin with the same economic purchasing power across the region. This will not only make trading across the regions easy but will hasten the process of having an automated trading platform.
Secondly, having digital cash will ensure the citizens in its member state can engage in cross-border transactions seamlessly with low transaction costs, Unlike transacting with physical cash or through banks where the transaction may take a while to reflect into their accounts.
Thirdly, citizens in member states will be able to trade their goods in E-commerce platforms such as E-bay and Amazon; products reach their customers outside their borders and across oceans. The customers will be able to pay for their goods and deliver them on time.
Fourthly, it will be easy to finalise countrywide projects that rely on funding from EAC. Digital money will be disbursed faster, with less bureaucracy, eliminating corruption and bottleneck process’s that make projects stagnate and make money disbursement difficult.
Use of digital money is safe and secure to use as compared to physical cash. The transactions are also traceable, making it the most efficient weapon to fight money laundering.
The infrastructure required to implement and roll out digital cash is lower than physical cash. For Digital cash via P2P platforms, secure codes are generated. In contrast, for physical cash, the infrastructure includes high operating costs of banks and their branches, employment of tellers and clerks and printing and minting money.
The introduction of digital money will create employment for Software engineers who will be tasked to develop new P2P platforms that will integrate with the existing platforms and allow member states to transact safely.
Digital currency will attract investors to invest in the region as the business operating cost will be low. This means that an investor from Europe can invest in stock markets and regional companies with low capital.
Although a common digital currency will foster integration among partner states, it’s good to mention that several disadvantages are expected with introducing a digital currency. Firstly the member states are on different levels of economic. This would mean that only some countries with stronger economic power and presence will benefit from the digital coin.
Secondly, Digital cash is prone to forgery as the codes are electronically created. This might lead to the circulation of cash that isn’t legit and might ultimately lead to the collapse of the entire financial system.
Thirdly, introducing digital cash might lead to cyber crimes and theft. Digital cash is stored in e-wallets. The e-Wallets can be hacked into, and money moved without the owners being aware.
Fourthly, without the proper regulations in place, Ponzi schemes and companies will sprout to conning unaware citizens seeking to make earnings through the EAC stock market.
In conclusion, as the East African Community member state ready for each other to join the global economies and present the region and their countries as lucrative areas to carry out business and invest, the secretariat needs to devise ways in which this can be made possible and simple. The introduction of digital cash alongside traditional cash will foster economic progression and open up the region for a much-needed economic growth spurt.