Chapter 8 Africa, Digital Identity and the Beginning of the End for Coins

By Jonathan Ledgard

Digital identity will be one of the most significant philosophical, political and economic questions of the early 21st century. While this question will be a pressing one in richer countries, it will be absolutely vital in poorer ones where the state is often weak or absent and where mobile-accessed Internet will be the portal to new forms of education, health and banking.

Picture the connectivity in poor countries a few years hence as seen on the battered screen of a cheap (but fast) smartphone. How do you make sense of yourself when you enter in? Do you have rights? Who is directing the choices you make inside there, who is recording them, who profits from your explorations? Are you trammeled again and again to the same domains? Are you even a citizen anymore when you are online?

In Africa, by 2020, 200 million young people will come online for the first time. They will do so through the battered screens mentioned above, but also through new forms of tablets and wearable devices. These young Africans will be in a much stronger position to improve the quality of their lives if they are offered authentic and secure digital identities that allow them to control their own data and more easily move value among the various participants in peer-to-peer networks.

The latest demographic predictions suggest that fertility in Africa is not slowing. The continent’s population may now reach 2.7 billion before 2050 – up from 230 million in 1950. By the end of the century the PIN code for the planet will be 1145: 1 billion for the Americas, 1 billion for Europe, 4 billion for Africa and 5 billion for Asia. Because of a lack of indigenous tech companies and the prevalence of English, French and Arabic as online languages, Africa will be a long-term play for big tech companies.

But by buying up so much digital real estate in Africa so cheaply they will likely achieve monopolistic positions; at some point in the early 2020s African users will find that nearly all their online interactions will be dominated by just a few companies – including Google, Facebook, Yahoo, Microsoft, and rising Asian giants like Samsung and Huawei. Throughout Africa they will run the computing architectures of user desktops, the civil service, stock exchanges and civil aviation. As smartphones and other sensors generate an explosion of data, African governments – erratic at best in the writing and implementing of laws governing data – are not likely to be at the forefront of security, privacy and consumer protections. By default, large tech companies will assume ever-more powerful positions versus the user – more powerful in many respects than governments themselves.

Despite steady improvements in connectivity in Africa with the laying of undersea cables, the online experience is likely to be patchy and expensive relative to the rest of the planet. The virginal moment for young Africans will likely be with Facebook, which has subsidized data charges to ramp up usage in many African markets. Facebook says it wants to massively increase access to the Internet in Africa as a common good, but it undoubtedly also has an eye on the burgeoning demographics. Even so, Facebook will be much smaller than Google. The Mountain View giant has beneficent and ingenious schemes of its own in Africa, such as the Loon project to improve Internet connectivity from balloons drifting at high altitudes. Such initiatives by big tech companies to provide email, software, search, mapping and data storage at a massive scale are welcome indeed.

It is in this context that the question of digital identity for young Africans becomes imperative. Where the state is weak and sometimes predatory, and where tech companies are overly dominant, it makes sense to push for a new trust layer that would retain data and build up a secure and authentic digital identity for every African who wants one. India’s Aadhaar national identity scheme shows what is possible. It has already registered 500 million Indians using a number code and matching biometrics. Aadhar is improving service delivery, but it is strengthening the state in a way that tempts overreach.

Advances in distributed computing make it possible to think more audaciously in Africa. Instead of just tagging a citizen, why not gift them full digital sovereignty? Providing Africans with secure, reliable digital identities will greatly empower them to take charge of their own commercial, political and social affairs, especially over and against the interests of corrupt governments and large corporations.

An open source “white label” software built as standard into every smartphone, tablet and wearable device would allow Africans to access the power of the Internet on fairer terms. They could trade data for services, choose new providers that disrupt the big tech companies, or hold onto their own data as an asset for microloans. Providing each user with a personal data store using the “trusted compute cell architecture” would make it harder for big tech companies to scrape private information for their own ends. (For more, see Chapter 13, “The ID3 Open Mustard Seed Platform,” by Thomas Hardjono et al.)

Such an offering would have to prove that it is robust enough to resist attack or theft of identity. The costs involved would be more difficult to handle. Who would pay for so many personal data stores? These are difficult but solvable problems. Costs are likely to fall as clean energy comes online and as Africa begins to benefit from cognitive computing and cables and other infrastructure improvements. For example, the architecture built to handle the enormous amounts of data that will be generated by the Square Kilometre Array radiotelescopy project under construction in South Africa’s Kalahari desert, will have many spinoff benefits.

One of the first effects of user-controlled digital identity will be to alter the way value is moved around in Africa. Savings clubs are popular across Africa. Each month members pay into a pot, which is then reinvested. A digital identity solution may allow such clubs to negotiate collective deals much more effectively; in effect, to set up lucrative microeconomies. From there it is a short hop to launching viable digital currencies. Even the best economic scenarios suggest that the average wage in Africa will not exceed US$6 a day by 2030. In our lifetimes the vast majority of transactions in Africa will therefore be very small, such as the expenditures of pennies to use a latrine in a slum.

How are these transactions paid right now? Nearly always with coins and small denomination notes, and with no transaction records. Coins are a blunt instrument for carrying out these kind of tiny payments: many are lost, many lose their value, they are expensive to keep in circulation, and, besides, are grubby with pathogens.

A digital identity allows value to flow in new ways and therefore to enable all sorts of microtransactions. A digital identity as maintained by smartphones could start to replace coins and small denomination banknotes. As wearable technologies improve over the next decade it will become possible to imagine that many transactions will be consummated by gestures or by bursts of song; a bracelet raised, value imparted, precisely, with almost no transaction cost.

Cryptocurrencies like Bitcoin and Ripple have a headstart, but a pan-African digital currency could be index-based like Ven. In any case, a common African digital currency aimed at improving the value of low-value transactions may perversely help regional integration. Because of the peer-to-peer nature of the transactions it is possible to imagine localized versions – one for every great African city, certainly, but perhaps one for women here, for farmers there, and for Catholics everywhere. The design of the currency should be memorable; I propose a pronking impala to match the iconic springbok on the kruggerand.

An “Impala” revolution could provide a boost to Africa in a period of scarce jobs, expensive food and widespread destruction of nature. Mobile money schemes such as Kenya’s M-Pesa have rightly been praised, but they are better suited for paying school fees or church tithes than for paying for a ripe banana. They do not work hard enough for the user.

By contrast, an Impala currency will set enforceable standards of performance and transparency. It could help users build credit histories to secure microloans for schooling, healthcare and housing. Governments and aid agencies using their own versions of the currency will have verifiable means of disbursing value accurately, cheaply, and in daily increments that might protect beneficiaries who would otherwise be exploited. Indeed, just as some African governments are promising laptops and tablets, so they might consider subsidizing wearable devices that boost inclusivity.

Since virtual transactions will happen mostly in the informal sector, African governments will lose little by setting a tax-free ceiling of a few dollars a day for every user. Taxes could trigger as a levy in an automatic exchange into a national currency when holdings of “Impala” exceed an agreed ceiling.

Jonathan Ledgard is Director, Future Africa, at the Swiss Federal Institute of Technology, and Africa correspondent-at-large of The Economist. He has reported from 50 countries and several wars for The Economist, with a focus on politics, security, environment, and science, and has published two acclaimed novels, Giraffe (2007) and Submergence (2013).

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