By “A trade war is being stoked between the two largest economies of the world. The consequences will affect those who have had no say, including small countries like Ghana. These events provide proof if some were needed, that ours is an interdependent world.”
– President of Ghana Nana Akufo-Addo
According to the Center for Strategic International Studies, though not the target, Africa is poised to suffer from the impacts of the Tradewars. Recently, the International Monetary Fund (IMF) lowered African growth projections from 3.3% to 3.1% for 2019, citing rising trade tensions, as well as Brexit and declining Chinese growth. It further warned that the trade war could alone cause up to a 1.5% cumulative drop in Africa’s GDP growth by 2021.
The predicted impacts of tariffs on African economies have already shaken investor confidence, hastening drops in commodity prices, local currencies, and major stock exchanges. There is a calling for the need for African countries to diversify their export menus away from traditional items such as oil and turn the focus on policies that drive down costs because manufacturing is currently too expensive in Africa, where lack of infrastructure is a major cause.
South Sudan for example, gets 95% of its foreign revenue from oil exports to China, according to IMF. For Angola, 60% of its exports are oil and minerals to Beijing. Meanwhile, China takes 45% of Zimbabwe’s exports of diamonds and other minerals. After major market-moving events over the last few months, China deliberately devalued the yuan to an 11-year low against the dollar. Wall Street suffered its worst day of the year on Monday, with the S&P 500 closing down nearly 3%, driving money into Bitcoin.
Bitcoin & Cryptocurrencies act as a shield from Trade war damages
“Throughout the last few years, we have been seeing the trend of Bitcoin increasingly becoming fundamentally correlated to more macro moves as increased economic uncertainty in the world increases,” Chris Reinertsen, chief marketing officer of blockchain consultancy Rhythm Technologies said.
Other crypto enthusiasts noted that, if exchanges were to solve the issue of cybersecurity, it could, in the longer term be seen as a safe haven.
Bitcoin, their argument goes, is immune to the impact of geopolitical tensions or government interference because of its decentralized nature. Unlike government-issued fiat money, bitcoin is produced by miners across the world racing to solve computer puzzles. Its supply is capped at 21 million, a scarcity that gives it intrinsic value, like rare metals.
The stats from various surveys show that a country like South Africa ranks at the top of the list of countries with the highest Bitcoin adoption numbers. More than 10% of the country’s population owns Bitcoin and even more are using Bitcoin trading as a speculative instrument to generate additional income as the South African rand seems to be struggling for a long time now and considering it’s currently trading at 0.066 versus the USD.
It doesn’t come as a surprise that alternative investments are becoming more compelling.
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