My slow-clap recognition of the current dominance of Mobile Money has been quite clear, especially MTN Mobile Money. I mean, there is an exact point in time where an MTN showrunner thought “ok, we’ve conquered telecommunications, now let’s get into money transfers”. A man briefly wonders about these things, because there is an answer out there, as to the exact when. The exact why though I am fairly sure of; BECAUSE THEY CAN. When a brand gets so big, and so good at being so big, it can successfully cross business sectors utilising the right strategy.
Such moves aren’t new. What happens when a waste management company like Zoomlion lingers into banking? Wait. Jospong did that, with OmniBank, now OmniBSIC. I can cite other examples, like the disrupting emergence of the largely successful Royal Drinks and Awake Mineral Water by Kasapreko, a formerly solely alcoholic beverage-producing company. These new ventures had already existing and tough competition.
Success therefore depends on STRATEGY. It is generally concluded that Coca Cola, a company not known to make mistakes, at all, eventually failed at maintaining the bold entry of its Dasani Mineral Water into the bottled water market as a result of bad strategy. Strategy is therefore everything when it comes to big moves like what Facebook is attempting.
Facebook launches Libra
On 18th June, 2019, Facebook, the American social media conglomerate, launched Libra, a cryptocurrency. It’s still a pretty bold step to venture into virtual currency for a company that got the world addicted to virtual likes.
The name Libra is also the seventh astrological sign in the Zodiac. The sign of Libra is illustrated by the scales; it represents justice. Libra is an old Roman unit of weight. And though Libra is spelt as “libre” in French, it translates to “free”.
The Libra Association
In Geneva, Switzerland, Facebook co-founded the Libra Association. The Libra Association is a group of powerful companies from different business sectors that will serve as the de-facto monetary authority of the Libra currency. It was founded with 28 members, aiming at 100 members as time goes by. Each member contributes $10 million to the project. Facebook still wants to “maintain a leadership role through 2019″. It’s only logical that it does.
Yet, after 2019, Facebook will not have a clear leadership role. The Libra Association awards an equal vote to each member. So eventually, Facebook will have as much a say as any other founding member. Facebook’s membership of the Association is through Calibra, a subsidiary of Facebook.
The Libra Association will also manage technical aspects of the currency and work with regulators to make sure they are abiding by and complying with existing laws and policies. They plan on adopting real-life techniques and safeguards that will make sure the value of Libra remains stable.
Who are The Libra Association
I did mention “right strategy.” Facebook’s strategy for the rollout of Libra seems to be centred around a system of harmonious integrations from very powerful inlets into our lives right from the go. This seems more obvious when you analyse the breakdown of The Libra Association’s founding 28 members. Here’s the exact list of companies grouped by their business sectors:
Payments: PayPal, Visa Inc., Mastercard, Stripe, PayU.
Telecommunications: Vodafone, Iliad SA.
Technology & Marketplaces: Uber, Spotify, eBay, Lyft, Calibra, Booking Holdings, MercadoPago, Farfetch.
Venture capital: Andreessen Horowitz, Ribbit Capital, Thrive Capital, Union Square Ventures, Breakthrough Initiatives.
Blockchain: Coinbase, Xapo, Anchorage, Bison Trails.
Nonprofit & Multilateral Organizations, and Academic Institutions: Women’s World Banking, Mercy Corps, Kiva, Creative Destruction Lab.
These companies add up to 28. With a roster like that, it’s easy to see how Libra will catch on pretty fast.
Why have a Cryptocurrency
With the proper rollout and implementation strategy, why not.
The case for Libra was made back in 2009 when the social media company launched Facebook Credits, a virtual currency. At that time, Facebook Credits was designed to take on a life of its own and turn into a micropayment system that is open to any Facebook application. It was often used in games but other applications utilised the currency as well. It was even sold in physical store outlets like Walmart, Target and Best Buy. Facebook Credits was retired after 4 years in 2013.
These waters are therefore not new territory for Facebook, though they are adopting a much bigger, more inclusive method of approach. The Libra Association says the purpose of Libra is to “empower billions of people”, pointing out that there are 1.7 billion people in the world without traditional bank accounts who could use the currency, Libra.
The Case for Libra in Ghana
The World Bank’s Economic Update Report on Ghana has stated that the main driver of financial inclusion in our country is not traditional banks, but rather Mobile Money. It estimates than within 5 years, more people would be accessing financial services using Mobile Money and other fintechs.
The report put particular emphasis on the government’s role in the integration of Mobile Money and modern financial technology in broadening the access of formal financial services to Ghanaians, using collection and payment of utility bills.
The report stated, “Current approaches remain piece-meal, and clear direction from government is needed to further push existing projects in these areas. To do so, financial and technical support to the Ministries, Departments, and Agencies (MDAs) and utilities is required to update their internal accounting systems.
This would allow full integration via open application programme interfaces (APIs) into institutions such as GhIPSS, allowing for individuals to use their bank account or mobile wallets to pay for government services or utility bills.”
The introduction of Libra into the mix is very timely and presents many opportunities for local innovation, taking into account the popularity and increasing use of Facebook, Whatsapp, Instagram, Uber and others like it. These apps will be the first to integrate Libra in its normal use.
Where’s Africa in the Libra Association
During the launch of this report, the World Bank Country Director, Dr. Henry Kerali, mentioned that Ghana is Africa’s fastest growing Mobile Money market. Ghana’s economy, though used by political parties in opposing commentary as critique, be it NDC or NPP when in opposition, has actually been generally relatively impressive over the last two decades. We are Africa’s shining star!
Libra is set to have a massive effect as a worldwide currency. I am sure there are some other criteria for inclusion into the Libra Association aside the $10 million mandatory contribution of members. It still begs the question of why I didn’t see African gamechangers like MTN on the list of Libra Association members. When Facebook, a company that literally changed how we live our daily lives, brings together companies from all over the world, to again literally change how we live our daily lives, I believe Africa needs proper representation at the highest level.
The only hint of Ghana I see on that list is Esther Afua Ocloo, née Nkulenu, a founding member and the first chairman of the Board of Directors of Women’s World Banking. She was a pioneer of microlending and a leading advocate for the economic empowerment of women. She died in 2002 at the age of 82.
I look forward to seeing Ghanaian and African companies on the list of Libra Association members in the near future. We must keep in mind that nobody can better understand and provide for Africa’s needs than Africans can. Oh we know ourselves so well!
Similarities and Differences Between Libra and other Cryptocurrencies
For starters, there will never be a Libra coin or Libra note. The currency will entirely exist in digital form, just like all cryptocurrencies. Also, like other cryptocurrencies, transactions will be recorded on a software ledger called blockchain that will authenticate each libra transfer. This Libra Blockchain will be managed by the founding members of the Libra Association for now, but later on the Libra Blockchain should take on an independent life of its own.
The main difference between Libra and other cryptocurrencies like Bitcoin, is that Libra will be backed by a substantial amount of assets that will anchor its value. The value of the Libra will increase and decrease in response to demand and popularity, as most currencies do. When more people want to use the Libra, the Libra Association will buy more of the underlying assets and create new Libra. When people want to sell their Libra for hard cash, the Libra Association will pay them and destroy the equivalent amount of Libra.
The Libra association hasn’t said exactly what kind of assets that will be used, but they did say that they will include “bank deposits and government securities in currencies from stable and reputable central banks.” This tells me it would involve major global currencies, like the United States Dollar, which doesn’t fluctuate much on a daily basis.
In stark contrast, other cryptocurrencies aren’t backed by anything. As seen with the Bitcoin, they fluctuate wild and move arbitrarily based on speculation. Without asset backing, when it’s gone, it’s gone.
History suggests, as does The Social Network movie, that the audacity of Mark Zuckerberg usually pays off. More radical shifts in the global finance and economic ecosystem has happened before. But this move by Facebook into the world of global virtual currency will not be without some major pushback and hurdles.
The United States Senator from Ohio, Sherrod Campbell Brown, a ranking member of the US Senate Banking Committee, tweeted on the day of the launch:
“Facebook is already too big and too powerful, and it has used that power to exploit users’ data without protecting their privacy. We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight.”
I am all for oversight, as far as it does not stifle innovation.
Colgate started as a trader in starch in 1820. In 1938, Samsung started as a trader of fish, fruits and vegetables. Marriott, the world’s biggest hotel chain company, started as a root beer outlet in 1927. Evolution for fast-growing brands is like the tide; it might tardy, but it shall surely come.
I therefore look forward to tactically executed evolution strategies into daring sectors not previously thought of by our own growing local companies. It would really not be bad to be alive to witness Printex SmartPhones. Or the Kpoo Keke Automobiles! An SM Sneaker Collection…by Shatta Wale would sell out before it even starts production!
IMAGINE THE AUDACITY!!!
Hit me up on social media to discuss and let’s keep the conversation going! Also feel free to throw at me topics you’d like to read on the Macroeconomic Bulletin.
These are all facts. And this has been an opinion piece.
The Writer is the Group CEO of Maxwell Investments Group, an International Trade and Business Development Solutions Provider. He works with a team of motivated professionals, governed by industry experts with experience spanning over a century. He writes about trending and relevant economic topics, and general perspective pieces. Facebook:@thisisthemax Instagram:@thisisthemax Twitter:@thisisthemax LinkedIn:/in/thisisthemax Website: www.maxwellinvestmentsgroup.com Email: firstname.lastname@example.org Mobile: 0249993319