eBusiness Weekly
Jeffrey Gogo
Engineering firm Appropriate Technology Africa (ATA) has become arguably the first mainstream company in Zimbabwe to accept payment in bitcoin, as manufacturers seek to break-free from the existing foreign currency crunch.
ATA is a private-owned company manufacturing a range of industrial, agriculture and mining equipment including electric motors, diesel electric generators, dump trailers, mini loaders, submersible pumps, angle grinders and others.
But with a national trade deficit of $1,3 billion during the first six months of this year, the Harare-based enterprise, like many others, has often faced challenges getting the hard currency it needs to buy key raw materials abroad.
Now some companies are looking to bitcoin as a means to earn hard currency more efficiently, and to keep businesses going in a country where cryptocurrencies remain something of a novelty, one, nonetheless, hated by financial regulators.
But progress so far is slow because of the falling price of bitcoin, officials say.
“We have been taking bitcoin payments since January (2018),” said an official with Appropriate Technology Africa, who cannot be named because she was not authorised to speak to the Press.
“We find that bitcoin allows us a chance to make payments for raw material imports rather swiftly,” she said, by phone.
It was not immediately clear how much worth of business ATA had settled via bitcoin (BTC) since January.
When making payment, the official said, customers send bitcoin equivalent to the value of goods they are buying to a bitcoin address — a long list of alphanumeric characters — supplied to them by the company.
But the rate of exchange is never fixed, largely because of the volatility in the price of bitcoin, which tends to fluctuate rather wildly, sometimes several times a day.
For example, if an electric motor cost $500, someone paying using bitcoin when the digital coin traded at around $7 000 a week ago would have to pay 0,0714 BTC, exclusive of transfer fees.
That’s about 15 percent less, or 0,0819 BTC, what one needed to pay to acquire the same piece of equipment late evening August 14, when bitcoin sold for just over $6 100.
Apparently, a decline in the price of bitcoin means a slightly higher cost in BTC payment terms.
Alternatively, this may also be looked at as a kind of exchange related gain for Appropriate Technology Africa, if the long-term valuations for the virtual currency are built in, and not least the everyday volatility.
Falling price frustrates bitcoin payments
Cryptocurrencies were only starting to flourish when the Reserve Bank of Zimbabwe (RBZ) in May moved in to halt their trade locally.
In a matter now before the High Court, the central bank accused digital currency exchanges Golix and Styx24 of breaking the law by mimicking the operations of commercial banks, particularly deposit taking, and facilitating foreign payments without RBZ approval.
Reserve Bank governor John Mangudya later reduced cryptocurrency trading to a “pyramid scheme”.
But that was not before 50 000 Zimbabweans had already invested in digital coins like bitcoin, ethereum or litecoin on Golix alone.
Many looked at virtual currencies as an asset that can be bought, held and traded forprofit like gold or common stocks. And yet others as a means of settling payments abroad, especially so in an economy where the RBZ keeps a chokehold on foreign currency allocations for international payments.
Golix says by end of 2017 it had helped facilitate about $1,8 million worth of international payments for Zimbabweans seeking to import used Japanese cars, pay school fees or health bills overseas.
The Reserve Bank of Zimbabwe says there just isn’t enough US dollars to meet every need.
That’s because the country was not earning enough forex from the sale of goods like tobacco, gold or platinum to other nations, with only about $1,62 billion worth of goods exported during the six months to June 2018, compared to imports of $2,9 billion.
So those companies in need of foreign currency, like Appropriate Technology Africa, often have to wait for their turn in a long queue attended to by the central bank on the basis of priority. Items such as fuel and electricity imports regularly top the list.
“We were attracted by the fact that bitcoin is an alternative currency, same as any other currency,” Andrew White, chief executive of ATA, told the Business Weekly, via text message.
But bitcoin’s tailspin, plunging about 70 percent from a record high $20 000 in December to $6,362 the morning of August 15, has frustrated the engineering company’s plans.
“Noone wants to pay in bitcoin because bitcoin has been losing value since last year,” White lamented.
Better as an asset?
The problems faced by ATA reflect more bitcoin’s qualities as an asset than it is as a long-term means of exchange.
The rapid increase in the price of bitcoin last year — a growth of more than 1,400 percent — was fuelled more by people looking to invest in the digital currency for trading.
Fewer considered it a means of payment.
The wild fluctuations in the price also make bitcoin an unstable and difficult option for settling financial transactions.
And added to that rising transaction fees and longer settlement times, which were making bitcoin a lot more inefficient compared to bank transfers.
Someone told this paper that they were charged about $31 trying to move just $7 bitcoin’s worth from the big American exchange Coinbase, last year.
In January, US-based financial group Stripe was forced to discontinue its support for making purchases online using bitcoin similar difficulties, including that “by the time the transaction is confirmed, fluctuations in bitcoin price mean that it’s for the ‘wrong’ amount.”
Andrew White, the Appropriate Technology Africa chief executive, said bitcoin was not “a favourable currency at the moment”, but the company will continue to explore means to add value to its business.
