A small town in rural South Africa is seeking to experiment with a digital version of their local fiat currency. Orania is a self-sufficient enclave that was founded in 1991 after the end of apartheid legislation and has a tiny population of 1,400. The predominantly white town aims to use digital currency as a way of boosting its local economy.
Digital Upgrade of the Ora
The town introduced its own fiat currency in 2004 to increase spending and boost self-sustainability. The currency, Ora, functions as a voucher or token and users can enjoy discounts at town stores. While the currency is not recognised by the South African Reserve Bank, it can be traded for South African rands at a ratio of 1:1 within the town.
However, as a fiat currency, the Ora has a few drawbacks that are hampering its growth and acceptance. Top of which are printing and currency transfer costs. Orania’s leadership are hoping the digital currency ‘E-Ora’ will eventually replace the paper currency that has been bogged down by transaction costs. By eliminating the fees involved in printing and minting, as well as transaction costs, more people will use the digital currency and thus boost the town economy.
Dawie Roodt a chief economist at the Efficient Group, a financial consultancy helping with the project, said in a BTC.info article,
“What we plan to do is to digitise the existing physical ora and replace it with an electronic one […] If you can reduce the cost of the transaction, you can boost economic activity quite substantially.”
Should the plans for the digital currency succeed, Orania will join a small group of micronations that are also experimenting with digital currencies. For instance, Liberstad a privately run city in Norway has its own decentralised monetary system. Another example would be the free republic of Liberland, which is situated on the western banks of Danube and has bitcoin as its national currency.
A Digital Economy Case Study
While the town makes its foray into digital currencies, people view the town as a racist community as 97 percent of its population are white. The fact that Orania has strict laws about the ethical composition of their population and segregative admission laws in post apartheid South Africa has been a major source of controversy and has added to Orania’s racist image.
However, despite the socially regressive policies, Orania, represents an interesting case study on the potential of digital currencies to transform local economies. For younger members of the town’s population who are already used to online banking, a shift to a digital currency is eagerly anticipated.
Looking to emulate bitcoin, Roodt hopes the ‘E-Ora’ can in the future become a fully fledged cryptocurrency, competing against South Africa’s rand. He said,
“The possibility is that we can soon have a new digital currency, which rivals the rand in South Africa, and the best part is nobody can stop us […] The only way to stop this is switching off the Internet.”
Presently, the plan is to develop an online platform that will enable members to trade the digital Oras on their smartphones. Eventually, the physical Ora notes will be replaced by the digital version of the currency. For digital economists, it will be interesting to see what happens to an economy when fiat currency no longer exists.