Does South Africa Need A Bitcoin Strategic Reserve?

In his July speech in Nashville, Trump mentioned starting a Bitcoin reserve to help the US dominate the global Bitcoin market in the face of growing competition from China. The market received the news well, which reflected in a considerable price increase. With a Trump win and a new administration on the way, the price is set to continue to skyrocket.

JUST IN – Trump, if President, pledges to form a Bitcoin Reserve, using 210,000 Bitcoin seized by the Department of Justice, as the core of a new “Strategic National Bitcoin Stockpile.” pic.twitter.com/ucvlyP3BDx

— Disclose.tv (@disclosetv) July 27, 2024

Proponents of the idea argue that by holding a stockpile of Bitcoin that continues to appreciate over the long term, the US could reduce its deficit without raising taxes, strengthening the US dollar.

If you are holding Bitcoin, you’ve increased your purchasing power dramatically; Trump has pumped your bags, and when “number go up“, “brain go off”.

So it’s no surprise that everyone who just heard about Bitcoin when it reached $ 100,000 wants to jump on the bandwagon. This couldn’t be more evident than when the uMkhonto weSizwe Party (MKP) called for an economic overhaul focusing on Bitcoin.

What is a Strategic Reserve?

A strategic reserve is a stock of a critical resource that can be released during crises or supply disruptions. The best-known example is the US Strategic Petroleum Reserve, the world’s largest supply of emergency crude oil, which was created by an act of Congress in 1975 after a 1973-74 Arab oil embargo throttled the US economy.

Presidents have tapped the stockpile to calm oil markets during war or when hurricanes hit oil infrastructure along the US Gulf of Mexico, as well as recently with the Biden administration tapping into it to flood the market and artificially lower gas prices.

Up in Canada, they hold a strategic reserve of maple syrup because lord forbid, they have to suffer through a shortage and deal with dry pancakes, while China has strategic reserves of metals, grains and even pork products because if there’s no Moo shu, you can be sure it would be the catalyst for a revolution.

Governments already hold Bitcoin; they just haven’t labelled it a strategic reserve.

According to data provider CoinGecko, governments worldwide held 2.2% of Bitcoin’s total supply, with the US possessing nearly 200,000 Bitcoins valued at more than $20bn at current levels. The site Bitcoin Treasuries showed that China, the United Kingdom, Bhutan, and El Salvador are the other countries with significant amounts of Bitcoin.

Of these countries, El Salvador and Bhutan would be the furthest along in terms of actively accumulating Bitcoin and holding it, while countries like Venezuela and Russia have nationalised mining pools, but we do not have oversight into how much their governments hold.

Recently, MK party spokesperson Nhlamulo Ndhlela called for South Africa to consider the implementation of a Bitcoin strategic reserve and the development of Bitcoin mining initiatives as a key part of its economic revitalisation and diversification strategy.

And you can read the motivations below.

The MK Party believes South Africa should consider adopting a Bitcoin strategic reserve as an asset, and implement Bitcoin mining initiatives as part of the broader economic revitalization and diversification strategy!!! Whilst this government continues to indebt our country with… pic.twitter.com/WcfFKRrUG2

— Nhlamulo Swabihi Ndhlela Ntukulu Wa Ka Moyane (@NhlamuloNdhlela) December 20, 2024

South Africa Must Embrace Bitcoin for Economic Revival and Financial Resilience

By Nhlamulo Ndhlela, MK Party National Spokesperson

As South Africans, we stand at a critical crossroads in our economic future. For decades, structural challenges, rising debt, and economic inequality have stalled the progress our nation so desperately needs. It is time to embrace bold, innovative solutions.

The MK Party believes South Africa must consider adopting Bitcoin as a strategic reserve asset and implement Bitcoin mining initiatives as part of a broader economic revitalization and diversification strategy.

Drawing from international successes while adapting them to our unique geopolitical and economic context, Bitcoin offers South Africa an opportunity to ensure financial resilience, innovation, and sustainable growth.

Bitcoin as an Inflation Hedge and Diversification Tool

The South African Rand (ZAR) has experienced persistent depreciation, driven by both global market volatility and domestic economic challenges. This has eroded the wealth of ordinary citizens, fuelled inflation, and weakened investor confidence.

Bitcoin, by contrast, is the hardest form of money ever discovered. Its scarcity, capped at 21 million coins, and decentralized nature ensure it is immune to the arbitrary monetary policies and inflation that afflict fiat currencies.

Over the past 16 years, Bitcoin has outperformed all traditional assets, from gold to U.S. Treasury bonds, offering unmatched long-term capital appreciation. Even a modest 1-5% allocation of South Africa’s reserves into Bitcoin could yield substantial returns, bolstering our fiscal strength and protecting national wealth from further erosion.

Moreover, holding Bitcoin alongside our 4.86 million ounces of gold reserves would create a diversified hedge against inflation and external shocks. This is not theoretical. Countries like El Salvador and forward-thinking U.S. states have already recognized Bitcoin’s potential to secure economic stability.

Financial Innovation and Economic Leadership

Bitcoin adoption would cement South Africa’s position as a leader in financial innovation, reinforcing our status as one of Africa’s most advanced economies. By integrating Bitcoin into our financial landscape, we can:

• Spur the growth of fintech and blockchain sectors, creating jobs and attracting skilled professionals.
• Empower grassroots communities through Bitcoin-backed digital stokvels and savings initiatives, therefore providing an accessible alternative to traditional finance.
• Draw foreign investment into our financial markets, boosting liquidity and fostering economic confidence.

Fiscal Resilience and Debt Management

South Africa’s rising national debt remains a significant concern. Bitcoin’s historical price trajectory, marked by long-term appreciation, offers an opportunity to strengthen fiscal resilience and reduce debt burdens.

For instance, a $1 billion investment in Bitcoin today could generate an equivalent $1 billion profit if Bitcoin appreciates by just 100%. These profits could be directly used to reduce South Africa’s foreign-denominated debt, improving our credit rating and stabilizing debt-servicing costs. International creditors would view South Africa as fiscally innovative and future-ready, enhancing investor confidence and opening the door to new economic partnerships.

A Strategic Path Forward

To ensure the successful adoption of Bitcoin, we propose a phased and strategic approach:

• Begin with a small, 1-2% allocation of national reserves to test Bitcoin’s impact on fiscal performance.
• Monetize 3GW of South Africa’s energy resources through mining initiatives, generating significant Bitcoin reserves without substantial upfront capital.
• Work with BRICS partners to integrate Bitcoin into a regional financial strategy, reducing reliance on the U.S. dollar.
• Encourage private-sector investment in energy infrastructure and mining operations to share costs and risks.
• Implement educational programs focused on blockchain technology and renewable energy, equipping South Africans with the skills to participate in this economic transformation.

Geopolitical Independence and BRICS Leadership

The decentralization of Bitcoin aligns with South Africa’s commitment, through BRICS, to de-dollarize and reduce dependence on Western-dominated financial systems.

In a multipolar world, the U.S. dollar’s dominance exposes us to risks such as currency volatility and punitive sanctions.

Global trends are shifting rapidly. Leading U.S. lawmakers have already proposed measures to establish Bitcoin reserves, with Donald Trump signalling plans to integrate Bitcoin into U.S. economic strategy. If the U.S. succeeds, it will seize a massive share of global Bitcoin capital, further consolidating its economic dominance. South Africa must act now to pre-empt this imbalance.

Early adoption would position South Africa as a pioneer within BRICS. Integrating Bitcoin into our reserves and financial systems could strengthen regional cooperation, foster innovation, and enhance our geopolitical leverage. All while ensuring independence from external economic pressures.

Monetizing Energy and Driving Growth

South Africa’s abundant natural resources, including solar, wind, and coal-based energy, remain underutilized. Bitcoin mining presents a groundbreaking opportunity to monetize these resources, attract foreign investment, and drive economic growth.

For instance, mining Bitcoin using Eskom’s excess or stranded energy capacity could generate billions of Rand annually in Bitcoin reserves while stabilizing energy infrastructure. By leveraging renewables for mining, we can simultaneously drive clean energy expansion, turning energy challenges into opportunities for sustainable development.

The success of nations like El Salvador, which harnesses geothermal energy for Bitcoin mining, proves the potential for job creation and revenue generation.

Similarly, Texas has used Bitcoin mining to stabilize its energy grid, attract billions in investment, and create thousands of high-paying jobs. South Africa can adopt and improve these models to address our unique energy challenges.

The Time to Act is Now

Bitcoin is not just a hedge against inflation but a strategic imperative for economic revival. By adopting Bitcoin as a reserve asset and investing in mining initiatives, South Africa can:

• Secure financial resilience in an increasingly uncertain global economy.
• Monetize untapped energy resources and stabilize our energy sector.
• Drive innovation, job creation, and foreign investment.
• Reduce our debt burden and strengthen fiscal sustainability.
• Assert leadership within BRICS and on the global stage.

We cannot afford to let this opportunity pass. As the MK Party, we believe that bold action, guided by a clear vision, is required to position South Africa as a global leader in the digital economic future. Let us embrace Bitcoin as a catalyst for growth, sovereignty, and economic transformation. The time to act is now. South Africa’s future depends on it.

Yours sincerely

Nhlamulo Ndhlela

National Spokesperson, MK Party

Now that you have gotten the gist of the idea and what other countries are doing, let’s look at my beloved country and the idea of a strategic reserve.

Protection against inflation

The claim that Bitcoin can shield the country from inflation has to be some of the most impressive mental gymnastics I’ve ever seen, 10 out of 10 in my book.

First, ask yourself, who is the only entity in the country able to create more Rands? The government is the one creating inflation, and the last time I checked, none of us ordinary citizens had a say over monetary and fiscal policy.

When new currency is put into circulation, the government gets to spend it first and realise the benefits of seignorage before prices adjust upwards. They’re the only ones who benefit from inflation, yet they need protection.

Is Jy Mal?

So you’re telling me the government needs to buy and mine Bitcoin to protect itself from itself?

Make it make sense.

If the South African government were to purchase Bitcoin directly or spend money on ASICs to start mining, where would purchasing power come from?

Taxes and new inflation, of course, so every Bitcoin the government holds, in this case, would be from purchasing power that should have been in the hands of a citizen, and I’m sorry, that’s not the ethos of Bitcoin.

Bitcoin was created to opt out of government currency debasement; now, you want to debase at a faster rate so that you can sit higher on the Bitcoin totem pole.

Nah, I am not having it.

If you use your eyes and simple logic for a second and take a look at M2 money supply growth since 1994, you’ll see that we’ve seen a 20x growth in money supply; that’s the government that did that!

If we look at how that translates to purchasing power versus the dollar, the South African Rand is down evil, over 80%; yes, there was a time when the Rand was R2.35 to the dollar, and not 18; that’s the government that did that!

So you’re telling me a track record of 30 years of monetary mismanagement will stop because you bought some Bitcoin?

Don’t make me laugh; Bitcoin doesn’t fix stupid; it exposes it.

Reducing The Countries Debt

Yes, you could move to a Bitcoin standard as you continue to inflate the currency away, but how does that change the status quo for the average South African?

Let’s say the Bitcoin in reserves is equal to the debt. Will you pay it back and sit with zero Bitcoin? If the country has no debt, then what? Are you going to stop taxing me?

Unlikely.

Why do I care how much debt the country has? We’ve already put up the Rand as the sacrificial lamb, and it will continue to trend towards ZERO in US Dollar and Bitcoin terms.

I couldn’t care less about the country’s debt as long as I could get out of Rands and put it into Bitcoin.

Dedollarising The Country

Yes, Bitcoin could provide a settlement network to help BRICS nations de-dollarise, but it is a complex issue with both potential benefits and drawbacks. Bitcoin transactions are not tied to any specific currency, allowing BRICS nations to conduct trade and financial transactions without relying on the US dollar.

But could it reduce their vulnerability to US economic and political influence? Not really, because you’re not going to get every country to move from a dollar standard. South Africa trades plenty with the US and EU, and they’re not moving off the EURODOLLAR market anytime soon.

While you can do some trade and settlement in Bitcoin and avoid holding too many US bonds, it’s not going to help if you cut your trade by 50% because the US and EU refuse to deal with you or decide to slap massive tariffs on your imports and exports.

In order to acquire Bitcoin, you would need to trade and generate economic value; it’s unavoidable. Bitcoin doesn’t generate Bitcoin on its own, and it doesn’t have a yield.

So what do you want to de-dollars for unless the BRICS country’s trade volumes can replace what you’re getting from the global dollar market?

Grid Stabilisation and Monetisation

Yes, absolutely, Bitcoin mining can be used as a demand response mechanism; it can be set strategically at any scale to help balance the supply and demand of energy, tap into stranded energy, and provide a value add as a method of excess energy storage.

We’ve seen this strategy used in Texas at scale with Riot mining, while we’ve also seen smaller projects like Gridless up in Kenya fostering the growth of micro-grids; the model works and has been proven, but these are private companies working together with governments, communities or private energy producers.

While I agree that coupling Bitcoin mining and energy producers is a win for everyone, it cannot eliminate corruption and short-term thinking. Every South African knows Eskom is in shambles; it’s got debt up to its eyeballs, has failing infrastructure, and has a growing operating cost.

Never mind onboarding new supply or demand capacity.

Why would we entrust an entity like this to use Bitcoin mining efficiently and responsibly for the country’s best interest when they have no track record of doing so?

If this were to go ahead, private entities would be able to figure it out on their own; as we start onboard energy producers who sell to the grid other than Eskom, they can decide if they wish to sell to the national grid or if they mine Bitcoin instead, whoever pays the best price gets the energy it’s simple.

Energy companies can then hedge their bets on how much ZAR income versus Bitcoin income they hold on their books, run their companies as profitably as possible, and pay their taxes. There is no need for the South African government to get involved in Bitcoin mining; it’s like asking one of these armchair Twitter football fans to manage Mamelodi Sundowns.

Big mouths, but can’t execute!

Job Creation

Has the South African government ever shown us any signs of being competitive in any market apart from corruption?

Press X to doubt!

Bitcoin mining is a ruthlessly capitalistic system. You compete with the world for equipment and expertise and generate the cheapest energy.

Can Bitcoin mining operations carve out successful niches for themselves in the demand response and standard energy market in South Africa? Absolutely, without a doubt, but leave this to the private sector, where people respect the idea of generating shareholder value and know how to read an income statement and balance sheet.

Also, the South African government has had very little success in improving employment numbers over the last two decades, and Bitcoin is not going to fix broken policies and fundamentally flawed ideologies that drive these policies.

Stacking Sats Via Seizure

Acquiring Bitcoin is not easy; if you’re acting above board, you can only purchase it, work for it or mine it; the other option is to steal it. Governments habitually take people’s money through taxes, inflation and seizures; since governments produce nothing, they have nothing to trade in the market that would earn them an income.

You can argue that they provide products like IDs, driver’s licences, passports and other documentation. However, these things don’t generate enough income to run a municipality, never mind a country and its various political parasites with an insatiable appetite for wealth without work.

Governments use their monopoly on violence to threaten you to pay taxes or indirectly confiscate throguh inflation. In the case of Bitcoin, inflation becomes a more challenging prospect, so you’ll have to default to something like a 6102 order of confiscation.

While unlikely, it is not impossible.  

Millions of South Africans own some amount of Bitcoin, yet the vast majority do not have custody of their coins; they leave it with popular local platforms like Luno and Valr, to name a few.

Now, not to be monger, but these platforms act as a honeypot for a government, which could force them to hand over coins or be shut down; they could nationalise these operations or force to pay out in cash rather than in-kind redemptions and keep the Bitcoin.

There are plenty of ways for a government to get a hold of Bitcoin, whether by hook or by crook. Even if you did self-custody, if you’ve left a record of Bitcoin purchases with a KYC exchange, you’re potentially on a government hit list, too.

A Decentralised Strategic Reserve

The only Bitcoin reserve strategy I think would work in South Africa is one where every South African who willingly chooses to own Bitcoin does so free of their own accord. If they believe it will benefit them, use Bitcoin. If you think it’s a scam and would prefer to lose purchasing power with Rands, that’s absolutely your prerogative.

Should Bitcoin continue to appreciate in value and enrich the South Africans who have chosen to move to a Bitcoin standard, all we will see is a growing population that gets to retain more of the wealth they already created for themselves.

Resulting in citizens having more say and influence over their local economies.

They can choose to put it back into South Africa if the conditions are feasible, or they can pack up and move somewhere they are treated best, and that is my wish for every citizen.

You don’t need a government to pump your bags; you don’t need them to permit you to do anything; once you have the funds, you make the rules.

Don’t listen to these larpers talking sweetly about Bitcoin. Eventually, they will change their tune once they fail to acquire and hold on to any; all they want to do is continue to enrich themselves with the sweat of your brow.

Reclaim your wealth and do with it as you see fit; that is the true revolutionary action.

In conclusion, I would like to leave you with the words of a former South African.