TL;DR: Because no one is mining cryptocurrency in Africa and because, to date, no locals have started their own cryptocurrencies to solve local problems, all the bitcoin in circulation in Africa comes from people who bought it at an exchange elsewhere for a profit. And in places where demand the demand for bitcoin is high, the price is even higher.

In this post is based on observations in Zimbabwe, South Africa and Nigeria. But I've had first hand experience running an exchange in Zimbabwe.

In Zimbabwe, our local exchange has been live for over 1 year and although the volume that was traded there has been constantly growing every month, the price of bitcoin there has almost always been around 10% higher than it is on other international exchanges. And many times its significantly more.

1. Liquidity

What we've seen in African countries where we have bitcoin exchanges is that although the price of bitcoin all over Africa is higher than it is on international exchanges, it tends to be lower in markets where there is more liquidity and higher in markets where there is less liquidity. In South Africa where the volume of bitcoin that's trade is high, it's around 5% higher than it is on other international exchanges but in places like Nigeria and Angola, where the volume of bitcoin that's traded there is low, the price of bitcoin there is gets as much as 100% higher.

2. Demand exceeds supply

Liquidity alone does not influence price but liquidity and supply/demand together are what influence price movements. If we have a bitcoin supply but don't have a demand for it, that does not force the price to go up. The price only goes up when the demand exceeds the supply. When demand exceeds supply, the demand will start competing amongst itself to buy the limited amount of bitcoin that is available on the free market - one where the highest bidder is the one who walks away with the bitcoin. In such a market, only the people willing to buy bitcoin at higher prices are the ones who actually walk away with bitcoin. The price of bitcoin in Africa is only higher because we actually people willing to buy bitcoin at a premium. In the next section I talk about why.

3. Bitcoin is better than the money we're using now

In Zimbabwe, you are very limited with what you can do with the money in your bank account because banks are restricting the use of debit/credit cards online and they are having trouble keeping their Nostro accounts liquid enough to allow their customers to do international transfers. In fact, in Zimbabwe, even the government has trouble sending money outside the country sometimes. Nigeria is almost in a similar situation where capital controls imposed by the Central Bank are making it difficult for locals to do business across the border. ** I couldn't find an article online to cite the statement I just made on capital controls so if you know one ** , please mention it in the comments below and I'll come back to update my article with that new information.

4. The bitcoin in Africa was bought on an exchange outside Africa

And when you think about it: the price of bitcoin that is quoted on an exchange, is not the actual cost to acquire the bitcoin. If you were to include bank transfer costs when you make the usd deposit, the deposit fee the exchange charges and the transaction fees you're charged when you actually buy bitcoin, the actual cost for buying bitcoin ends up being in the 3% - 6% range. The costs are even higher if you're buying with a different currency than the one that's supported on the exchange because your bank starts making money from you on the exchange rate they use to convert your money to that other currency.

How this can be fixed…

A few possible solutions are:

1. Mining

It's generally accepted that electricity cost in Africa is too expensive to use to mine cryptocurrency but that statement is just not true. While it's true that you could mine profitably in other parts of the world you can still mine profitably in places such as Zimbabwe. A quick back-of-the-envelope calculation shows that if one were to purchase the latest Antminer, and use it to just mine bitcoin at just the peak electricity cost in Zimbabwe, they would make all their money back in less than 7 months.

2. Remittances

We already have people that are taking advantage of the negative transfer fee that exists when you send money to Africa - increasing that number could bring down the price of bitcoin in Africa.

Remittance costs to Zimbabwe using companies like Western Union and Moneygram cost about 11% to 15% of the money being sent so if someone in the Diaspora is holding $100 and wants to send it to Zimbabwe, less than $90 actually gets to the recipient. But with the difference in the price of between Zimbabwe and the western countries, it's now possible to get a negative transfer fee: that is, someone wants to send $100 but more than $100 will actually get to the recipient.

3. Exporters opting to get paid in bitcoin

This would make sense to them, firstly because they get negative transfer fees when they get paid from abroad. Secondly because they get paid in a currency they easily convert to a local currency but can do so much with if they have to do business across the border for example.

4. FDI coming in bitcoin

For the same reasons exporters would/should want to get paid in bitcoin, African companies/startups with offshore investors could/should also opt to have investment money sent in bitcoin.

5. More cryptocurrencies apps being launched on the continent

bitcoin was the first cryptocurrency and it was designed to solve a specific problem: allowing online payments to be sent directly from person to person without going through a financial institution. However, bitcoin is not the only player in the game. There are hundreds of other cryptocurrencies that work in a way that is similar to or was inspired by bitcoin and each of these cryptocurrencies solve a very specific problem for either a specific market or a multi-sided market.

With a $9.7 billion market capitalisation and with over US 1.5 trillion worth of bitcoin traded on exchanges every day, bitcoin is still the biggest and most popular cryptocurrency. There are 87 other cryptocurrencies that have a market cap that is greater than $1million.

Cryptocurrencies are not hard to convert to bitcoin. Getting more cryptocurrencies being developed on the continent to solve problems that are specific and unique to the continent will increase the bitcoin in circulation on the continent and this will reduce the price of bitcoin on African exchanges.

To those wishing to venture into that space, David Johnston has some excellent whitepapers on the best practices one should follow when launching their own cryptocurrency and on where these cryptocurrencies get their value from.

6. Getting more locals to work for bitcoin/cryptocurrency

Bloggers in Africa can start writing on Steemit and get paid in cryptocurrency.
People with extra disk space on their computers can use apps Storj or Sia.

http://coinivore.com/wp-content/uploads/2015/07/bitcoin-africa.png

Image Credit: http://coinivore.com/