South African teenagers are skipping school to chase risky crypto dreams
Young South Africans in the townships are drawn to the promise of quick riches with cryptocurrencies, but risk losses and fraud
- Young South Africans see crypto as a path to quick riches
- Poverty, high unemployment push them to crypto
- Users who are not fully aware of risks, vulnerable to fraud
By Kimberly Mutandiro
JOHANNESBURG, Sept 26 (Thomson Reuters Foundation) – John first heard about cryptocurrency three years ago, when the teenager came across slick YouTube videos and Facebook posts by other South Africans claiming to have become wealthy overnight with bitcoin.
Inspired, the then 14-year-old downloaded a trading app, lied about his age to create an account, and started buying and selling crypto with his savings.
He was soon making small profits, but when the crypto market crashed this year, John lied again – to his parents, who didn’t know about his trading activities – to get money to cover his losses.
“I will pay it back when I get rich,” said John, who lives in Langaville Township, a low-income area east of Johannesburg. He asked that his last name be withheld.
John, who likes to wear designer T-shirts and jeans, said dozens of teenagers in his town are also trading cryptocurrencies — hoping to emulate the influencers and self-styled crypto experts they follow on YouTube and Instagram.
“I’m now training other guys in the community,” John told the Thomson Reuters Foundation in a park where he often hangs out with his friends, who also trade crypto.
“All you need is a mobile phone, a bank account and a few dollars and I’ll show you how to make the big bucks,” he said, adding that he has about 20 clients who pay him a fee of R300-R400 ( $17 -$23) to show them how to set up accounts and trade.
South Africa ranks eighth globally in terms of public crypto ownership – 7.1% of the population owned digital currency in 2021, more than the UK or Brazil – according to the United Nations Trade Agency (UNCTAD). Ownership is also high in Kenya and Nigeria among African nations.
A recent survey – published this month by financial information firm finder.com – put crypto ownership in South Africa at 10%, with those aged 18-34 making up 43% of owners.
Although there is no such data on South Africans under the age of 18, more young people are getting involved in the hope of quick riches, even as authorities and financial experts warn of the dangers of fraud, massive losses and mental illness..
“There is an allure of making money through crypto trading that can be very compelling … but with the risks involved and the lack of understanding of those risks, it can be very harmful,” said Ram, who researches cryptocurrencies.
AMAZING ARRANGEMENTS
Cryptocurrencies were designed to be free from central financial authorities such as governments and central banks. They allow “peer-to-peer” transfers between users online without any intermediaries.
While they offer users in crisis zones and unstable economies an alternative, their relative anonymity also provides a haven for criminals, extremist groups and sanctioned governments. A sharp decline in value recently has hurt many users.
The South African central bank said last month that it would allow ownership and trading of cryptocurrencies, as well as their use for money transfers. But it is still easily regulated.
Fraud is a major concern: The founders of a cryptocurrency exchange in the country – Africrypt – disappeared in 2021 after telling customers their accounts had been hacked. The loss of around $3.6 billion is among the biggest crypto losses worldwide.
And in June of this year, a US regulator brought civil charges against a South African man and his company for soliciting bitcoin from thousands of people as part of a fraud scheme worth over $1.7 billion in bitcoin.
South African police have warned the public about fake crypto schemes, said Thandi Mbamo, a spokesperson for the criminal investigation unit.
“We are investigating the cases,” she said, without giving further details.
Young people like John are particularly vulnerable, according to Ram.
“They may not fully understand the technological complexity and lack of regulation in the space, and issues around account hacking and theft,” Ram said.
“They get caught up in making a quick buck. But they can be taken advantage of and lose all their money, he said, while also warning of potential negative effects on mental health.
STRESSED
Unknown to his parents – who do odd jobs for a living – John has been skipping school, surfing YouTube for trading tips and trying to lure more customers with his flashy clothes and a picture of a stack of currency notes on his WhatsApp profile.
When he goes to school, he says he is unable to concentrate, distracted by notifications on his trading app and tired from staying up late on YouTube and TikTok.
Once a straight-A student, John’s grades have slipped. But he still hopes for success.
“In the township, life is not that easy – I want to grow my crypto business and make enough profit to start other businesses,” he said. “I think trading is my future.”
For John and other poor young South Africans, well-paid jobs seem out of reach given persistently high levels of unemployment.
Tiamo, 15, said he is stressed by the volatility and having to lie to his mother about what he does with his money.
Tiamo, who asked that his last name be withheld, has been into crypto since he received a spam WhatsApp message in March that said: “Do you know you can earn up to R85 000 within two days?”
He replied, and started chatting with a 19-year-old, who helped him set up a crypto trading account and gave him tips.
In the first week, Tiamo lost R1000 of his savings. He told his mother he had been robbed and has since told her several lies and skipped school to shop and try to make up for his losses.
“I will make it one day,” said Tiamo, who lives with his single mother and two siblings in Johannesburg’s KwaThema Township. “My mother struggles to put food on the table. I can’t stop now.”
Reporting by Kimberly Mutandiro; Editing by Rina Chandran and Kieran Guilbert. Please credit the Thomson Reuters Foundation
