Cash is still king in South Africa

Pepkor CEO Pieter Erasmus said, “Cash is still king” in South Africa, as 93% of group sales at the country’s largest retailer by footprint were conducted in cash. 

Erasmus made these comments when announcing Pepkor’s interim results for the six months up to the end of March. 

Below are some highlights from Pepkor’s interim results:

  • 4.3% growth in revenue to R43.8 billion
  • 9.8% decrease in operating profit to R5.1 billion (before capital items)
  • 11.7% decrease in HEPS to 80.8 cents (8.6% decrease in normalised HEPS1)
  • 168 new stores opened
  • No dividend was declared

Pepkor offers alternatives to cash payments, and its interim results indicate these alternatives are gradually replacing cash. 

Cash sales in the six months rose 2.6%, while credit sales rose 36.7%. This was primarily driven by Pepkor’s Tenacity credit offering. 

This offering is now available across all its brands, creating a single credit platform across brands such as Pep, Ackerman’s, and Tekkie Town. 

Tenacity has grown significantly, with 345,000 new accounts opening in the last six months. Over 25% of users use Tenacity at multiple Pepkor brands. 

Erasmus said their customers in good standing remain stable compared to prior periods as Pepkor looks to expand its credit offering responsibly. 

“Our customers are saying that they need different tender types,” Erasmus said. This has pushed Pepkor to develop platforms like Tenacity and extend credit more liberally.

“As a group, we need to continuously review where we allocate capital to maximise value”, with one of the company’s focus areas being fintech and credit.

However, cash usage will remain high in South Africa and particularly at mass market retailers like Pep as many customers still choose to receive their social grant payments in cash at these stores. 

According to BankservAfrica, nine out of ten transactions in South Africa are still made in cash, with 95% of informal small business customers and 63% of formal business customers opting to pay in cash.

Many South Africans view paying in cash as safer and more convenient, while fees on digital platforms are seen as too high, according to Bankserv.