Cash transactions are expected to surge in South Africa over the festive season, as around half of consumers still favour cash as a payment method.
This is according to Cash Connect’s operations director Mark Templemore-Walters, who said that as many as 90% of transactions in South Africa are still settled with cash.
According to Bankserv, consumer preference for cash is particularly evident over holiday periods such as the festive season.
The organisation says that the amount of cash circulating in South Africa is R182 billion, with orders of R84 billion processed during the December period last year.
Templemore-Walters warned that retailers that go cashless risk shutting out people who cannot use cards or digital payments because they don’t have a smartphone or who cannot get a bank account and card as they do not have an ID or proof of address.
“These are some of the most vulnerable populations, including those in rural areas and foreign nationals,” he said.
The Bureau of Market Research has found that around 11% of transactions over the Black Friday and festive season periods will go through informal retailers, the vast majority of which operate on a cash-only basis.
Accenture research has also shown that 80% of South Africa’s population visit spaza shops daily.
“Cash costs are low for consumers and merchants alike for many transaction types, particularly smaller payments,” he explained.
“Cash is convenient, universal and works when there’s load shedding. It gives consumers privacy and control.”
“The barrier of needing a card terminal, computer or phone to pay and be paid doesn’t exist with cash.”
Research from fintech company, Stitch, shows that half of consumers favour cash because it is more convenient, 41% say it is safer, 25% say fees for digital payments are too high, and 22% value the anonymity.
“Despite the hype about digital payments, cash still clearly has a strong role to play,” said Templemore-Walters.
This was recently seen when the country’s largest clothing retailer, Pepkor, reported that 90% of its sales are still made in cash.
However, South African Reserve Bank’s Deputy Governor Fundi Tshazibana recently expressed her concern over the amount of cash in circulation in South Africa.
South Africa has between R160 billion and R180 billion of cash in circulation, she said.
Tshazibana explained that this amount of cash presents several challenges for the country’s individuals and businesses.
“It limits the types of transactions that can be interacted with and presents a set of vulnerabilities,” she explained.
“Losing physical cash means the loss is irreversible, unlike electronic wallets or other forms of payment.”
This significant amount of cash being used in the country also brings about concerns related to criminal elements.
“Conversations have revolved around tracking cash crossing borders, a responsibility of revenue authorities,” she said.
South Africa has also seen increased crime related to cash in transit (CIT). The Cash-In-Transit Association of South Africa shed light on how this crime increased.
There had been 217 CIT robberies across the country between January and August, compared to 191 in 2022 and 188 in 2021. This equates to almost one CIT robbery a day in 2023.
Tshazibana said this emphasises the need to secure physical cash in the country, and one way to achieve that is by reducing the amount of cash used in the country.