Skip to main content

Cash is not going anywhere in South Africa

| Economic factors

Despite the advances in cheque and credit cards, payment apps, and cryptocurrency, cold, hard cash is thriving in South Africa.

Mark Labuschagne, Head of Cash and Cheque at Absa Retail and Business Banking, told MyBroadband that the demand for cash in the country was expected to grow in the coming years.

“The size of the parallel, or informal, economy is a significant determinant on the demand for cash,” said Labuschagne.

“Estimates put this as low as 35% of the formal economy, and as high as equal to it.”

But it is not just South Africa which is hungry for banknotes – international markets are seeing an increased demand for cash.

A recent report by Bloomberg stated that physical cash in circulation in the US and Europe was growing.

“There’s been a big increase in workhorse denominations – $1 through $50 bills and 1 euro to 50 euro coins and notes,” stated the report.

Big money

Labuschagne said that according to the PYMNTS Global Cash Index in 2015, South Africans used a total of $183.7 billion in cash. This is up from $156.9 billion in 2010.

“One of the major factors that has contributed to this growth is that cash is traditionally used for lower-value payments (R250 and less), but the volume is driven by the fact that around 90% of payments in SA are made in cash.”

He said cash will continue to be used for a number of reasons, including the fact that it is anonymous and has universal acceptance.

The demand will also remain strong due to “low levels of financial inclusion and the cost of adopting and managing alternative payment and collection mechanisms”.

“Because of the size of SA and the distances travelled due to our geography, cash demand is strongly linked to communities and centres.”

“Cash remains the payment means of choice because it is easily transported and recycled within these communities,” said Labuschagne.

Paying with plastic

While cash, and eventually card, payments are expected to fall away as digital payments expand and improve, there are multiple barriers to adoption, said Labuschagne.

“To participate in these payment instruments requires an account and access to technology. Both come at a cost and the former requires a higher level of documentary compliance,” said Labuschagne.

“Financial, or rather transactional, literacy also plays a part in keeping people in payment streams they and their stakeholders know, trust, and understand.”

With cash a straightforward payment method understood by citizens and businesses, its demand therefore remains healthy.

“Cash is the lifeblood of our economy,” said Labuschagne, even though it carries security risks like cash-in-transit robberies.

As stated by Bloomberg, when dollar bills in circulation start to decline, we can “write the eulogy for cash money”. It may not be anytime soon, however.

Related Articles

Budget: Liquor, cigarettes to cost more, no inc...

By: IOL Finance 2024 Budget made provision to raise R15 billion in taxes to alleviate fiscal pressure and support debt stabilisation.

Retail consumers now seeking value as cost of l...

By: IOL COST-of-living pressures muzzled sales volumes for retailer Spar’s Southern African business, including South Africa, although group turnover, which also accounts for its stores in Switzerland, Ireland and England, was up 9.3% for the fiv...

Excessive heat could result in higher food pric...

By: Given Majola - IOL The excessive heat across South Africa currently is a significant concern for the farming sector, according to the Agricultural Business Chamber (Agbiz).

Budget 2024: South Africans should not expect a...

By:Dhivana Rajgopaul - IOL Amid the budget deficit not moving in the right direction, a tax specialist has said South Africans can expect Finance Minister Enoch Godongwana to raise the price of beer and cigarettes, but being an election year, no ...

Retail sales cool in 2023 with consumers still ...

By: Siphelele Dludla - IOL Consumers in South Africa are expected to continue struggling this year under the brunt of stubbornly high inflation, rising cost of borrowing and weak consumer confidence after retail activity plunged in 2023, in spite...