South Africa’s cash economy is carrying an estimated R90 billion annual cost, putting pressure on businesses as companies balance the continued demand for physical money with the rapid shift towards digital payments.
A South African Reserve Bank (SARB) study has revealed the scale of the cost involved in keeping cash moving through the economy, with businesses and consumers ultimately bearing the financial burden.
The cost goes well beyond ATM and banking fees.
Almost half of the estimated R90 billion is attributed to direct costs, including transaction charges and the infrastructure required to distribute and manage cash.
For businesses, however, the expense does not stop there.
Cash-intensive companies also have to account for the cost of handling physical money, transporting it, securing it, depositing it and managing the risks associated with theft and cash losses.
There are also indirect costs linked to travelling to access banking services, waiting in queues and the time spent managing cash transactions.
A costly business infrastructure
The findings highlight the scale of the infrastructure required to keep cash available across South Africa.
Cash remains particularly important to informal businesses, rural communities and cash-dependent households, meaning companies operating in these markets cannot simply switch away from physical money.
At the same time, digital payments are becoming increasingly widespread, creating a challenge for businesses and financial institutions that must maintain cash infrastructure while demand for electronic transactions grows.
The SARB says the cost of maintaining the cash ecosystem is rising, prompting the central bank to pursue its Cash Smart Strategy.
The strategy aims to reduce duplication across the cash system, improve access and strengthen security while making cash more affordable.
Businesses face a payment-system balancing act
The SARB has stressed that the strategy is not about eliminating cash.
Instead, the central bank expects cash and digital payments to operate alongside each other, creating a hybrid payments environment.
For businesses, that means managing two payment ecosystems at a time when margins are already under pressure.
The R90 billion annual cost also raises questions about how efficiently cash is distributed across the economy and who ultimately pays for maintaining the system.
As South Africa accelerates its move towards digital payments, businesses will increasingly have to weigh the cost of accepting and handling cash against the cost, accessibility and convenience of digital alternatives.