A Cashless Society In South Africa Is A Fantasy
The South African Reserve Bank at the end of last year purchased 50% of a payment service app called PayShap which is part of the BankservAfrica’s payment systems. This was a significant purchase as the app allows banks to switch and clear payments between other banks and is interoperable with every bank in the country. The SA Reserve Bank is in charge of the NPS or National Payment Systems so PayShap was more strategic with one eye on cashless transactions.
When you see changes trying to be implemented in South Africa you always have to ask the question why and who is this benefitting. This is not about curbing crime with cash in transit heists still a problem and they tend to be seasonal. Wait for the festive period as these heists will sike over December and January. Many believe these are inside jobs involving the police and government officials. So why the push to a cashless society?
The SA taxman/ receiver has a short fall of R72 million in 2025 and the only way to fix this is find the areas where taxes are avoided due to cash transactions. One has to understand the local culture in order to understand the problem and why having no cash will fail miserably.
When the masses who are lucky enough to be employed get paid their salary into their bank accounts an estimated 60% withdraw all their funds in one go. You notice this on the last Friday of the month as ATM's run out of cash. For some reason the people prefer to have the cash on them than using a bank card.
The cost of transactions would be a big reason as the masses do not earn big salaries and many are sub R10K ($600) per month. This covers rent paid in cash, pay as you go electricity again cash and their transport via taxis also a cash payment.
All cash transactions with no VAT and no taxes.
The informal sector where the majority purchase their monthly needs is a reported R600 billion industry all done using cash and cannot be taxed or tracked. 15% vat on R600 billion is R90 billion and solves the revenue shortage in one go and this idea of cashless is more about not missing out.
The middle/upper class are already maxed out when it comes to taxing so this is now looking at their own people who are poor and cash to them gives them control. These people have a distrust when it comes to banks and generally many have very basic education so have no idea how to manage their money. They feel safer having their cash with them or hidden somewhere where they live. This is what their parents and grand parents did so this is not going to change anytime soon. The bank accounts are used only to receive their salaries and then to take it all in one lump sum. This is not how those in the first world countries live and this is Africa knowing nothing else.
Posted Using INLEO
Here in Latin America too, a lot of the economy is cash-based. Moving everyone over to a digital system would be quite a challenge. Hyperinflation could be one of the catalysts.
Indeed, creating a cashless society in South Africa would be very challenging. Moreover, the local financial habits, reliance on cash, and the large size of the informal sector make this effort difficult. What are your thoughts on this?