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South Africa\u2019s central bank plans the biggest overhaul of the nation\u2019s cash system in decades, moving to create a cash-management company, roll out white-label ATMs and tighten oversight of how money circulates to make it cheaper and easier to access.<\/p>\n
Cash moving through Africa\u2019s biggest economy tops R180 billion ($10.7 billion), or 2.5% of gross domestic product, and accounts for about two-thirds of all transaction volumes even as digital payments grow. Managing, transporting and securing physical money cost about R90 billion last year, a burden shouldered by consumers. Crime accounts for 13% of that.<\/p>\n
Read: Consumer confidence rises in Q4<\/p>\n
The so-called Cash Smart Strategy aims to ensure physical funds remain accessible for low-income and rural communities that have limited digital-payment options and often face costs as much as five times higher than wealthier urban users. The reforms \u2014 likely to be the largest change in how cash is circulated since ATMs were introduced more than 40 years ago \u2014 are intended to ease that burden.<\/p>\n
The central bank expects cash usage to drop by 30% to 40% when the nation reaches digitisation levels comparable to India, Brazil and the European Union.<\/p>\n
\u201cIt\u2019s a very radical transformation of the industry,\u201d Pradeep Maharaj, the head of the South African Reserve Bank\u2019s Payments Ecosystem Modernisation Programme, said in an interview.<\/p>\n
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Key to the proposed strategy is establishing a cash utility co-owned by entities including banks and retailers. The company would mirror the Netherlands\u2019 Geldmaat \u2014 a joint venture between ABN AMRO Bank NV, ING\u00a0Groep NV and Rabobank NV that operates a unified ATM network.<\/p>\n
The utility would model cash demand and distribute it accordingly, removing the R480 million indirect subsidy currently received by a few private companies that hold and circulate physical money on the central bank\u2019s behalf.<\/p>\n
ATMs, which are mostly owned and operated by lenders such as Capitec Bank Holdings and FirstRand, would be rolled into the company and converted to white-label facilities that any bank\u2019s customers can use at little or no cost.<\/p>\n
\u201cThere\u2019ll be complete interoperability and therefore we\u2019d be able to reduce the fees to almost zero,\u201d Maharaj said.<\/p>\n
While the changes may affect commercial bank revenue, \u201cwe hope that doing this would reduce the costs they incur by even more and make up for that,\u201d he said.<\/p>\n
Read: Rand is losing its reputation for wild swings<\/p>\n
The strategy won\u2019t \u201ccome without cost but it will be a worthwhile shake-up if we can make cash cheaper, more accessible and safer,\u201d said Jannie Rossouw, an honorary professor at the University of the Witwatersrand\u2019s business school.<\/p>\n
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Declining cash in circulation would also weigh on the central bank\u2019s seigniorage income, or the interest it earns on deposits placed with it in exchange for notes, he added.<\/p>\n
The central bank is also considering extending cash regulations beyond lenders and may introduce operating licenses for cash-in-transit companies, retailers and some payment-service providers. A draft regulatory framework is expected early next year.<\/p>\n
The Reserve Bank further plans to engage major grocers including Shoprite Holdings and Pick n Pay Stores \u2014 which recycle as much as R100 billion in cash a year \u2014 about taking stakes in the planned utility and operating as licensed cash wholesalers with direct access to cash, a move that could benefit their businesses, he said.<\/p>\n
Read: How the Sarb\u2019s new payments exemptions will affect consumers<\/p>\n
It presented the plan to banks this month and will engage with industry experts starting January. Rolling out the strategy could take as much as three years.<\/p>\n
\u00a9 2025 Bloomberg<\/p>\n
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