Phapano Phasha is a director at Centre for Alternative Political and Economic Thought. Picture: Supplied
By Shane Dladla and Phapano Phasha
CASH economies have historically being linked to all sorts of crimes and corruption as well as tax evasion and counterfeiting. Research has shown that cashless economies provide a stronger control regime against anti-money laundering which could be used to funnel corruption and terrorist activities.
India, which is a BRICS member and one of the fastest developing economies in the Global South, has substantially transformed its payment practices into a cashless economy with a forecast of $344 billion (about R6.3 trillion), according to GlobalData. This represents a year-on-year growth of 11.3%.
This shift is mainly attributable to the rapid changes in consumer preferences and confidence in card payments and advancements in technology that has enabled this transformation but more importantly, enabled India to better monitor terrorist activities within its borders.
South Africa, with a population of about 61 million people, is the smallest among the BRICS countries, both in terms of population and land size, with a Gross Domestic Product (GDP) of $378bn in 2023.
Sadly, South Africa has the highest income inequality in the world, with a Gini coefficient of around 0.67 with a forecasted unemployment rate of 33.5% in 2024.
While the data does paint a gloomy picture of the state of affairs at play in South Africa, we can take a few lessons from India which has not fully gone cashless but who share a similar outlook, especially on our shared history of colonialism, inequality, poverty, and terrorist activities outside and inside our borders and our seas.
According to a study by the Global Initiative Against Transnational Organized Crime, East and Southern African ports are sweet and easy spots for illegal activities and drug trafficking of meth, cocaine and heroin mainly from Pakistan, Afghanistan and Iran, with these activities primarily thriving on the cash economy.
Recently, the South African police uncovered a military training base in Mpumalanga where 95 Libyans were arrested and a lot of speculation ensued about the cash transactions that enabled this activities to take place.
In Africa, cash economies such as Nigeria and Ghana’s have not benefited from fiscal monetary policy implementation due to government’s inability to control the flow of cash in and outside their countries.
While South Africa and the continent share some parallels with India who are now better advanced in promoting a cashless economy, migration into a cashless economy requires a deliberate effort by government to expand its Information and Communication Technology (ICT) base through a massive investment in digital infrastructure to facilitate the end-to-end monetary exchange.
Equally, a cashless economy does have its disadvantages, such as the slow pace of adoption in digital technologies, increased exposure to online fraud such as phishing, low if not lack of compliance with the Protection of Personal Information Act relating to consumer information, hacking attacks and a heavy reliance on network stability and availability. We can conclusively say that the pros of a cashless economy by far outweigh the cons.
South Africa stands to benefit significantly from such an investment and will go a long way to improving financial inclusivity of the marginalised and monitoring criminal activities.
The proliferation of cash fuels criminal and terrorist activities, and the shift towards a cashless economy needs to happen. India offers a blueprint for South Africa and the Global South to leverage of.
With the high crime rate, and criminal activities within our borders and at out ports, going cashless will curb theft and crime.
In summary, the cost of cash is high and does not have any long-term economic benefit.
But is South Africa ready for the shift? Perhaps we are, and an accelerated partnership and collaboration between the financial institutions, government, the police, the Payment Association of South Africa, consumer bodies and other stakeholders need to take place to transition Africa’s biggest economy by GDP into a cashless state.
Shane Dladla and Phapano Phasha are directors at the Centre for Alternative Political and Economic Thought. The views expressed here are their own.