The South African Reserve Bank has clarified that companies, including retailers, are not obliged to accept cash as a means of payment, even though it is defined as legal tender. The clarification comes as more and more consumer-facing companies, such as coffee shops and restaurants, in South African stop accepting cash from their customers for security reasons. This has led to confusion about whether companies, including retailers, are permitted under South African law not to accept legal tender in the form of banknotes and coins.
But the Reserve Bank has firmly rebuffed the idea that cash, or any other form of legal tender, must be accepted as a form of payment by retailers and other businesses.
“Banknotes and coins are legal tender as issued by the South African Reserve Bank. And while the Bank promotes and encourages the use of cash in a safe and efficient manner, businesses, based on risk management principles and other considerations, can exercise their discretion on whether to accept cash or not,” it said in e-mailed response to questions.
The trend towards cashless retail outlets is gaining momentum in South Africa. Last year, Shoprite Group launched nine cashless clothing outlets, called Uniq, as well as an OK Urban outlet which is also cashless.
‘Substantial benefits’
Indeed, the increasing cost of handling cash, along with the associated safety risks are a strong incentive for retailers to remove the physical medium from their payment ecosystems in favour of digital methods such as cards and banking apps. “There are substantial benefits to moving to a cashless society, with security being top of mind,” Deven Moodley, Pick n Pay executive head for financial services and mobile.
Despite these benefits, there are those who see the removal of cash from retail as classist and exclusionary. A screenshot of a Woolworths Café poster alerting customers that the store would from 16 January no longer accept cash set social media ablaze at the weekend, with many users incorrectly assuming that the announcement applied to all Woolworths Food stores and not just W Café coffee shops.
“It leaves some people outside [the system]. Not everyone has a bank account. Even people with bank accounts are still underbanked, for various reasons. Also, our payment tech doesn’t always work. And not everyone knows how to use the payment tech or use it comfortably,” @__Shezi said in response to the X post.
While it is true that many in South Africa’s lower segments of the economy remain unbanked, informal economy expert GG Alcock recently said that township and rural economies are also trending towards cashless in-store transactions since customers feel safer using their bank cards to pay and retailers reduce risk by carrying less cash.
The transition of a significant number of Sassa social grant payments from cash to card has also driven an uptick in digitisation and card usage in the informal economy.
“Three years ago, all grants were paid in cash. They then moved to the Post Office, and today the majority (58%) of grant recipients is paid through [digital] financial services,” said Lesaka Technologies South Africa CEO Lincoln Mali in November 2023.
According to the Reserve Bank, parties to a transaction “can agree on any form of payment”, and trends in both the formal and informal sectors of the economy suggest that both retailers and customers generally agree with the idea of using safer digital payment methods instead of cash.
“People are annoyed with Woolworths, but I haven’t seen outrage over car licence centres that take cards only, etc. Also, they are apparently doing it for safety. People forget that crime is rife in SA. Maybe the staff and customers at Woolies don’t matter,” said @SydanhamStekkie.