The current state of SA's cash economy

 

Andre Harmse, Product Manager of BankservAfrica’s Integrated Cash Management System (ICMS), shares some insights on the cash economy.

As of September 2021, the number of bank notes and coins in circulation in South Africa amounted to R166 billion. Cash represents 2.7% of the country’s R6.1 trillion GDP, according to the South African Reserve Bank’s Quarterly Bulletin published in September 2021. Supporting these figures are BankservAfrica’s Integrated Cash Management System’s (ICMS) monthly data showing cash ordered by banks for their ATM and branch networks amounted to over R70 billion per month for the six months ending September 2021.

These figures reflect the high demand for cash in South Africa, even in these current, digital times. South Africa’s duality of a sophisticated digital banking and payments ecosystem, and a unique, well-operated cash ecosystem, is likely to persist in the years to come.

However, ensuring an adequate supply of cash comes at a price – according to activity-based costing projections, this is estimated to be at R85 billion per annum. It costs R23 billion – R25 billion per annum for the entire wholesale cash supply chain to ensure the right quantity and quality of cash is available to all users. Furthermore, the direct costs of securely moving, handling, and storing cash amounts to R60 billion.

The current state of South Africa’s cash economy brings the need to better understand the cash industry and improve the level of collaboration in the payments industry.

A trusted and preferred partner to the cash industry

In the early 2000s, the SARB and the major banks requested BankservAfrica to develop a system to replace their manual processes for interbank ordering, clearing and settlement activities. In 2006, the Integrated Cash Management System (ICMS) was formed as a centralised, interoperable platform to connect all parties who play a role in ensuring adequate cash supply to all users in the ecosystem. These include the SARB, Banks, Cash Processors, Cash In Transit companies and an independent administrator responsible for cash supply chain optimisation.

Jointly developed by the major banks, SARB and SBV, ICMS is owned and operated by BankservAfrica. ICMS is a high value, near real-time service that processes cash orders and completes settlement transactions for intra-day activities between the SARB and commercial banks in the national RTGS (Real-time Gross Settlement) system. It also provides a national view of cash in circulation by quality, quantity, currency denomination and geographical location to ensure there’s always a good supply of cash.

Processing R4 billion-R5 billion worth of settlement transactions for cash orders and clearances daily, ICMS is a critical cash infrastructure used to daily collect inventory data from banks for planning and scheduling activities by the SARB and the industry. Cashlogix, the company responsible for administering the national wholesale cash inventory and supply chain, relies on ICMS data to monitor inventory and ensure the adequacy thereof.

BankservAfrica is well-positioned as the trusted and preferred partner of the cash industry.

The road ahead for ICMS

The focus at ICMS will be continued support to the industry and stakeholders to drive automation and efficiencies in the cash supply chain. We intend to modernise ICMS to transition to a platform service to enable easy and seamless integration and access for new participants. For as long as cash is around in South Africa, we want to play a key role in ensuring interoperability and efficiency for all players in this ecosystem.

Watch this space for more information about our future plans!

 

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