Introduction
Cash remains a critical component of South Africa’s payments ecosystem. Given the current role of cash together with the continued acceleration of South Africa’s economy, it is timely that the South African Reserve Bank (SARB) has launched its Payments Ecosystem Modernisation Programme (PEM), and alongside this its Cash Smart Strategy.
For context, it’s worth observing a number of indicators to form a view on the macro context for cash and payments in South Africa. From 2019 to 2024 (ie, including any impact of the COVID-19 pandemic):
- ATM withdrawals grew by 14.6% (annual growth rate 2.8%)
- Total cashless payments grew by 44.6% (annual growth rate 7.6%)
- Currency in circulation grew by 9.3% (annual growth rate 1.8%)
- The CIC/GDP ratio declined by 16.4% (annual decline rate 3.5%)
- Number of ATMs declined by 3.8% (annual decline rate 0.8%)
- Number of bank branches declined by 5.6% (annual decline rate 1.1%)
- Number of EFTPOS devices grew by 2.1% (annual growth rate 0.4%)
These data point to an environment in which there is a modest transition toward non-cash payments, but where underlying cash activity is strong, cash is widely used, and there is a stable infrastructure. What we can’t see is the health or stability of key cash system components, specifically the cash in transit/cash management infrastructure.
As discussions accelerate around the Cash Smart Strategy, including the possible introduction of utility models, it is timely to take stock of the current state of South Africa’s cash management sector (with cash management companies – CMCs – providing combinations of cash logistics, processing and vaulting services). This paper does not seek to assess or critique specific reform proposals. Instead, it examines the current pressures within the CMC market, why these pressures matter, and how they shape the context in which any structural reform will need to land.
The central observation is a simple one: South Africa’s CMC sector continues to function, but it is operating under tightening economic and commercial conditions. Understanding that reality is essential if reform is to strengthen, rather than inadvertently destabilise, the cash system.
The Current CMC Landscape in South Africa
South Africa’s CMC market is relatively concentrated, with a small number of large national operators responsible for the bulk of cash distribution and processing. These include a mix of bank‑anchored structures and large, privately owned operators, all of which have developed extensive physical infrastructure over many years including vehicle fleets, depots, vaulting capacity, technology, and security capability. South Africa has a relatively unique structure around wholesale (Tier 1) and retail (Tiers 2 and 3) CMC operations, which creates operational and commercial delineation between CMCs.
This is an economically crucial sector, operating under extreme pressure from violent crime and facing input cost increases, but where operators find hard to recover from their major banking and retail customers. That said, service continuity remains high, geographic coverage is extensive, and commercial operators continue to meet demanding security and compliance standards. At the same time, this landscape reflects long‑standing commercial assumptions: bilateral contracting, negotiated pricing, and a reality that scale and volume underpin economic viability. The CMC sector in South Africa is highly regarded as being operationally resilient, competitive and innovative.
Economic Conditions: Tightening Without Collapse
Our observation of the current CMC environment is that it is under economic pressure without visible signs of imminent collapse.
CMC operations are inherently capital‑intensive and dominated by fixed and sticky costs. Fleet acquisition and maintenance, specialised labour, fuel, insurance, security technology, and regulatory compliance all represent structural cost drivers that do not adjust smoothly with changes in demand. Over recent years, many of these input costs have increased materially, while CMC pricing has remained competitive. On the other hand, revenue is typically driven by variable models based around the number of transport events and the volume of cash processed.
As a result, we anticipate that the CMC sector is experiencing increasing pressure on margins. That said, what we have seen in many countries is a particular trait by CMC operators: pragmatic stoicism. There is often an approach by CMCs that they will get on with things, try to get a better outcome, not make a fuss, and control the things that are in their control. We expect South Africa to be no different. But the outworking of this hits financial realities: thin margins mean that investment decisions become more cautious, capital expenditure is deferred, and day-to-day service structures are changed, which can impact on customer experience and their service needs.
The current Tier 1/2/3 structure of commercial CMC services also creates cost and market presence anomalies, which we anticipate frustrate strategic and commercial opportunities for all operators.
To be clear, none of what we see in the South African market suggests imminent failure. But it does seem that the sector has reducing slack to absorb shocks or material change.
Competitive Dynamics and Early Signals
One of the clearest indicators of tightening conditions, which we see across many markets, is the changing nature of competition within the CMC market.
Industry participants display increasingly aggressive bidding behaviour, there is heightened price sensitivity among customers, and contractual terms tighten because the CMCs are prepared to take on increased contractual risk in order to win or retain volume. This type of behaviour is completely rational from a single operator perspective. However, at a system level it creates growing fragility within the cash system. Where the CMC sector is concentrated and all operators are competing aggressively, the potential for sudden distress grows.
The relevance for South Africa is that participants who can influence the trajectory of the CMC sector – major customers, SARB, and the operators themselves – need to be alive to signals such as these, and to act on them.
Banks (and Large National Retailers) as Anchor Customers in the CMC Ecosystem
Large commercial banks play a unique and central role in the health of the CMC sector in most countries. They are the key relationship for central banks and play an important role in cash distribution; they are significant influencers of overall cash demand and activity; they are often the largest customers for CMCs; and they often set the standard and network for geographic coverage, service standards, and industry price points. In some markets, large retailers also find themselves as highly significant industry influencers due to the size and breadth of their cash operations, though often retailers have a narrower understanding of the cash cycle and their long term influence of it.
While banks are often described simply as customers of CMC services, their influence runs deeper. Procurement strategies, contract structures, volume allocation, and pricing expectations all shape the economic viability of CMC operations. In practice, banks already act as de‑facto system stewards, regardless of whether this role is formally acknowledged.
Globally we see a wide range of bank attitudes and behaviours. There is the full spectrum from banks who recognise and act on a genuine stewardship role, through to banks who act purely with short term commercial interest and then banks that actively work to remove cash from their business. Banks – logically – often make decisions independent of each other, which can mean that while major banks in particular are a significant interest group, alignment can be low.
In South Africa, the major banks are shareholders of one CMC and major customers of multiple CMCs. On the face of it this certainly affirms what we have seen elsewhere regarding the level of influence and importance that banks have on the future of the cash system.
The banking landscape is critical to understand both for the health of the CMC sector and when considering industry-level transformation.
Why CMCs Become Central as Reform Accelerates
As SARB considers structural interventions, in particular utility models, the importance of the current CMC environment increases rather than diminishes.
Reform processes tend to introduce uncertainty before benefits materialise. This uncertainty can mean that investment decisions are deferred, collaboration reduces, and commercial self-interest increases. Cash system participants can find themselves “jumping at shadows” because of a lack of information, misinformation, or the prospect of a future decision that could materially affect them.
More broadly, utility models inevitably reshape where risk sits in the system. Decisions about pricing, asset control and investment obligations, service obligations, and participation will have a very real impact on industry economics. This is particularly so for CMCs, as the most physically constrained and capital‑intensive layer of the cash system. Beyond this, where a utility model is introduced it becomes critical to consider the commercial and economic impact of the transition from current state to future state.
At this stage, it is neither necessary nor desirable to resolve how a utility might be structured. What is important is recognising that CMCs will be the execution layer where reform choices are most immediately felt.
Reform Implications: Questions, Not Answers
From the current state of the CMC sector, a number of questions naturally arise as reform discussions progress:
- How should reform engage a sector that is functioning well but where margins are under pressure?
- How might a utility model interact with existing commercial mechanics?
- What responsibility should major customers carry in maintaining resilience through any transition?
- How can reform avoid unintentionally accelerating cost pressure or capacity withdrawal before efficiencies are realised?
- How can communication of policy intent and action serve to manage or even reduce uncertainty?
- What indicators should policymakers monitor to detect stress early, rather than react late?
These questions do not imply opposition to reform. On the contrary, they reflect the reality that structural change is most successful when it is grounded in the existing economics of the system it will reshape.
Looking Ahead
South Africa has an opportunity that many other markets lacked: to consider structural reform of its cash system while the cash system is functioning well, service levels remain high and before visible crisis forces reactive intervention. The condition of the CMC sector is central to whether that opportunity can be realised.
By understanding current pressures, competitive dynamics, and the role of key actors, participants can engage more constructively with the next phase of reform discussions. The refinement of the Cash Smart Strategy, utility arrangements, or access reforms will ultimately be tested not in policy documents, but in the operational realities of cash system health.
This article was co-authored by Matt Sykes & Scott Forster of the CPT Group and Barry Röhrs of Röhrs & Associates.