Township businesses still rely heavily on cash. The township economy is a significant contributor to South Africa’s overall GDP.
Spaza shops, hair salons, shisanyamas, and backyard mechanics move billions of rand every year, and most of that money still changes hands as notes and coins. Estimates put the informal sector’s worth at around R900 billion, with some reports pushing that figure closer to R1 trillion. Township businesses alone are thought to contribute close to 6% of national GDP. Spaza shops on their own account for about 5,2% of that number. These are not small side hustles. FirstRand once found a cash-only wholesaler in a township pulling in over $2 million a month, an amount the bank had expected the business to make in a full year.
So why hasn’t card and app-based payment taken over here the way it has in malls and formal retail chains? The answer isn’t stubbornness or a lack of awareness. It comes down to cost, trust, and how township economies actually function day to day.
Cash Doesn’t Eat Into Thin Margins
Township traders often work on razor-thin profit. A spaza shop owner might make a few rand on a loaf of bread or a cold drink. Card machine fees, even the small percentage charged per transaction, chip away at that margin fast. When you’re competing against twenty other shops on the same street, every cent counts.
Small business owners are hesitant to switch entirely to card payments due to the idea that it would wipe out a chunk of their monthly profit, simply from transaction fees stacking up over hundreds of small daily sales.
This is something a lot of outsiders miss when they talk about “financial inclusion” in townships. It’s not that people don’t understand digital payments. It’s that the economics of a R5 sale don’t always support the fees that come with going cashless.
Banking Access is Still Patchy
According to Standard Bank, fewer than 20% of township businesses are registered businesses, and many of them do not use bank accounts for their businesses. Thus, restricting them from funding opportunities. Most rely on personal savings or help from family. When you’re not plugged into formal credit and banking relationships, cash becomes the default tool because it’s immediate, it doesn’t require a device, and it doesn’t depend on network coverage.
Load shedding and patchy connectivity also play a bigger role than people realise.
Trust Runs Through Relationships, Not Systems
Township commerce runs on relationships built in the community over years, sometimes decades. The spaza owner knows which customers are good for credit until payday. Cash fits naturally into this world because it’s tangible and instant.
Digital payments introduce a layer of abstraction that some traders simply don’t need yet. When a customer hands over notes, the transaction is done. There’s no waiting for a transfer to clear, no worrying about a declined card, no dependency on a bank’s app working properly that day.
The Informal Economy Runs on Informal Terms
Roughly 19,5% of South Africa’s total employment sits in the informal economy, and around 40% of the working-age population lives in townships. A huge portion of that activity happens outside VAT registration, labour regulation, and formal tax compliance. Standard Bank’s research found that 49% of township businesses operate out of homes or garages rather than commercial premises. That kind of setup doesn’t always come with the infrastructure or the appetite to formalise payment systems.
Additionally, some traders prefer cash because it keeps their turnover less visible. That’s not necessarily about avoiding tax out of dishonesty; it’s often survival logic in an economy where formalising can mean losing access to grants, housing subsidies, or other support tied to income thresholds.
The Risk of Cash Handling
Cash carries risk. Carrying large amounts of cash home at the end of a trading day is genuinely dangerous. Yet even with that risk, many owners still prefer cash because the alternative, card machines and the fees, delays, and technical hiccups that come with them, feels like a bigger daily headache than an occasional risk.
This is shifting, slowly. Fintech companies like Shop2Shop have built what they call closed-loop payment systems, giving traders access to their funds quickly rather than waiting days for a bank transfer to settle. That immediacy matters, because working capital in a spaza shop turns over fast. Stock needs replacing constantly, and a trader can’t afford to wait three business days for money that should already be in their pocket.
What’s Changing on the Ground
More than half of township business owners, 56% according to Standard Bank, say they’d prefer EFT or bank transfers if the friction were removed. That tells you the shift isn’t about resistance to technology. It’s about whether the tools on offer actually fit how these businesses operate.
The traders leading this change aren’t waiting for banks to catch up. Many spaza shop owners already sell airtime, data, and prepaid electricity digitally and have done so for years. They understand digital rails better than most people give them credit for. What’s held back broader adoption is cost and reliability, not comprehension.
The South African Reserve Bank’s Payments Ecosystem Modernisation initiative is trying to lower the cost of digital transactions for small merchants, which could genuinely move the needle if wholesale fees come down. Until that happens, expect cash to remain the backbone of township trade, not because it’s outdated, but because right now, it’s still the most practical option on the table.
The Bigger Picture
Township businesses aren’t behind the curve. They’re running a parallel economy shaped by different pressures, such as tighter margins, patchier infrastructure, and relationships that hold more weight than any app. In the township, cash isn’t a symptom of underdevelopment; it’s a rational response to real constraints.
Anyone building a payment product for this market needs to understand that going cashless isn’t the goal. Giving traders the freedom to choose the right tool for each transaction is important.
Township businesses still rely heavily on cash. The township economy is a significant contributor to South Africa’s overall GDP. Spaza shops, hair salons, shisanyamas, and… Read More
