The overwhelming majority of transactions among South Africa’s informal enterprises are still conducted in cash, despite years of effort to expand card and digital acceptance. Understanding why cash persists, rather than treating it as a problem of insufficient technology, is what determines whether a business selling into or operating within this market succeeds.
The informal sector represents well over a million enterprises, which makes how they transact a substantial commercial question rather than a peripheral one.
Cash persists because it solves real problems for traders
Cash settles instantly, costs nothing per transaction, requires no device or connectivity, and leaves no record that complicates informal tax and regulatory positions, which means the preference is rational rather than a failure to adopt better technology.
Acceptance cost is the binding constraint, not willingness
Card acceptance fees that are negligible on a large purchase are significant on a low-value one, and for traders working on thin margins per item, a percentage-based fee can consume a meaningful share of the profit on each sale, which is the actual barrier.
Customers also need to be able to pay digitally
Acceptance is only half the equation, since a trader offering card payment in a community where most customers carry cash gains little, which means digital payment adoption depends on both sides of the transaction moving together.
Cash creates genuine costs traders do not always count
Handling volumes of cash carries security risk, banking time and reconciliation difficulty, and businesses making the case for digital acceptance are generally more persuasive when they address these specific costs rather than arguing for modernisation in the abstract.
The scale of the informal sector that these traders operate in is measured in the labour force surveys published by Statistics South Africa.
Frequently asked questions
Why does cash still dominate informal trade?
Because it settles instantly, costs nothing per transaction, needs no device or connectivity and leaves no record complicating informal regulatory positions, making the preference rational rather than a technology gap.
What actually prevents traders from accepting card payments?
Transaction cost. Percentage-based fees that are negligible on large purchases consume a meaningful share of profit on low-value items, which is the binding constraint for thin-margin traders.
Is expanding acceptance enough to shift behaviour?
No, because a trader accepting cards in a community where customers carry cash gains little, meaning adoption requires both sides of the transaction moving together.
Does handling cash carry costs traders overlook?
Yes, security risk, time spent banking and reconciliation difficulty are all real costs, and arguments for digital acceptance land better when they address these specifically.
What does this mean for businesses selling into the informal market?
That payment terms and methods need designing around how the market actually transacts rather than how a formal-sector business would prefer it to, since the cash preference reflects genuine economics.
Further reading
Originally published in December 2017. Updated September 2026 to explain why cash persists in informal trade rather than reporting a single research finding about its prevalence.
