CASH TO CARD: THE NEXT FRONTIER FOR SA’s MICRO SME SECTOR - Mandla Khupe
South Africa’s informal economy, made up of thousands of small businesses in city centres and townships across the country, represents a massive opportunity for job creation and economic growth, and the move from cash to digital is an important move to unleash the potential of this sector.
“For migration from cash to card to gain meaningful momentum, it needs to be driven by consumers and this is already happening. GG Alcock’s research for his book KASINOMICS indicated that in townships each person has on average two debit cards,” says Khupe.
Over the past year, Retail Capital has noticed a consumer-led drive to digitization in the informal sector. Merchants have little choice but to cater to the choices and needs of their customers.
This has been accelerated by COVID 19, with people demanding contactless ways of paying for goods. Certainly, we are seeing a marked uptake of QR payments and card machines in townships, most notably in food and beverage and services sectors, including hairdressers, taverns and spaza shops.
However, there is more to gain from digitizing payments than convenience. As more digital payment vendors make inroads into informal economies, those businesses gain access to a host of digital services through their partners that would ordinarily been out of reach. Most notably, is access to working capital and loans.
If a merchant uses a partner payment portal, for instance, they can have access to instant and guaranteed funding, because they have built up a digital profile that would otherwise not even have been an option. There is enough research and anecdotal evidence in SA and abroad that says access to capital is vital for small business owners not only to survive, but to scale and take their businesses to another level.
When I go to townships, one of my first stops is the ATM to draw money, just in case. Those that spend most of their time in townships may not find it convenient to go elsewhere to shop, and so they are the ones pushing the merchants to make a move. A stolen card machine has far less impact than a stolen cash register, for example, so crime is a consideration.
Educating small business owners about the benefits for their businesses is crucial. The most immediate benefits are:
* It professionalizes the business. Being able to take QR code payments or offer a card machine immediately takes the business from an informal setup and brings it into the digital age.
* Owners can manage their businesses and track turnover better. Often, small, or micro enterprises use the same account for the business and personal use. The lines become blurred. The digital trail enables a business owner to get a clearer view of the performance of the business.
* Moving into the digital space opens a host of services, not least, funding. A service provider can get a real-time view of how the business is doing, meaning that the entrepreneur can access funding driven by fintech. Access to capital may be the difference between carrying on as they always have and scaling to the next level.
Watch as the potential of these micro-enterprises is realized over the coming years, thanks in large part to moving from cash to card.