Cash in the current COVID-19 situation

Honey Mamabolo, South African Mint Managing Director

How important is cash in the current COVID-19 situation?

In South Africa, the demand for cash as a form of payment is still high, despite the advances that have been made in debit and credit card and electronic payments. One of the reasons for this is because a cash transaction is a straightforward payment method that is universally accepted and understood by individuals and businesses (both formal and informal). With a large part of our society classified as ‘unbanked’, there is a heavy reliance on the use of cash.

Digital payments are not always an option for vulnerable communities, low-income earners, the elderly, and people who live in rural areas, due to access barriers such as poor infrastructure, network reach, and a lack of financial literacy. There have, however, been significant developments in the mobile money transfer space, with millions of people who are classified as unbanked, gaining access to financial services by virtue of owning a mobile or cellular phone. In current times, and mostly during the COVID-19-induced national lockdown, there has been a surge in the usage of these platforms as an easy, secure, and affordable way to send and receive cash.

At the onset of the COVID-19 pandemic, concerns were raised about the risk of transmission of the virus through the handling of coins and banknotes. But medical experts and the World Health Organization (WHO) have confirmed that both coins and banknotes are safe to use and there is no scientific evidence indicating that coins and banknotes carry or transmit the virus. COVID-19 is transmitted either through coming in close contact with an infected person or touching a variety of surfaces that could be contaminated. The virus spreads through respiratory droplets produced when an infected person coughs or sneezes.

In addressing the concerns of handling coins during the COVID-19 pandemic, the South African Mint would like to reiterate that personal hygiene remains the best defense against the coronavirus. Wash your hands regularly with soap and water or an alcohol-based sanitizer, and avoid touching your face after touching any frequently-touched surface or object, which can include coins. These are personal hygiene practices that should have been followed even before the outbreak of the COVID-19 pandemic. Further to these measures, wearing a mask and keeping a safe physical distance in public spaces will mitigate against the risk of transmission and contraction of the virus.

What is the current impact on your business/operations?

Following the declaration of COVID-19 as a national disaster under the Disaster Management Act, the President of South Africa invoked a national lockdown on the 27th March, which still continues today, with less restrictive measures on the movement of people and trade, after two highly restrictive months. While the South African Mint, a wholly owned subsidiary of the South African Reserve Bank, is listed as an essential service provider under the Disaster Management Act, the South African Mint elected to cease all production activities during the first, most restrictive months of the national lockdown, as the health, safety and well-being of employees remains a top priority. The Mint started operations again on 15 April 2020, operating at less than 25% of production with skeleton staff to produce circulation coins to build buffer stocks and ensure the security of coin supply to the SARB and the country. The majority of the Mint’s employees to continue to work from home to help flatten the COVID-19 curve through de-densification at our site.

How do you think this will change the coin industry?

The outbreak of COVID-19 has changed the way in which the South African Mint and companies across the world conduct business. With the highest risk being the health and safety of people, there is a heightened focus on virus transmission mitigating strategies such as screening and classifying employees with vulnerabilities and underlying diseases, as well as ensuring that employees wear the correct personal protective equipment (PPE) at all times. The pandemic will have an impact on raw material supply chains as well as the export coin market.

In South Africa, there is still a strong structural demand for coins from formal retailers – in part, a function of their fractional pricing structure. The informal economy is driven mostly by cash and, to a large extent, by coins, where traders in the informal sector recirculate coins to consumers as change and also use coins to buy stock.
The reality is that cash is still a dependable, stable and reliable form of payment. Cash continues to be the most widely used form of payment in all regions of the world. According to the G4S World Cash Report 2018, cash in circulation is growing. The report surveyed 47 countries, covering 75% of the global population and over 90% of the world’s gross domestic product. The findings show that the demand for cash has continued to rise globally, despite the increase in electronic payment options, including mobile money transfers, in recent years.

The high demand for cash (both coins and banknotes) during the COVID-19 crisis has further demonstrated that, while there is constant talk and aspirations for a ‘cashless’ society, the use of cash is not going away any time soon. Until there are reliable payment alternatives that satisfy central banks, regulators and the man on the street, putting an expiry date on cash would be premature, given the role of cash as the lifeblood of most developing economies.