Around the world, central banks are grappling with one of the biggest questions facing the future of money: should they issue digital versions of their national currencies?
Known as central bank digital currencies (CBDCs), these digital forms of cash have become a growing area of research and experimentation. Some countries have already launched them. Others are running pilot projects. Many more are still trying to answer a more fundamental question: what problem would a CBDC solve?
South Africa falls into that last group.
The South African Reserve Bank has spent several years exploring the technology through initiatives such as Project Khokha, which examined how distributed ledger technology and tokenised money could work within the financial system.
That naturally raises another question.
How close is South Africa to introducing a digital rand?
If recent comments from the Reserve Bank are anything to go by, the answer appears to be: not in the immediate future.
In a keynote address at the Gordon Institute of Business Science in Johannesburg on 9 June, SARB Deputy Governor Rashad Cassim suggested that the Reserve Bank’s focus has shifted.
Rather than introducing a retail CBDC in the near term, he said the immediate priority is modernising South Africa’s payments infrastructure.
The payments people rarely think about
Most people don’t spend much time thinking about payment systems. Money leaves one bank account and arrives in another. Salaries are paid. Debit orders go through. Card transactions are approved in seconds. Much of that happens so seamlessly that the underlying infrastructure is almost invisible.
Cassim described these financial market infrastructures as the “plumbing of the financial system” because they allow money and assets to move safely between buyers and sellers.
How quickly a salary reflects, how easily a small business is paid, what it costs to transfer money to a family member, and whether payments can be made instantly all depend on the systems operating behind the scenes.
According to Cassim, that is where much of the Reserve Bank’s current attention is focused.
Building on what already exists
Cassim also drew a distinction between different parts of South Africa’s payments system.
The country’s wholesale payment infrastructure, he said, is highly developed.
The South African Multiple Option Settlement (SAMOS) system, introduced in 1998, processes transactions worth about R584 billion every day, with approximately 90% of the value settled in real time.
Retail payments present a different picture.
Countries such as Brazil and India have made rapid progress in providing consumers with faster and lower-cost digital payment systems. South Africa has also made progress, but the Reserve Bank believes there is still work to do.
That work includes initiatives such as PayShap, but Cassim explained that the broader Payments Ecosystem Modernisation programme extends well beyond a single payment platform. It is intended to improve the underlying payments infrastructure, encourage greater competition, and widen access for new participants, including non-bank providers.
“The compelling need is to modernise the payment system to give every South African fast, simple, and secure digital payments.”
What others are making of the SARB’s approach
Legal practitioners at ENS, one of Africa’s largest commercial law firms, view the issue in much the same way.
In a recent analysis, banking and finance executives Angela Itzikowitz and Era Gunning, together with candidate legal practitioner Dylan Martheze, argue that South Africa’s conversation about digital money is less about whether a retail CBDC is possible than what should happen first.
As they put it: “A retail CBDC may be technologically feasible, and it may remain relevant in the longer term, but it is not a substitute for a payment system that already works well for households, merchants, informal traders and businesses.”
The authors argue that the more immediate question is not whether South Africa can introduce a retail CBDC, but whether it should first “fix the underlying rails on which everyday payments depend”.
Why payment infrastructure matters
The ENS authors argue that payment infrastructure is about much more than technology.
If existing payment systems remain expensive, fragmented or slow, introducing a digital currency does not necessarily solve those problems.
Instead, they suggest improving the payments ecosystem could make digital payments faster, cheaper, and more accessible without requiring consumers to adopt an entirely new form of money.
For fintech companies, payment providers and businesses developing digital financial products, they argue, that may prove just as significant as any future decision on a retail CBDC.
Then there are stablecoins
One of the reasons the conversation around CBDCs has become more urgent is the rapid growth of stablecoins.
Unlike cryptocurrencies such as Bitcoin, whose values can fluctuate sharply, stablecoins are generally linked to assets such as national currencies. They are increasingly being used for payments, cross-border transfers, and other digital transactions.
Cassim said the growth of private digital instruments, including stablecoins, is one of the reasons the Reserve Bank began exploring a retail CBDC. In a world where privately issued digital money is becoming more common, he said central banks are under greater pressure to provide a safe form of public digital money that supports payment innovation while preserving monetary sovereignty.
Cassim said the growth of stablecoins also raises an important question: are they becoming more popular because they offer a faster and more efficient way of making payments, or because they allow users to work around existing domestic and cross-border payment channels?
According to Cassim, the answer matters.
If stablecoins are gaining ground because existing payment systems are too costly or inefficient, then strengthening the payments ecosystem becomes part of the solution.
If they are primarily being used to bypass existing channels, the policy challenge looks very different.
The ENS authors make a similar point. They argue that the growth of stablecoins should not automatically be seen as a reason to introduce a retail CBDC. Instead, it strengthens the case for building a payments system that is efficient, competitive, and trusted, so that consumers and businesses are not drawn to alternatives simply because existing payment methods are expensive or inconvenient.
What happens next?
So, how close is South Africa to a digital rand?
Based on the Reserve Bank’s latest comments, probably not as close as the pace of global developments might suggest.
That is not because the idea has fallen away. Research continues, and the SARB has made it clear that a retail CBDC remains part of its long-term thinking.
For now, however, the focus is on upgrading the payment rails that underpin everyday transactions.
If that work continues to be the priority, South Africa’s digital rand is likely to come only once those foundations are firmly in place.
