The International Monetary Fund (IMF) has warned that the continued use of cash in South Africa puts the country at a high risk of illicit financial activities. The report, which was released on Monday, found that the country’s large cash-based economy creates opportunities for money laundering, corruption, and tax evasion.
According to the IMF, South Africa has one of the highest cash-to-GDP ratios in the world, with cash transactions accounting for approximately 60 percent of all transactions in the country. This presents significant challenges for the South African Revenue Service (SARS) to monitor and collect taxes.
The report also highlighted the challenges faced by banks in managing cash exchanges, including the high costs of cash handling and security, which are passed on to consumers in the form of higher transaction fees.
The IMF recommended that the South African government should take steps to reduce the use of cash in the economy, including promoting digital payments and electronic transactions. This would help to reduce the risks associated with cash exchange and improve the efficiency of the country’s financial system.