When government launched its digital transformation road map this week, much of the focus was on its potential to improve service delivery for citizens. There was little focus on an aspect of the road map with much more potential to boost the economy — digital payments.
Building public digital infrastructure is one of the new items on Operation Vulindlela’s phase two to-do list. But OV is meant to be about removing barriers to growth. It could do a lot for wellbeing and productivity, not to mention government efficiency, if government were to get its digital act together. But the real economic upside is in the payments space. That’s particularly so regarding opening access to the economy for even the smallest businesses and the poorest consumers.
Anyone visiting Kenya might experience the joys of tipping the waitron, or buying goods from a street vendor — or from the supermarket — using just a mobile phone number (albeit one provided by the private operator Safaricom, which invented M-Pesa). In India, no mobile is required: the digital payment system is linked to the digital identity number provided by the government’s Aadhaar system, which is also used to access all public services.
A digital ID system is the first priority on SA’s road map list, with data exchange between government departments and a digital payments system to support grants and other transfers to and from, and it all combines in a single, trusted digital services platform that in the words of the road map will “reshape” how citizens interact with government in all its forms.
The Bank is working closely with the department of home affairs on the digital infrastructure, and with the SA Revenue Service. It enables more tax and money-laundering scrutiny and some economic actors will not enjoy it.
It is all a bit ambitious for a government that, more than a decade since it launched smart ID cards, has managed to issue these to less than half the population. The presidency has brought in some serious private sector expertise to help. But its track record on IT is dispiriting. It is even more concerning if a single government-issued digital ID is meant to be used as the basis for a real-time payments system such as M-Pesa, or India’s UTI, or Brazil’s hugely successful PIX, which has grown so rapidly since Covid-19 that it has displaced cards and cash.
As it turns out, the payments piece was already happening anyway, led by the Reserve Bank, which is responsible for SA’s world-class national payments system — and has over the past three years been modernising this, working with the big banks to build the infrastructure to support a fast, low-cost digital payments system for SA.
We start from a high base, given that more than 90% of adult South Africans already have bank accounts, against 17% in India when that country launched the UTI system. But 60% of South Africans still use cash for transactions. The new system would aim essentially to replicate digitally what people think happens when they transact in cash.
That needs, first, that the system can identify, verify and authenticate the payer and the payee, in real time. The Bank is building a digital financial ID system that would sit on top of government’s digital IDs. If necessary it could provide the underlying infrastructure for government’s digital IDs — which could make sense, ensuring the information would be reliable and available 24/7.
The Bank also needs to power up a fast payment system that allows irrevocable, free real-time transfers, with no waiting a day for money to reflect — the street vendor needs to see the money instantly. The system also needs interoperability so that wherever that car guard or spaza shop’s money is stored digitally, they can use that store of value to transact.
The Bank is working closely with the department of home affairs on the digital infrastructure, and with the SA Revenue Service. It enables more tax and money-laundering scrutiny and some economic actors will not enjoy it. But the system opens up huge potential for growth-boosting innovation and entrepreneurship. Even if government achieves a fraction of its road map service delivery ambitions, the payments piece could be a game-changer.
• Joffe is editor-at-large.
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