Abstract

South Africa is moving toward digital payments, and a retail central bank digital currency (‘CBDC’) could reduce cash reliance and promote financial inclusion. Using the International Monetary Fund’s REDI framework (an acronym for Regulation, Education, Design & Deployment and Incentives), a retail CBDC could encourage broader access to digital payments and support a more inclusive financial sector in South Africa. A retail CBDC could tackle mistrust of financial institutions, low financial (and digital) literacy, inadequate infrastructure, and high transaction costs. Regulation would update laws for safe use; education would build trust and literacy, especially in low-income areas; design and deployment would ensure secure, user-friendly, interoperable and offline-accessible systems with phased rollouts and low fees; and incentives such as cashback, discounts or tax breaks could encourage adoption amongst consumers and merchants. While the South African Reserve Bank considers a retail CBDC feasible, it currently prioritises modernising the payments system, supporting fintech and exploring wholesale applications. We conclude that modernisation is the essential first step, creating a secure, adaptable foundation, while a REDI-aligned retail CBDC could later complement cash, reduce reliance on physical currency and expand access to digital financial services, fostering a more inclusive financial sector for South African consumers.