The South African Reserve Bank (SARB) has warned of dire consequences should the country face censure due to its stance on Russia\u2019s invasion of Ukraine.<\/p>\n
At worst, secondary or indirect sanctions could be imposed on the country and lead to a sudden halt to capital inflows and increased outflows, the bank said in its latest financial stability review published on Monday.<\/p>\n
It cautioned that South Africa\u2019s financial system would be unable to function if its ability to make international payments in dollars was impeded.<\/p>\n
More than 90% of South Africa\u2019s international payments are processed through the Society for Worldwide Interbank Financial Telecommunication system, Herco Steyn, the report\u2019s lead author, told reporters.<\/p>\n
\u201cShould South Africa be banned from SWIFT due to secondary sanctions, these payments will not be possible,\u201d he said.<\/p>\n
South Africa has adopted what it says is a non-aligned stance toward the war in Ukraine, and it has abstained from several United Nations votes condemning Russia\u2019s actions.<\/p>\n
Its neutrality was called into question this month when US Ambassador Reuben Brigety accused Pretoria of supplying weapons to Russia.<\/p>\n
Diplomatic Furore<\/strong><\/p>\n While President Cyril Ramaphosa denied the allegation, the diplomatic furore that ensued sparked fears that trade worth billions of dollars could be placed at risk, and the rand fell to a record low against the dollar.<\/p>\n The row \u201ccould further exacerbate declining domestic financial market depth and liquidity and further erode investor confidence and sentiment if considered alongside the Financial Action Task Force greylisting and the country\u2019s inability to arrest the growing prevalence of load shedding,\u201d said Steyn.<\/p>\n Even if the nation isn\u2019t sanctioned, the threat alone could mean the country\u2019s financial institutions are subjected to more intensive scrutiny by their foreign counterparts<\/strong>, said Nicola Brink, the head of the central bank\u2019s financial stability department.<\/p>\n \u201cThey start derisking South Africa essentially, which means that even if nothing happens, there is already some effect, with risk premia increasing,\u201d she said in an interview.<\/p>\n Other critical risks of South Africa being sanctioned include:<\/p>\n The most significant risk to the country\u2019s financial system remains sustained power cuts that negatively impact domestic economic growth, investor sentiment and business activity and exacerbate other pre-existing vulnerabilities.<\/p>\n It noted that there had been 13,000 gigawatt hours of outages between January and May 2023, surpassing the 11,697 gigawatt hours of cuts for the whole of 2022.<\/p>\n\n
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