What if South Africa’s access to SWIFT is threatened?

How serious is the threat of South Africa being cut off from the global banking SWIFT system?

The SA Reserve Bank says the risk is to certain individuals rather than the country as a whole, but the possibility was serious enough to attract the attention of Finance Minister Enoch Godongwana, who reportedly raised this very concern in a [recent] closed-door meeting with the banks.

Read: SA treasury, banks fear SWIFT loss, Sowetan says
Listen/read: What happens if SA loses access to the Swift payments network?

The SWIFT [Society for Worldwide Interbank Financial Telecommunication] system is the lifeblood of international trade. It is a communication system between banks that allows transactions to be processed in a safe and secure way. Cutting individuals off from SWIFT denies them the opportunity to transact across borders.

How did we get here?

A bill currently before the US Congress, introduced by Representative John James, wants a review of US-South African trade relations. It does not specifically call for a SWIFT ban, but we have seen enough international precedent to know how this could go, says Faadil Moti, CEO of payments company 80eight.

It may start small and escalate quickly, as was the case with Russia and Iran. This comes at a time when SA is trying to remove itself from the Financial Action Task Force (FATF) grey list by tightening controls over money laundering and terrorism financing.

The US is using its global heft to squeeze compliance from its trading partners, using tariffs, threats of sanctions, and its control over the SWIFT system.

Read: South Africa moves closer to exiting dirty-money list in October

Prepare contingencies

In this podcast, Moti explains that there are alternatives to SWIFT, such as Russia’s SPFS and China’s CIPS, though these are slower and considered less secure. There’s also the Pan-African Payment and Settlement System, which, while slower than SWIFT, could be adopted for trade, he says.

“The more scalable path is a hybrid infrastructure in my view, connecting traditional rails with digital assets, stablecoins, and even tokenised liquidity layers in the near future,” says Moti.

For some types of transactions – such as cross-border remittances – mobile money and stablecoins are now widely used across Africa.

The threat of being cut off from SWIFT cannot be taken lying down, and SA must start preparing contingencies and workarounds, Moti adds. This will require regulators to provide clarity on issues such as the use of stablecoins in cross-border payments.

Read:
Digital payments in Africa: Can regulation keep up with the rapid innovation?
Yellow Card, Visa agree to hasten stablecoin adoption in Africa

“If you look over the past 18 months or so, South Africa has been impacted by the FATF grey listing. And that, from my experience, did have an impact on certain transactions. Like, for example, individuals using their allowances to send funds abroad for crypto purchases were limited in terms of which banking institutions they could send to. Since South Africa was placed on the grey list, many of these offshore institutions considered these transactions as high risk, or even prohibited them.”

Moti adds that SA’s economy has [shown resilience] to pressures in the past, and companies should continue business as usual – while understanding the risks, should things go south with the US.

“Being placed on the grey list] was a great learning curve for South African institutions to tighten the anti-money laundering and terrorist financing gaps it had, which is important for aligning with the international standards for better and greater trade flow.

“But building alternatives is no longer just about innovation. It’s now about adoption, and South Africa is ripe with opportunity to jump onto these alternatives – of course, when regulation permits.”

South Africa is not alone in facing threats from the US. India has been slapped with 50% tariffs on a vast number of goods entering the US, and faces the possibility of more tariffs because it buys oil from Russia. In other words, displeasing the Trump administration can have serious trade consequences – and India is working on its own plans to counter these hostile measures.

In this podcast, Moti lays out a number of paths the future could take and what alternatives are available. Not to be missed.

For previous Moneyweb Crypto Pod episodes, click here.

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