What If South Africa Lost Access to SWIFT?

What is the potential impact of South Africa being excluded from the global banking SWIFT system?

The South African Reserve Bank suggests that the threat mainly affects individual entities rather than the country overall. Nonetheless, this issue was significant enough for Finance Minister Enoch Godongwana to discuss it in a [recent] closed-door meeting with banking officials.

Read: SA treasury, banks fear SWIFT exclusion, says Sowetan
Listen/read: What would be the consequences for South Africa if it loses access to the SWIFT payment network?

The SWIFT [Society for Worldwide Interbank Financial Telecommunication] network is vital for global trade. It acts as a communication interface for banks, ensuring secure transaction processing. Being barred from SWIFT restricts individuals’ capacities to engage in cross-border transactions.

What brought us to this predicament?

A proposal in the US Congress, introduced by Representative John James, calls for a re-evaluation of US-South African trade relations. While it does not specifically advocate for a SWIFT ban, historical evidence points to possible repercussions, according to Faadil Moti, CEO of payments firm 80eight.

Such limitations could begin subtly and escalate rapidly, similar to the situations experienced by Russia and Iran. This occurs as South Africa works to expunge itself from the Financial Action Task Force (FATF) grey list by improving measures against money laundering and terrorism financing.

The US has considerable power to enforce compliance from its trade partners, utilizing tariffs, threats of sanctions, and its influence over the SWIFT system.

Read: South Africa moves closer to leaving the grey money list in October.

Prepare for alternative solutions

In a recent podcast, Moti discusses alternatives to SWIFT, including Russia’s SPFS and China’s CIPS, although these options are generally slower and viewed as less secure. He also notes that the Pan-African Payment and Settlement System could facilitate trade, albeit with longer processing times.

“I believe the most scalable solution is a hybrid infrastructure connecting traditional payment systems with digital assets, stablecoins, and tokenized liquidity layers in the near future,” Moti suggests.

For specific transactions—such as cross-border remittances—mobile money and stablecoins are gaining traction in Africa.

South Africa cannot afford to adopt a passive stance in light of the SWIFT risk; it must develop contingency plans and alternative strategies, Moti stresses. This requires regulatory frameworks governing the use of stablecoins for international payments.

Read:
Digital payments in Africa: Can regulation keep up with rapid innovations?
Yellow Card, Visa collaborate to accelerate stablecoin adoption in Africa.

“In the last 18 months, South Africa’s FATF grey listing has influenced various transactions. For example, individuals trying to use their allowances to transfer funds abroad for cryptocurrency purchases faced hurdles with specific banks. After being grey-listed, many offshore banks flagged those transactions as high-risk or outright prohibited them.”

Moti asserts that while South Africa’s economy has displayed resilience, companies should maintain standard operations while recognizing potential risks if relations with the US decline.

“Being added to the grey list was a significant learning experience for South African institutions, pushing them to strengthen controls against money laundering and terrorism financing, which is essential for adhering to international standards and enhancing trade flow.

“However, creating alternatives isn’t only about innovation; it’s also about adoption. South Africa is well-positioned to embrace these alternatives—provided they receive regulatory approval.”

South Africa is not alone in facing challenges from the US. India has encountered 50% tariffs on a range of products entering the US and risks facing further tariffs for purchasing oil from Russia. This illustrates how displeasing the Trump administration can lead to substantial trade repercussions—India is actively pursuing its strategies to mitigate these adverse effects.

In this podcast, Moti outlines several potential futures and available alternatives, making it an informative listen.

For previous episodes of the Moneyweb Crypto Pod, click here.

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