By Brian Okoth
South Africa’s central bank has warned that the country risks facing international sanctions should its stance on the Russia-Ukraine war be known.
The South African Reserve Bank says should Pretoria pick a side in the conflict, then there is a possibility of secondary or indirect sanctions being imposed on the nation by global powers.
In a financial stability review (FSR) report released on Monday, the central bank said if the sanctions are introduced, then there could be a sudden halt to capital inflows and increased outflows.
“The impact of this on the economy and financial markets will be far-reaching. As a country with low domestic savings and a current account deficit, South Africa is highly dependent on foreign investment inflows to fund this deficit,” said the reserve bank.
The regulator warned that South Africa’s financial system “won’t be able to function” if its ability to make international payments in foreign currency was stopped.
South Africa makes more than 90 per cent of its international payments through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system.
“Should South Africa be banned from SWIFT as a result of secondary sanctions, these payments will not be possible,” said the central bank.
These fears come a few weeks after the US accused South Africa of supplying weapons to Russia, allegations President Cyril Ramaphosa denied.
“The risk of secondary or indirect sanctions being imposed on South Africa if its neutral stance on the Russia-Ukraine war is perceived as unconvincing has increased since the previous financial stability review [report],” said South Africa’s central bank.
