South Africa (Common Wealth) _ Following a U.S. diplomat’s accusation that Russia was providing weaponry to support its campaign in Ukraine, South Africa’s central bank issued a warning about risks to the country’s financial stability due to capital outflows and the potential for sanctions.
The South African Reserve Bank (SARB) stated in its biannual health check on Monday that these concerns, together with the prospect of a grid failure caused by frequent power outages and persistently high inflation, have exacerbated the systemic risks to the financial system.
This year, a number of unfavorable events have severely impacted the South African economy, including the continent’s most developed economy experiencing its worst-ever power outages, which have increased costs by billions of business operations and home costs.
The Financial Action Task Force (FATF), an intergovernmental organization that monitors financial crime, also placed the nation on a “grey list” in February to compel it to implement criteria to stop the financing of terrorism and money laundering.
According to SARB’s Financial Stability Review (FSR), the FATF greylisting and bad domestic economic conditions have reduced foreign ownership of South African government bonds from 42% in the previous five years to 25% today.
Following these domestic problems earlier this month, there was a diplomatic dispute with the U.S. after one of its ambassadors accused it of providing arms to Russia, sparking concerns about possible penalties and a steep decline in the rand.
It would be “impossible to finance any trade or investment flows or to make or receive any payments from correspondent banks in USD,” according to the report, if sanctions were placed on South Africa.
It stated that, despite the recent volatility in the global banking sector, the nation’s domestic financial institutions and the financial system remained resilient, but a combination of global and local issues could test its resilience beyond the next 12 months.
