As the deadline draws nearer for EFTs, debit and credit payments from the Common Monetary Countries (CMA) including eSwatini, Lesotho and Namibia to be treated as cross-border payments, economists say the move should be welcomed as it would help South Africa get off the grey list.
In July, the South African Reserve Bank (SARB) announced that as of September 30, low-value electronic funds transfers (EFTs), debit and credit payments made between CMA countries – eSwatini, Lesotho, Namibia and South Africa – will be treated as cross-border transactions and subject to greater due diligence requirements.
SARB said that these low-value retail payments were previously treated as domestic payments in South Africa, with the four CMA countries and their participating banks processing the transactions via South Africa’s domestic retail payment system which provided a low cost, effective and efficient payment service to their clients.
In February last year, global financial crime watchdog Financial Action Task Force (FATF) placed South Africa on its “grey list” for not complying with international standards around the prevention of money laundering, terrorist financing and proliferation financing.
Professor Bonke Dumisa, an independent economic analyst, said the country needed this to get off the grey list.
“The problem is for us to get off the FATF’s grey list, South Africa has to prove that it has done everything it can. It was not put to South Africa as a question.
South Africa was told that you’ve got a lot of money that flows from the country directly to (criminal groups) and South Africa has to prove that it is fully in charge of what goes out of the country to the other places,” he said.
Dumisa said it was high time the SARB implemented this regulation and more still needs to be done.
“Yes, it is going to be a problem for people who live in South Africa but have got their families in those countries, because it means they cannot transact as much as they want to with their families ... But it (the regulation) does not say money must not move from South Africa to those countries, it simply says that there must be stringent requirements for money to move, for transactions to be traced easily,” he said.
Old Mutual Group chief economist Johann Els said in terms of what the FATF needs, South Africa must tighten up the regulations to get off the grey list.
“We need to implement all those regulations that are internationally acceptable to make sure that fund flows are legitimate. So this is absolutely what we need to do and I think it is another step in the right direction in terms of getting off the grey list,” he said.
Explaining the move, the SARB said the country’s payment system and processes must be regularised.
“Doing so will, along with other benefits, prevent criminals from having easy access to EFT payments to launder funds, and ensure this misuse can be identified more effectively when it occurs.”
The SARB said regularising these low-value retail payments will help the country achieve its goal of exiting the FATF greylist by January next year.
However, Brett Tungay, who is the Federated Hospitality Association of South Africa’s (Fedhasa) East Coast chairperson, said the move could pose a challenge for the tourism industry.
Tungay said with resorts and hotels, deposits are always requested for bookings.
He said with the new system it could delay payments, which would mean guests would come to stay even when the payment has yet to clear.
In another example, he said if he and colleagues take a booking from a customer in Lesotho, often they are not aware where the client is from, and during the verification process to release the money, the bank requires certain details they do not have.
They then have to go back to the client, which creates unnecessary admin for the tourism industry.
“Any economy that has impediments to doing business, the more bureaucracy you have, the less trade you have. If you want the economy to grow you need less bureaucratic process,” said Tungay.
The Mercury