Payment change for South Africa explained

The Common Monetary Area (CMA) has revised its regulations regarding electronic funds transfers (EFTs), impacting cross-border payments in South Africa.

Nedbank explained that the CMA is a financial alliance between South Africa, Namibia, Lesotho and Eswatini, aiming to boost trade and economic growth across the four countries.

“Within the CMA, SARB plays a key role in setting monetary policies and foreign exchange regulations,” Nedbank said.

“Under this agreement, our neighbours’ currencies – the Namibian dollar, Lesotho loti, and Swazi lilangeni – are valued 1:1 with the South African rand. So, within the CMA, these currencies are interchangeable with the rand at equal value.”

Previously, banks processed cross-border payments within the CMA via an EFT, but they have now shifted to using the Society for Worldwide Interbank Financial Telecommunications (SWIFT) network.

This means that these transactions are processed as international payments, which impacts processing times and fees.

“All EFTs, debit or credit transactions between CMA countries are now treated as cross-border payments with stricter tracking and compliance requirements,” Nedbank said.

“Although treating these payments as domestic transactions in the past allowed for efficient, less expensive services, the system had vulnerabilities.”

This change results from the South African Reserve Bank’s (SARB) efforts to comply with anti-money laundering best practices.

According to the bank, the new measures aim to meet international financial crime standards and address recommendations from the Financial Action Task Force (FATF), an intergovernmental organisation formed to combat money laundering.

South Africa was added to the greylist in February 2023 for not complying with international standards around the prevention of money laundering, terrorist financing and proliferation financing.

In response, South Africa has launched a 22-point Action Plan – all of which it has to meet – hoping to be removed before June 2025.

“The FATF has urged South Africa to tighten its controls by January 2025 so that it can be removed from the FATF greylist,” Nedbank explained.

As a part of these efforts the SARB released a statement on 26 July 2024, stipulating that changes to the CMA would take effect from 30 September.

“Our payment systems and processes must be aligned to enhance compliance with international standards,” the SARB stated.

Nedbank explained that while this affects cross-border payments, internal EFTs within the same country will stay the same.

“Under the new rules, banks in the CMA now process all payments through the Southern African Development Community real-time gross settlement (SADC-RTGS) system, previously reserved for high-value transactions only.”

“Debit orders are also affected – you must now initiate them from accounts based in the same country as the company or individual being paid, offering added protection through local oversight.”

“SARB and the CMA Cross-border Payments Oversight Committee have noted the potential impact on banking times and costs, and assured bank clients that they are working to minimise disruptions.”

The committee’s goal is to find a balance between essential regulatory updates and the provision of affordable, efficient payment services within the CMA.

FATF President Elisa de Anda Madrazo emphasized that combating financial crime is not only an ethical obligation but also crucial for economic stability.

She stressed that financial integrity plays a key role in reducing poverty, empowering individuals, and fostering economic growth. Therefore, the proposed changes should enhance both financial integrity and inclusion.

“The Payments Association of South Africa is overseeing changes in cross-border payments within the CMA,” Nedbank explained.

“Some payment processes in the CMA will not be affected – for example, internal EFTs within the same country will stay the same.”

In addition, the new system will also not change cross-border or high-value payments within the Southern African Development Community through the SWIFT network.