With reports that South Africa's tensions with the US present a risk of the country being excluded from the SWIFT global payment system, an economist has warned of the dire consequences for growth, investment and employment should this happen.
Frederick Mitchell, chief economist at Aluma Capital, warned that South Africa needs to re-evaluate growth-limiting domestic policies that have irritated the administration of US President Donald Trump.
He said removal from SWIFT — the Society for Worldwide Interbank Financial Telecommunication — would trigger capital flight and business closures that would take decades to draw back, even if South Africa were to regain access to SWIFT with time.
“So it's a whole cascading effect that will take place ... What it boils down to ... is the tariffs and losing SWIFT will deindustrialise South Africa faster than you can imagine, because if you can't trade, you can't export. [When] manufacturing companies close down, it's gone.”
SWIFT, established in 1973, has become the established cross-border payment network between international bank accounts. It encompasses more than 11,500 institutions across more than 200 countries.
US congressman Ronny Jackson has introduced the US-South Africa Bilateral Relations Review Act to the House of Representatives' committee on foreign affairs, proposing that ANC leaders face sanctions over their alignment with US adversaries including Russia, China and Iran. The bill could also lead to sanctions targeting South Africa's financial systems.
That's akin to 20% of the South African bond market that's taken up by institutional investments from the US. So, if they're not allowed to do all that, who's going to take it up?
— Frederick Mitchell, chief economist at Aluma Capital
Mitchell also warned that there were concerns that, along with sanctions, the Trump administration could bar institutional investments from the US in South African debt instruments, specifically government bonds. “That's akin to 20% of the South African bond market that's taken up by institutional investments from the US. So, if they're not allowed to do all that, who's going to take it up?”
Mitchell said South Africa would not have the same resilience to exclusion from SWIFT that Russia has demonstrated since being cut off after invading Ukraine in 2022. This was due to Russia’s status as a major gas exporter to Europe and a nuclear superpower.
“As a small open economy, one will always be at the mercy of bigger global powers. That's just how it is. We need to make a distinction between South Africa and Russia, because we know that the Russian economy is based on exports of oil and gas and natural resources ... to Western Europe.”
On the policy front, Mitchell said current broad-based BEE requirements were not going to fly with the US, as they were “a 30% tax on capital in South Africa by default”.
In a recent briefing to reporters, agriculture minister John Steenhuisen said some demands from the US in ongoing negotiations to secure a trade framework between the two countries were beyond the realm of economic and trade policy.
“We’ve seen, in a number of the letters that have been sent to various other countries, most notably Brazil and India recently, that these things go beyond just tariffs,” he said. “I think we’re seeing some form of new era now where trade and tariffs are being used to deal with issues outside of what would generally be trade concerns.”
James Booth, head of revenue at Verto SA, said any threat of exclusion from SWIFT was a serious concern for the South African economy as the system underpins most international trade and finance.
“Disconnection would disrupt flows of capital, trade and remittances. That said, these risks also highlight why South Africa and the wider region need to diversify settlement options — including regional payment systems and even crypto solutions like stablecoins,” he said.
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