Sub-Saharan Africa
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South Africa's Central Bank Warns of Possible Sanctions, Capital Outflows

South Africa's government has repeatedly said that the country has never been involved in a struggle between world powers and it has no intention of doing so now, as it sticks to its own non-aligned policy. Pretoria's neutrality was questioned, however, when US Ambassador Reuben Brigety accused it of supplying weapons to Russia.
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The central bank has warned of risks of financial instability and severe repercussions because of the possibility of sanctions over South Africa's neutral stance on the conflict between Russia and Ukraine.
In its financial stability review published on Monday, the bank outlined several dire consequences the country may face if its non-aligned stance is censured. It was noted in particular that secondary or indirect sanctions could be imposed on South Africa, resulting in a sudden halt to capital inflows and increased outflows.
The bank cautioned that the country's financial system would be unable to function if its ability to make international payments in dollars was limited because of sanctions. It was highlighted that the impact on the economy and financial markets will be far-reaching.

"Should this risk materialize, the South African financial system will not be able to function if it is not able to make international payments in dollars and it could lead to a sudden stop to capital inflows and increased outflows," the report said.

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More than 90 percent of the country's international payments are processed through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international payment system. The report underlined that "should South Africa be banned from SWIFT as a result of secondary sanctions, these payments will not be possible".
It was claimed that this could exacerbate "declining domestic financial market depth and liquidity", and further undermine investors' confidence, given the Financial Action Task Force (FATF) greylisting and the nation's struggle to tackle load-shedding.
The review explained that even without formal secondary sanctions, South Africa's financial institutions could be subject "to more intensive scrutiny by foreign counterparts".
It was emphasized that South Africa is highly dependent on foreign investment inflows to fund its current account deficit, and in case of sanctions these inflows would dry up, causing financial instability.

"South Africa is already plagued by foreign investment outflows as a result of its weak economic conditions and the recent FATF greylisting. Jeopardizing remaining investment inflows, which come predominantly from the US, EU and UK, could therefore lead to financial instability," the report said.

Apart from a threat to the participation of South African financial institutions in the global financial system, the review pointed out that the country's ties with its largest trading partners could be affected and it could lose its preferential trade access.
The report also noted that sustained high levels of load-shedding continue to be one of the biggest risks to South Africa's financial stability, weighing heavily on the prospects of domestic economic growth. The country's persistent challenges in generating electricity continued to have a negative effect on productivity across the nation, not to mention investors' sentiment.
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Earlier this month, Reuben Brigety, the US ambassador to South Africa, said that weapons and ammunition were loaded aboard Russian ship the Lady R in December 2022. The administration of the South African president denied the allegations, pointing out that they undermine the partnership between South Africa and the United States.
South African President Cyril Ramaphosa has recently highlighted that since the onset of Russia's special military operation in Ukraine, the country has been under "extraordinary pressure" to abandon its position of neutrality and choose sides in the confrontation between Russia and the West. He also reiterated that other African nations "are threatened with penalties for pursuing an independent foreign policy and for adopting a position of non-alignment".