South African banks will implement a significant change to domestic electronic funds transfer (EFT) between South Africa, Lesotho, Eswatini, and Namibia in September 2024.
The Common Monetary Area (CMA) regulators decided to discontinue processing electronic EFT payments and collections within the CMA.
The Common Monetary Area comprises South Africa and its three neighbours, Namibia, Lesotho, and Eswatini.
The CMA’s decision means South African account holders can no longer make EFT payments to account holders in other CMA countries.
They will also not be allowed to receive EFT payments from other CMA countries unless they are initiated on a global banking channel.
Before this restriction, South African account holders could make EFT payments to Lesotho, Eswatini, and Namibian accounts.
South African banks initially warned their account holders that the regulatory changes would start to be applied in April 2024.
15 April 2024 was set to be the final day of processing domestic EFT, including credit payments and EFT debit collections, to and from Namibia.
However, the Bank of Namibia extended the effective date to 30 September 2024. As such, regulators have decided to extend this deadline.
The final day of processing domestic EFT, including credit payments and EFT debit collections, to and from Lesotho and Eswatini, is 9 September 2024.
Nedbank explained that people making and receiving payments or collections to beneficiaries in a CMA country after September 2024 could not use EFT.
“You can use our global payment platform, global transactions on the Nedbank Business Hub, or our global host-to-host solution to make and receive these payments,” it said.
It further warned that debit order collection processing will only be supported in-country and not between countries.
“Debit orders collected from accounts within the CMA will have to be initiated from an account domiciled in Namibia, Lesotho or Eswatini,” it said.
This will require access to an in-country banking service to submit debit order collections and the receivables and billing processing accounts.
Alternatively, these debtors can initiate payments from the respective CMA countries to you using a cross-border service.
Standard Bank said all payment flows between countries within the CMA will be done via the Swift platform and will no longer be processed via EFT rails.
Therefore, Swift (the Global Payment Society for Worldwide Interbank Financial Telecommunications), must be used to initiate all cross-border payments.
Absa said regulators have instructed banks to discontinue processing debit and credit EFT payments to Namibia. Credit and debit EFT payments will also be discontinued.
“If you want to continue making payments to Namibia, you can use the Swift service available through our relationship banking, international banking and foreign exchange teams,” it said.
“We understand that these changes may affect your banking experience, and we are committed to assisting you through this transition.”
This change is set to be disruptive for many businesses and families in the Southern African region.
Cross-border payments via Swift will take more time because of the increased checks and controls.
It will add a significant amount of overhead to people or businesses who want to send money to Lesotho, Eswatini, and Namibia.
It is also not clear what impact it will have on online payment systems which use EFT as a channel for online shopping.
Although online shops like Takealot do not ship to neighbouring countries, people in Lesotho, Eswatini, and Namibia subscribe to South African services via EFT payments.
These new regulations are set to disrupt these EFT payments. The same goes for debit orders for business services.
A 2023 Finmark Trust study found that many families in the region depend on income received via cross-border remittance.
“Cross-border remittances provide these people access to essential services and contribute to micro-economies in many SADC communities,” the report said.
In 2022, formal outbound remittances from South Africa via authorized dealers totalled nearly $1 billion.
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