There are mounting regional concerns that the Common Monetary Area (CMA)’s decision to repeal treatment of cross-border transactions might cause considerable distress to Small and Medium Enterprise (SMEs).
The CMA is a monetary union. Although each country issues its currency, the South African Reserve Bank governs all four currencies, meaning the rand can also be used in each country.
The CMA countries – Lesotho, Eswatini, South Africa, and Namibia – are changing cross-border payments, with low-value cross-payments now handled through a regional infrastructure payment system.
With the repeal of the CMA cross-border transactions, South African banks are no longer processing electronic (Electronic funds transfers) EFT payments and collections within the CMA. Customers will also no longer be able to receive EFT payments from other CMA countries.
This decision was made by CMA regulators earlier this year and will be effective on Monday, September 16.
As a result, regional organisations are coming out to express dissatisfaction with the new dispensation which they argue will only serve to disrupt the CMA’s regional integration process.
A recent statement from EcowaSadcSynergies (ESS), a media group covering ECOWAS and SADC, has recommended that all member states party to the African Continental Free Trade Area (AfCFTA) that are also members of the CMA zone must consider calling on the respective central banks of South Africa; Namibia; Lesotho and Eswatini to join the Pan African Payment Settlement Systems (PAPSS) so as to continue enjoying SWIFT-free cross-border transactions
ESS also recommends consumer protection agencies and chambers of commerce within the CMA countries to immediately-convene emergency meetings to assess the impact of
recent decisions on citizens and businesses operating in the CMA zone.
“Member states of the CMA zone must immediately engage the SADC Secretariat to
help establish a consumer protection agency for the SADC/SACU/CMA regions.
“The Common Market for Eastern and Southern Africa (COMESA) is one of the African RECs touted world-wide as having significant best practice in this respect.
“COMESA’s Competition Commission offers much best practice worthy of emulation,” ESS said in a statement
ESS also noted that it is true that PAPSS remains one of the operational successes of trading under AfCFTA.
It added that PAPSS must undertake consistent sensitisation of its products to help enhance ECOWAS-SADC synergies for AfCFTA operationalisation; and the continuous deepening of regional integration consistent with the seven aspirations of Agenda 2063.
That said, the Bank of Namibia extended the effective date of stopping processing cross-border EFT payments to September, 30 2024.
“Due to regulatory changes, the Bank of Namibia and the CMA Cross-border Oversight Committee will discontinue EFTs for payments to and from Eswatini, South Africa and Lesotho,” it said.
The South African Reserve Bank (SARB) said the change will treat low-value EFTs and debit and credit payments as cross-border transactions and subject them to stricter diligence requirements.
In doing so, criminals will no longer be easily allowed to use EFT payments to launder funds, and any misuse will be identified more effectively.
The move forms part of South Africa’s plan to get off the Financial Action Task Force’s grey list.
