The South African Reserve Bank has warned that perceptions that South Africa's 'neutral' stance on the Russia-Ukraine conflict is a Potemkin one could have devastating consequences for the country's financial stability if secondary sanctions are imposed.

The SA Reserve Bank made the stark warning in its bi-annual Financial Stability Review (FSR).

"Since the release of the November 2022 FSR, two new risks have been added to the RVM [Risks and Vulnerability Matrix], namely (i) capital outflows and declining market depth and liquidity; and (ii) secondary sanctions amid heightened geopolitical polarisation," the FSR said.

"The risk of secondary or indirect sanctions being imposed on South Africa if its neutral stance on the Russia-Ukraine war is perceived as unconvincing has increased since the previous FSR...

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

That, in a nutshell, is the risk the government is taking with a "neutral stance" that most commentators regard as pro-Russian.

Over 90% of South Africa's international payments are processed by the Society for Worldwide Interbank Financial Telecommunication system, or Swift.

Exclusion from Swift would make such payments impossible, the FSR's lead author, Herco Steyn, was quoted as saying by Bloomberg. That would make it almost impossible to import things...