Small to medium-sized enterprises (SMEs) operating in South Africa have a unique edge because of the country’s exciting financial technology (fintech) sector. The growth of this sector has meant that selling outside of the country has become seamless and low-cost, a vital factor for SMEs as globalisation increases.
According to Mastercard’s 2022 Borderless Payments Report, 46% of SMEs in Eastern Europe, the Middle East and Africa (EEMEA) are earning more money than before the pandemic. Online business and international sales are key drivers, with 71% of SMEs recording above-global-average growth in online sales, while 77% are planning to do more business internationally going forward.
Additionally, 64% of the 3000 small businesses that answered the survey credit cross-border payments with enabling their business to grow, emphasising that cross-border payments will be a key focus for business growth across the EEMEA region.
These statistics highlight a growing opportunity for SMEs to leverage fintech and modern payment models to enhance their reach and increase sales through cross-border payments. In this article, we look at what cross-border payments are, which regulations govern them and provide tips to help SMEs with cross-border transactions.
What are Cross-Border Payments?
Cross-border payments are financial transactions where the payer and recipient are located in different countries, commonly involving currency conversion and, traditionally, correspondent banking networks. These transactions can take 1–5 business days and are essential for international trade, remittances, and investment.
How SMEs Leverage Cross-Border Payments in Africa
Here are some ways in which SMEs are using cross-border payments.
1. Enabling International Trade
Cross-border payment technology allows SMEs to expand beyond local markets, unlock new customer bases and diversify their supply chains. Additionally, this mitigates risks during local economic downturns because it maintains trade relationships with international partners.
2. Driving the Digital and Services Economy
Cross-border transactions can be facilitated with clients abroad, particularly in digital services, consultancy and e-commerce.
3. Attracts Investments and Partnerships
These transactions can serve as a mechanism for receiving investment and forming strategic partnerships with international stakeholders. Allowing for more growth and market expansion for SMEs.
Cross-Border Payments Regulations and Compliance in South Africa
Cross-border payments in South Africa are primarily governed by the Currency and Exchanges Act 9 of 1933 and accompanying Exchange Control Regulations, overseen by the South African Reserve Bank (SARB).
Key Regulatory Frameworks
- Exchange Control Regulations (1961): These govern the movement of currency across borders for residents, managed by the SARB’s Financial Surveillance Department (FinSurv)
- Financial Intelligence Centre Act (FICA) (2001): Mandates that financial institutions report international funds transfers exceeding specific thresholds
- National Payment System Act (1998): Controls the administration and supervision of payment, clearing, and settlement systems
- Customs and Excise Act 91 of 1964: Governs payments involving the import and export of goods
- SADC-RTGS System: Bank-level rules that manage regional payments within the Common Monetary Area (CMA)
Key Compliance Areas for SMEs
Authorised Dealers (Banks)
Authorised dealers are typically commercial banks. When conducting cross-border transactions, they must be processed through an authorised dealer, which ensures that necessary reporting to the SARB.
Financial Intelligence Centre Act (FICA) and Anti-Money Laundering (AML)
Electronic cross-border transactions (inbound or outbound) of R20 000 and above must be reported to the Financial Intelligence Centre (FIC) via an International Funds Transfer Report (IFTR). Secondly, businesses must verify the identities of foreign customers and suppliers to comply with anti-money laundering (AML) regulations. Lastly, any suspicious activity must be reported to FIC.
Record-Keeping
To avoid penalties, SMEs need to maintain detailed records of transactions, including:
- Invoices from foreign suppliers/to foreign buyers
- Proof of payment (Currency conversion documentation)
- Customs clearance documents for goods entering South Africa
Regulatory Constraints
If buying goods from a foreign supplier and selling to a foreign buyer (without the goods entering SA), the deal must comply with SARB merchanting rules, which require matching payments and receipts.
Note: Individual “discretionary allowance” of R1 million/year does not apply to corporate business transactions.
Crypto Assets
As of 2026, the National Treasury is integrating crypto assets into the capital flow management framework, requiring transparency for transactions using digital assets.
Benefits of Cross-Border Payments for SMEs
Here are some of the ways in which cross-border payment solutions are positively impacting SMEs.
1. Complex Tech-driven Solutions, Simple User Experiences
By leveraging blockchain and distributed ledger technologies (DLT). Tokenised cash and smart contracts automate transactions based on predefined conditions, ensuring security, transparency and efficiency.
Despite being quite complex, these solutions prioritise a simple user experience, with technology being used to facilitate the experience without users needing to interact with the complex backend.
2. Accessible, Inclusive, Fast and Cost-effective
High-speed, cost-effective solutions have significantly lowered barriers to international trade for SMEs and previously excluded customers, while driving financial resilience. SMEs benefit from faster and secure digital payments as well as value-added services derived from leveraging their own data. From streamlining cash flow to enhancing customer experiences and expanding opportunities in the digital economy.
3. Success through Strategic Partnerships
Cross-border payments facilitate collaboration, with traditional and fintech players working together. These collaborations drive more efficient and secure digital and trade finance solutions, all of which are essential to further enhance trust, security and accessibility for all, including SMEs.
Tips for SMEs Navigating Cross-BorXder Transactions
Here are some tips to help SMEs looking to conduct cross-border transfers.
Tip 1: Conduct Due Diligence
It’s very important to ensure you conduct thorough due diligence to evaluate the risks associated with foreign partners, suppliers, and markets. This means verifying that the foreign entity complies with local laws and regulations, including corporate governance, labour laws, and environmental standards.
Additionally, it’s important to assess the financial stability of the foreign entity to ensure it can fulfil its obligations. Lastly, conduct background checks on the foreign entity to evaluate its reputation and business practices.
Tip 2: Contractual Considerations
Contracts are an essential part of cross-border transactions. When drafting and negotiating contracts, it’s important to consider the following:
- Specify the governing law of the contract. This depends on the nature of the transaction and jurisdictions involved; South African law may only sometimes be the preferred choice. Businesses should carefully consider the implications of choosing foreign law.
- Ensure you include a clear dispute resolution mechanism in your contract. Arbitration is often favoured for cross-border disputes due to its neutrality and enforceability.
Tip 3: Protection of Intellectual Property (IP)
Cross-border transactions often involve the transfer or licensing of intellectual property. SMEs need to register their trademarks, patents, and copyrights in a foreign jurisdiction to ensure protection. IP rights registered only in South Africa do not automatically extend to other countries. Ensure you have clear and enforceable licensing agreements when transferring or licensing intellectual property across borders. These agreements should address issues such as royalties, exclusivity, and termination rights.
