Risk Committee Update: February 2026

This month’s Risk Committee newsletter focuses on high-level observations from our recent due diligence visits to South Africa, Botswana, Zambia and Namibia, where we met with all the major banks and FMIs in the region.

South Africa

South Africa's economy has received a significant boost in financial credibility and operational efficiency following its removal from the Financial Action Task Force (FATF) grey list in October 2025. This positive development, leveraged during the country's G20 presidency, has improved investor sentiment by confirming the nation's commitment to global anti-money laundering standards and reducing the friction and compliance costs associated with international transactions.

However, the positive momentum from the delisting has not resulted in credit rating upgrades yet, as major agencies and economists maintain that South Africa's high government debt, fiscal challenges, and persistent structural issues - particularly in energy and logistics - remain the primary obstacles to unlocking sustained, long-term economic growth.

Below are some key developments related to capital markets:

• Operation Vulindlela, the treasury‑led reform programme, has reshaped South Africa’s infrastructure in two phases: Phase I (completed in 2022) unbundled Eskom, and reformed electricity, transport, water, immigration, spectrum and mining regulation; while Phase II (2023‑2025) is delivering an Energy Security Bill, a competitive wholesale power market, rail‑access reforms, water service public‑private partnerships, digital identity, and public‑infrastructure upgrades, plus a points‑based visa system.
• Strate, the central securities depository, safeguards ZAR 17.5 trillion (USD1.0 trillion) of assets, and has added a trade‑repository licence, beneficial‑ownership data sales, an e‑voting platform, and a cross‑border T+0 link with Euroclear; its 2026 fee review and weekly Rule 18 reporting has helped lift South Africa off the FATF grey list.
• Competition is opening as the JSE rewrites rules to remove Strate‑specific language, while Granite’s dormant CSD licence and the A2X competition case are testing market openness.
• JSE Clear will extend its clearing licence to cash bond clearing by Q4 2026. JSE Clear had a PFMI assessment in 2025 where everything was fully observed and the size of the default fund increased from SAR 500 to 600 million.
• The South African Reserve Bank’s “Project Khokha”, a wholesale central‑bank digital currency (wCBDC) pilot, has processed over 12 million tokenised settlements, with near‑real‑time audit trails slated for a Q1 2027 trade repository launch.
• The SARB has broadened its Orderly Closing and Reopening of Markets (OCARM) framework to cover a spectrum of disruption scenarios - from medium sized bank failures to nationwide grid outages - requiring banks, custodians and exchanges to keep documented response plans. A full scale insolvency simulation is slated for 18 February 2026, using live day data to test the orderly winding down of a participant and its impact on settlement, cashflows and corporate actions processing across the entire ecosystem.

There have been developments in the continuing legal battle between the stock exchanges, JSE Ltd, and A2X, which has been escalated to both the Financial Sector conduct Authority (FSCA) as well as the competition tribunal in 2025 and is expected to be further escalated in 2026. JSE are being accused of restricting access to their broker system, meaning that A2X had to develop their own broker terminals. Conversely, A2X has been subject to an Enforceable Undertaking from FCSA for listing companies between February and October 2023 without an active opt-in action. A2X completed a remediation opt-in process in August 2024, resulting in 40 of the 43 listings remaining – however the FCSA have fined A2X ZAR 700,000.

The FCSA approved rule changes by JSE in in December 2025, whereby explicit references to Strate as a CSD were made generic.

Strate has been responding to the Joint Standard on Cybersecurity and Cyber Resilience Requirements introduced in May 2024 and has formed a new Data Governance Committee, in line with the regulation, whilst conducting enhanced internal and external cyber tests. Moreover, they have drafted a recovery and resolution plan and are working with the Canadian Depository for Securities to create a wind-down plan.

SARB’s ‘Orderly Closing and Reopening of Markets’ (OCARM) framework was expanded in 2025 to include multiple failure scenarios (rather than just for a national blackout). In 2025, market-wide testing was conducted to simulate the failure of a medium-sized bank as well as a national grid failure and, in February 2026, testing in relation to a major participant failure will take place.

Botswana

Botswana’s economy is feeling the strain as the global demand for diamonds has been poor for a considerable period of time (diamond production fell by 18% last year). In 2025, the country’s output is expected to shrink a little (from ‑0% to ‑0.9%); inflation is around 4%; the government’s budget gap has widened to roughly 6.5% of the economy; the balance of trade is negative; the pula has slipped slightly; and the central bank has lifted the main interest rate to 7.75%. As a result, about a quarter of all workers are unemployed, with the youth unemployment rate at almost 40%.

• Botswana’s market is undergoing a whirlwind of regulatory and technical changes. In August 2025, the Settlement Guarantee Fund (SGF) saw regulators change the rules governing that fund to make it less punitive and easier to use – the steep 16% penalty for failed trades was cut to a tiered 2% (for local equities) and 6% (for dual‑listed stocks). A modest 0.01% levy now applies to every trade, and contributions must be made in cash only.
• The Central Securities Depository (CSDB) has rewritten its rulebook: it now spells out documentation for off‑market transfers, sets clear procedures for participant insolvency, and defines accounts as dormant after two years of inactivity.
• Parallel to the rule overhaul, CSDB has been busy fixing post go live bugs, deploying patches in September 2025, reinstalling its VPN after a rollback, and upgrading to ISO 20022 (replacing SWIFT MT199 with the Pain.001 message). Other faults fixed have included trade processing glitches for volumes above five million, mandatory email requirements that aren’t legally required, and investor account opening errors caused by the system treating email addresses as unique identifiers.
• The long-running project to migrate government bonds from the Bank of Botswana (BOB) to CSDB, which was slated for completion at the end of January 2026, has been further delayed with a new provisional go-live date of 31 March 2026. The new model would see BOB retain responsibilities of primary issuance and Transfer Secretary oversight of government bonds, but their custody, clearing and settlement would take place in CSDB. Trading would be conducted on a mix of the Botswana Stock Exchange’s ATS system and OTC platforms.
• On the legal side, the Data Protection Act 2024 (effective January 2025) now obliges every organisation to appoint a data protection officer and handle personal data transparently and securely; the Banking Act 2023 strengthens bank resolution tools and gives depositors priority in liquidations; and the Cybersecurity Bill 2025 creates a dedicated authority to police critical digital infrastructure.
• Meanwhile, the Botswana Stock Exchange is seeking comments on revised equity‑and‑debt trading rules and a new “Mandate Transfer Board” for intra‑fund transfers, and the Non-bank Financial Institutions Regulatory Authority (NBFIRA) has released draft REIT rules for public input.
• Botswana's financial market is being significantly reshaped by the 2023 pension fund rule, which mandates that funds increase their local asset allocation to 47% by the end of 2026 and 50% by December 2027. This phased repatriation is expected to inject approximately BWP 18 billion (USD 1.285 billion) into the domestic economy, boosting liquidity and supporting asset prices on the Botswana Stock Exchange (BSE), where pension funds already own a dominant share of the free-float stock. While this influx underpins a projected economic growth of 3.1% for 2026 and encourages investment in newly allowed infrastructure and increased private equity classes, analysts caution about heightened concentration risks due to the shallow nature of the local market.

Botswana's sovereign credit ratings were recently downgraded by major agencies (Moody's to Baa1, S&P to BBB) in late 2025, due to the aforementioned challenges in its diamond-dependent economy, weak global demand, and rising debt, with both agencies maintaining a Negative Outlook and signalling potential further cuts (though ratings remain in the investment-grade category, reflecting strong governance despite economic pressures).

Zambia

By November 2025, Zambia was finally pulling out of its worst drought in 40 years. This drought had destroyed almost half of the 2024 maize harvest, knocked out much of the country’s hydro‑electric power and dragged GDP growth down to a meagre 1.2%, while sparking serious food‑security worries.

The tide turned when the government renegotiated roughly 94% of its foreign debt, securing a 30% haircut and longer repayment terms, which allowed the credit rating agencies S&P and Fitch to declare the country out of default. Since early‑2025, the Zambian kwacha has strengthened about 7% against the US dollar, and inflation has eased to around 11%; economists now expect the economy to expand by roughly 5‑6% for the year. Nevertheless, Zambia remains exposed to future climate shocks and its reliance on a narrow export basket keeps their outlook vulnerable.

Over the past two years, the financial market has been overhauled: the Bank of Zambia (BoZ) launched an e‑bond platform, migrated its RTGS to ISO 20022, and capped non‑resident government‑bond issuances at 5% of annual volume, while mandating par pricing for all new bonds. A 2023 budget green‑bond tax exemption, a July 2025 cybersecurity act - creating the Zambia Cybersecurity Agency - and a July 2025 Deposit Protection Fund (targeted for launch in 2026), have strengthened regulatory and safety nets.

The Lusaka Securities Exchange demutualised its CSD (now Lusaka Clearing and Settlement Agency Ltd), extended trading hours to 09:00h, and is consulting on moving from T+2 to a faster settlement model. The CSD upgrade slated for 2026 will introduce the Avento web/API platform, cutting settlement times from four hours to under 30 minutes. Other reforms include revised FX rules (board rate trades up to USD 5m), the Pensions and Insurance Authority’s removal of the 50% Zambian ownership requirement for custodians (gazetted Q2 2025; licences Q4 2025), a uniform 0.125% custodian commission on bond cash‑flow processing (effective Jan 2026), and an increase in withholding tax on government bond interest, from 15% to 20% (effective Jan 2026).

Zambia's sovereign rating saw recent upgrades from S&P (to CCC+, exiting default) and Fitch (to B-, from Restricted Default), reflecting significant progress in debt restructuring, fiscal reforms, and improved investor confidence, although challenges like election risks and climate shocks persist, with Moody's holding a Caa2 (Positive) rating, showing improved but still speculative status.

Namibia

Namibia officially launched its Central Securities Depository (CSD) on 4 December 2025, a fully electronic system for securities registration, settlement and corporate actions. The initiative, led by the Namibia Securities Exchange (NSX), in partnership with the Bank of Namibia (BoN), falls under the regulatory oversight of the Namibia Financial Institutions Supervisory Authority (NAMFISA). This marks a significant step in modernising the country’s capital markets.

Test dematerialisation is complete; NSX and Bank of Namibia will potentially look at dematerialising securities in 2026. The CSD has been onboarded into the Namibia Interbank Settlement System (NISS), meaning settlement will be in central bank money. In terms of a settlement guarantee fund, with the NSX guarantee fund currently at 20 million (NAD) – new contributions will go into a new guarantee fund. Bank of Namibia will have representation on the board, and they are working on insurance with an international company. Equities will be untouched; they will start with government bonds and the like – going from the most illiquid to liquid products.

Note: Changes to our cash questionnaire

There have been requests to make changes to our cash questionnaires, based on developments over the past year, specifically around ISO 20002 and the go-live for cash management specific queries. We observed that a number of banks were using translation systems, where they would receive in an ISO 15022 message, and these systems would then translate it and send out a reformatted ISO 20022 message: all these cash messages now have to be in the ISO 20022 format. We have therefore amended our questions to reflect this.