/ MEDIA STATEMENT / The content on this page is not written by Polity.org.za, but is supplied by third parties. This content does not constitute news reporting by Polity.org.za.

South Africa is now at great risk of being subject to increased monitoring (greylisted) by the Financial Action Task Force (FATF) due to weaknesses in the country’s ability to enforce anti-money laundering and terrorism-funding regulations, and to investigate and successfully prosecute financial crimes.

The DA demands that Treasury acts with haste to implement the recommendations by the FATF to avoid the country sliding into an economic catastrophe.

The Governor of the Reserve Bank, Lesetja Kganyago, confirmed in response to question during a meeting of the standing finance committee that if South Africa were to be “greylisted” it will have dire consequences for the economy, as the move will hamper South Africa’s ability to attract investment and international financial transactions in the country.

The impact on the economy and the financial system is expected to become progressively worse. Together with a deteriorating balance-of-payments situation, being greylisted will compound to economic stagnation.

Other threats to South Africa’s economy and financial system include:

Banks operating in South Africa would face increased inspections by regulatory authorities, which means higher transactional, administrative, compliance, auditing and funding costs;

South Africa may be placed on the EU’s blacklist and the UK’s list of high-risk countries, which means access to commercial loans, borrowing from the International Monetary Fund (IMF) and various other sources of financial aid would be restricted;

Banks’ ability to conduct cross-border transactions would be restricted, which would hampering imports and exports leading to a decline in international relations and GDP – the Reserve Bank already expects a decrease in GDP for the second quarter of 2022;

The price of debt will increase and thus accelerate the crowding out of service delivery by higher interest repayments. This is already happening, as markets appear to be pricing in an inevitable greylisting.

The reputational damage of being greylisted would be so immense that the country could even face additional downgrades in investment and credit ratings, further restricting access to international markets.

If South Africa does not have easy, affordable access to global financial markets through the international financial system, it will become increasingly difficult to meet even the most basic needs of citizens, which spells disaster for the poor.

The major FATF-related risk to the economy stems from the possibility of government being unable to implement the financial watchdog’s recommendations in a satisfactory manner. It is the responsibility of National Treasury oversee the necessary legislative and technical remediation work that must be undertaken if South Africa is to avoid being greylisted.

Issued by Dr Dion George MP - DA Shadow Minister of Finance