COMMUNITY LIVING
institutions . Despite efforts by numerous stakeholders in South Africa , the FATF ’ s January 2023 assessment of the country ’ s progress found that eight strategic deficiencies remain .
The FATF found that while South Africa had sound laws , frameworks and oversight around anti-money laundering and combating the financing of terrorism , prosecution and conviction of serious financial crimes was weak .
What are the potential impacts of greylisting ?
Greylisting affects a country ’ s reputation . Direct effects depend on how the rest of the world responds . Because the FATF calls for countries and financial institutions to apply enhanced due diligence and counter-measures when dealing with countries on the grey list , possible impacts include weakening access to international trade and financial systems as well as added difficulty and costs of doing business . It might also result in a reduction in capital flows and a higher cost of capital . Evidence on the impact of greylisting on other countries is mixed .
Any factors that are likely to mitigate the impacts of greylisting ?
South Africa already attracts a low level of foreign direct investment inflows given the impact of loadshedding , crumbling infrastructure and political uncertainty on investor confidence . Activity on our capital account consists largely of portfolio flows ( foreigners purchasing and selling South African bonds and equities ).
Also , South African financial institutions have deep , longlasting relationships in the global trade and financial system with correspondent banking playing a key role in facilitating the operation of our multinational corporations and commodity exports , which the world relies on .
What will greylisting cost me ?
Locally , there should be limited direct impact on South Africans . Those South Africans who deal with offshore counterparties ( banks , brokers or other financial institutions ) may experience more onerous due diligence screening , less efficient transaction processing and a generally higher cost of doing business .
2020 and removed in October 2021 after swift , decisive action to address deficiencies and strengthen its regime on anti-money laundering and combating the financing of terrorism . National Treasury has said that South Africa is expected to address deficiencies by ‘ no later than the end of January 2025 ’.
What happens if we don ’ t get off the list ?
A sustained period of greylisting may see the steady erosion of investment flows into South Africa , a higher cost of borrowing for local institutions and the government , as well as weaker long-term economic growth . The most impactful economic risk would stem from the withdrawal of banking and payments services , which are critical in facilitating trade , investment , remittances and economic growth . For the man on the street , the impacts will most acutely be felt by those needing to send or receive money to or from abroad , a higher cost of borrowing due to higher interest rates , higher prices on imported goods , and potentially a higher unemployment rate as economic growth deteriorates .
What should investors do ?
As always , we encourage investors to focus on factors they can control to ensure that they reach their financial goals :
• A well-diversified investment portfolio provides the best protection against global or SA-specific market risks .
• History shows that staying invested for the long term and avoiding attempts to time the market delivers better longterm returns for investors .
• Keeping investment fees low means you can hold on to more of your investment returns .
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How long is greylisting likely to last ?
Kelin Pottier
Generally , it takes one to three years for countries to address deficiencies and be taken off the grey list . A shining example close to home is Mauritius , which was placed on the grey list in February
The content herein is provided as general information . It is not intended as nor does it constitute financial , tax , legal , investment , or other advice . 10X Investments is an authorised FSP ( number 28250 ).