Reported by: Prinesha Naidoo

South Africa’s government and state-owned companies will find it harder to borrow money, while banking and asset-management fees may increase if the country is added to a global watchdog’s list of nations with shortcomings in tackling illicit financial flows. 

The Financial Action Task Force, which polices compliance with anti-money laundering and terror-financing measures, will decide whether to include South Africa on its so-called “gray list” during meetings scheduled for Feb. 20-24. That’s after an evaluation carried out in 2019, following an era of endemic graft, found Africa’s most industrialized economy lacking in all 11 of its effectiveness measures to combat dirty-money flows.  

The classification will mean increased financial oversight and put South Africa on par with the likes of Syria, the Democratic Republic of Congo and South Sudan. It will also weigh on the reputation of a nation which has a flagging economy, a 32.9% jobless rate and a full-house of junk credit ratings. Governance and policy failures have also forced President Cyril Ramaphosa to declare a state of disaster over electricity-supply constraints.  

The immediate impact of graylisting is likely to be muted because South Africa’s myriad problems mean international banks already place the country in a higher risk category and as markets have already priced in the move, according to Peter Attard Montalto, head of capital markets research at Intellidex. A 2022 report by the research firm showed a “high probability” of the country being added to the list.

Read full report: https://www.bloomberg.com/news/articles/2023-02-19/dirty-money-risk-looms-large-for-south-african-banks-state-companies#xj4y7vzkg