Early last year, South Africa faced a sobering reality through its grey listing by the Financial Action Task Force (FATF).
What this designation signalled was that South Africa’s efforts to combat money laundering, terrorist financing, and other financial crimes fell short of international standards.
Simply put: grey listing is not a symbolic reprimand; it has far-reaching consequences that could stifle economic growth, discourage foreign investment, and tarnish the country’s global reputation.
To restore its standing, South Africa must act decisively and recognise the depth of the issue through global precedents.
Realising the non-financial cost of grey listing grey listing places South Africa under enhanced scrutiny by global financial institutions, increasing the cost and complexity of doing business with the world.
The impact is real and tangible.
Foreign investors, wary of regulatory risks, may reduce their exposure to the country. Capital inflows — already under strain — could dry up, further weakening the rand and exacerbating inflation.
Moreover, South African businesses face increased compliance costs as financial transactions undergo intensified due diligence.
In practical terms, this means delayed payments, disrupted trade, and reduced competitiveness.
For a nation battling economic stagnation, grey listing has, and may continue to be, an albatross around the neck of its growth ambitions.
While we know that South Africa’s governmental institutions are hard at work attempting to rectify the six outstanding action items (as evidenced by National Treasury’s most recent update), it remains illustrative to assess the impact that a prolonged grey listing has had on similar emerging economies.
Pakistan for instance was grey listed in 2018, and subsequently experienced a marked slowdown in foreign direct investment.
— Moneyweb.
