Deputy finance minister David Masondo has toned down expectations of how soon SA will get off the Financial Action Task Force (FATF) greylist, saying October 2025 is the most realistic timeline to achieve this.
This may dash hopes that SA could exit the greylist as early as February next year. But Masondo told investors in London this week that SA might not have addressed all of the remaining 14 deficiencies identified by FATF by then.
“We are just being realistic given what we know and what we still need to do,” Masondo told Business Day on the sidelines of the London gathering.
At the time SA was greylisted in February 2023, it jointly agreed an action plan with FATF to address 22 items linked to strategic deficiencies in its regime to combat money-laundering and terror financing. SA has since managed to get eight of those items addressed and struck off FATF’s list, with rapid progress particularly on enacting legislative and regulatory reforms to close the gaps in its compliance.
The remaining 14 items were meant to be addressed in stages by February 2025 in terms of the action plan, enabling SA to be removed from the greylist by the time of the June plenary of FATF. But Treasury had already said in July that it would be a tough challenge to get all of the final five items done by the beginning of next year as planned.
Masondo said in an interview on Tuesday that SA would by then have reduced the deficiencies but would not have addressed all 14. “To be globally competitive the cost of doing business must come down, but greylisting leads to higher transactions because of the enhanced due diligence that’s required,” Masondo said.
FATF had found that SA’s financial sector was solid and did not enable terror financing or money-laundering, but there was still work to be done in areas such as establishing a beneficial ownership register.
Finance minister Enoch Godongwana is expected to provide an update at his October 30 medium-term budget on the latest findings from FATF on SA’s progress.
SA is widely expected to struggle to get off the list until it shows progress on prosecuting crimes related to money-laundering. The partnership between business and government to tackle the energy, logistics and crime crises weighing on economic growth has made this one of its focus areas. Business has partnered with the Hawks to set up a specialised forensics laboratory to speed up the prosecutions of 20 priority crimes involving money-laundering.
Damage
Though the effect of greylisting has not been too damaging to the economy or the financial sector so far, the experience of countries that have been greylisted by FATF suggests the longer a country stays on the list, the greater the damage. And for SA to make a speedy exit within no more than two years would be a positive for investor confidence.
Masondo was one of the cabinet members who joined deputy president Paul Mashatile at SA’s London Investment Week this week. Mashatile told bankers and investors that SA sought to strengthen bilateral trade and investment relationships between the UK and SA. And he urged a collaborative approach to tackle the pressing issues facing the financial sector, including in areas such as sustainable finance and financial inclusion.
Speaking after an infrastructure forum hosted by Standard Bank at its London office, Masondo said a lot of investors were willing to deploy capital in infrastructure, energy, freight logistics, water, telecommunications and digital infrastructure. “What they are waiting for is the incentive structure we need to put in place to get that money flowing into those infrastructure projects,” he said.
There were discussions on how to enable investors to get returns when they invest in transmission infrastructure, where mechanisms such as credit guarantee schemes are being looked at to derisk investment in infrastructure.
Investors were also looking at investing in rebuilding and refurbishing rail infrastructure and the department of transport was finalising a private sector participation framework for this, and for third-party rolling stock on the freight lines.
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