The issue of SA’s potential greylisting by the Financial Action Task Force (FATF) is expected to loom large in conversations between SA banks and their international counterparts in Washington, DC, this week, as the world’s bankers gather on the sidelines of the annual meetings of the IMF and World Bank, which start on Monday.
About 10,000 people traditionally descend on Washington for the annual meetings, which are being held fully in person for the first time since before the Covid pandemic. And the title of the opening panel discussion, “Addressing multiple crises in an era of volatility”, reflects the magnitude of the issues to be discussed this year.
Finance minister Enoch Godongwana and Reserve Bank governor Lesetja Kganyago and their senior officials will be there, as will leading private sector bankers and economists.
The head of SA’s climate finance team, Daniel Mminele, is also due to attend ahead of the COP27 climate summit next month at which SA is due to present the $8.5bn (about R150bn) just energy transition investment plan agreed with its international partners.
While the finance ministers and central bankers of the IMF’s 190 member countries attend the official meetings of the fund and the bank, the weeklong event also draws CEOs and board members from all the major global banks.
“You’ve got a massive number of bankers in Washington at this time of year,” said one CEO, who said all SA’s banks would use the gathering as an opportunity to meet at senior level with the correspondent banks with which they do trade finance, foreign exchange trading and other international business. They would also meet some of the global investment banks.
Investec traditionally hosts a breakfast in Washington at the end of the annual meetings which it uses to promote SA to investors and lenders, and which draws senior executives from SA and global banks.
With SA facing possible greylisting by the FATF, some local bankers see this year’s meetings as a particularly important opportunity to cement their relationships with correspondent banks. “When times are tough, you need those relationships,” the banker said.
Global economy
While SA’s financial regulators have done much to put measures in place to stave off greylisting, the question is whether the task force, which is due to publish its report-back on SA in February, will deem it to have done enough on the law enforcement side to prevent fraud and money laundering.
The expectation is that greylisting would make cross-border transactions more cumbersome and costly for banks’ clients because of the enhanced due diligence international banks will demand in light of the high risk attached to transacting with SA. Bankers say if SA is put on the greylist, the priority will be to get off it as rapidly as possible, ideally within a year.
This year’s annual meetings in Washington are expected to be particularly important given the dramatic developments in the global economy over the past year and the big questions these have raised for economic policymakers.
Climate finance, global inflation and the debt distress and food security crises facing many poor countries are among the issues that will be high on the agenda at the meetings.
In a curtain-raiser on Thursday last week, IMF MD Kristalina Georgieva provided a stark assessment of the outlook for the global economy, saying that the IMF’s latest forecasts indicate countries accounting for about one-third of the global economy will slide into recession this year or next year.
“Overall, we expect a global output loss of about $4-trillion between now and 2026,” she said. “This is the size of the German economy — a massive setback for the world economy.”
In just three years, the world had experienced the Covid-19 shock, Russia’s invasion of Ukraine and climate disasters on all continents.
“These shocks have inflicted immeasurable harm on people’s lives,” Georgieva said. “It is a dramatic moment and we can only deal with it if we strive to build bridges so that the world comes together ... Trouble travels: it doesn’t stay in one place.”
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