Finance minister Enoch Godongwana says SA still has time to avoid greylisting by global watchdog the Financial Action Task Force.
He disagreed with an independent report commissioned by Business Leadership SA (BLSA) released on Wednesday, which said SA is 85% likely to be greylisted in February 2023.
Godongwana said there is a “good chance SA can avert it”, provided stakeholders and “not just National Treasury” act urgently.
The minister said government will be filing a report with the FATF in October and it will be engaging with it “right up” to the date of the plenary decision.
Preventing money laundering and associated activities relies on a “government-wide effort”, he said in a written reply to Business Day.
BLSA released the report on the prospects of an FATF demotion last week. CEO Busi Mavuso said BLSA is “committed to improving the environment in which businesses operate, which is why the FATF issue has concerned us”.
Research and consulting firm Intellidex produced the report for BLSA. It estimated the economic effect would be less than 1% of GDP if SA acts fast. But the damage could reach up to 3% of GDP if SA is seen as slow and reluctant to satisfy FATF standards.
An IMF study in 2021 found greylisted countries had an average drop in capital flows of 7.6% of GDP.
“We did the research through a mixture of a review of others’ research as well as interviews with key players,” he said.
Releasing the report last week, Intellidex chair Stuart Theobald said there is a slim chance SA will avoid being relegated when the FATF makes a decision within four months.
“There’s a way open to avoid greylisting but the probabilities are very low,” said Theobald.
However, he expects improved political momentum “close to crunch time” and said the Treasury reacted to the risk well before other departments.
Treasury director-general Ismail Momoniat heads a committee on antimoney laundering and combating terrorism finance.
Godongwana said Momoniat’s team is working with agencies “to make significant progress in implementation the legal framework and improving effectiveness”.
The minister said that combating financial crime and enforcing antimoney laundering measures depend on the private sector’s co-operation.
Mavuso agreed, saying: “We all need to work together […] that is in the best interests of SA anyway.”
In August, Fitch’s head of ratings in the Middle East and Africa thought it “quite unlikely that such a greylisting will have an impact that is sufficient to change the rating, or even the outlook on SA’s rating”.
Graviton Financial Partners, a member of the Sanlam group, said that it takes countries an average of five to 10 years to be promoted off the greylist. There are exceptions. Mauritius was removed in less than two years.
“It’s still really important that we limit the economic impact, and the way we do that is to convince the world that we’re going to get off it as soon as possible,” said Theobald.
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