The National Treasury has expressed confidence that South Africa will soon be removed from the Financial Action Task Force (FATF) greylist, marking a significant milestone in the country’s efforts to strengthen its anti-money laundering and counter-terrorism financing measures.
South Africa was placed on the FATF’s greylist in February 2023 after the global financial crime watchdog found deficiencies in the country’s compliance with international standards. The listing raised concerns about financial transparency and led to increased scrutiny of South African transactions, higher compliance costs, and capital outflows.
According to Dr. Azar Jammine, Director and Chief Economist at Econometrix, South Africa has now fulfilled 21 of the 22 action items required by the FATF. The remaining condition relates to prosecuting individuals involved in terror financing and money laundering.
“The Financial Action Task Force has indicated that South Africa appears to have met the final requirement, but they will conduct an on-site inspection to verify this before making a final decision,” Jammine explained. If confirmed, the country could be formally delisted by October 2024.
The greylisting had immediate financial consequences, contributing to capital flight and a sharp depreciation of the rand in 2023. Jammine noted that the threat of greylisting alone had already spooked investors, pushing the rand to nearly R20 against the US dollar at one point.
“Being on the greylist increased bureaucratic hurdles for financial transactions, making South Africa a less attractive investment destination,” he said. However, anticipation of delisting has since bolstered the rand, which has strengthened to below R18/USD, easing inflationary pressures and raising hopes for interest rate cuts.
Despite progress, analysts warn that reputational damage may linger. “Trust isn’t restored overnight,” Jammine cautioned, pointing to broader governance concerns, including corruption and slow judicial processes.
The upcoming FATF inspection will involve interviews with financial institutions and regulators to assess whether enforcement measures are effectively implemented. Any negative feedback could delay South Africa’s removal.
While Treasury’s optimism signals a turning point, experts stress that sustained reforms are crucial to prevent future relisting and restore full investor confidence.
“The road to stronger financial governance is far from over,” Jammine said, “but this is a significant step forward.”
The FATF’s final decision is expected later this year, with markets closely watching the outcome.
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