South Africa is off the grey list
South Africa has been taken off a global watchdog’s dirty-money list, providing a boost for increased foreign investment in Africa’s largest economy.
The Paris-based Financial Action Task Force said on Friday that South Africa, along with Nigeria, Mozambique, and Burkina Faso, is no longer on the list of jurisdictions subject to increased monitoring.
This comes after the affected governments stepped up efforts to combat money laundering and terrorist financing.
The yield on the South African benchmark 10-year bond fell 4 basis points to 8.9% at 5:27 p.m. local time and the rand extended gains, appreciating 0.6% against the dollar.
South Africa and Nigeria landed on the grey list in February 2023, while Mozambique was added in October 2022 and Burkina Faso originally got designated in February 2021.
At the FATF’s June plenary, the organisation praised the nations for their recent reforms to address illicit financial flows.
South Africa’s exit from the list should reinforce market optimism and signal progress on government reforms.
This is a boost for institutional strength that may lift sentiment, lower bond yields and ease debt-servicing costs, even if it doesn’t alter the growth outlook, Jee-A Van Der Linde, senior economist at Oxford Economics, said.
The removal from the so-called grey list should also make it easier and cheaper for citizens working overseas to send money home.
The FATF announcement may also help pave the way for new investments by foreign firms.
Prescient Investment Management CIO Bastian Teichgreeber said that getting off the grey list will not result in any massive moves in South African assets, with markets already expecting the removal.
However, it will boost confidence among international investors, which is crucial for South Africa to grow its economy.
Under the presidency of Mexican official Elisa de Anda Madrazo, the FATF has revamped its grey-listing criteria.
It has placed a greater emphasis on scrutinising the body’s wealthiest members while putting less of a focus on jurisdictions classified as least-developed countries, which typically pose a lower systemic risk.
The FATF assessment calendar shows South Africa could have an on-site visit in April 2027, when it will be evaluated on the group’s new methodology for the fifth round of reviews.
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