South Africa faces an uphill climb to escape a global dirty-money monitoring list by next year, according to the outgoing chief executive officer of Nedbank Group Ltd.<\/p>\n\n\n\n
\u201cI think it will be very difficult for us to get off the list by 2025 largely because of the slow progress in investigations and prosecutions,\u201d Mike Brown said in an interview in Bloomberg\u2019s Johannesburg office on Monday. \u201cThat is going to be the hardest bit to get us off the list.\u201d<\/p>\n\n\n\n
The Paris-based Financial Action Task Force (FATF) placed South Africa on its watchlist in February 2023, citing deficiencies in tackling illicit financial flows and terrorism financing. It gave the country until Jan. 31, 2025, to address the shortcomings.<\/p>\n\n\n\n
Inclusion on the so-called grey list means financial transactions with a South African component are subject to enhanced due diligence.<\/p>\n\n\n\n
While an extended stay on the list risks damaging investor sentiment toward South Africa, Brown said the impact has been muted so far, and will likely remain so as long as the country remains committed to remedying FATF\u2019s concerns as soon as possible.<\/p>\n\n\n\n
\u201cIt\u2019s something that nobody wants as a country because it doesn\u2019t have a good smell about it, so inherently, it is negative to the investment case for a country,\u201d Brown said. \u201cBut from a bank point of view, it really has not changed the ability for us to do business on a global basis with global banks.\u201d<\/p>\n\n\n\n
According to Brown, lenders started doing additional checks on South Africa as early as 2016 when the country\u2019s issues were becoming widely known, meaning the FATF decision made little practical difference. Nedbank is one of the nation\u2019s largest lenders by assets.<\/p>\n\n\n\n
State Capture<\/strong><\/p>\n\n\n\n South Africa\u2019s move onto the FATF gray list followed an era of endemic government corruption \u2014 referred to locally as state capture \u2014 under former President Jacob Zuma. His successor Cyril Ramaphosa estimates the graft cost the economy at least 500 billion rand ($25.6 billion).<\/p>\n\n\n\n While the government has stepped up efforts to tackle white-collar crime and exit the list, the National Treasury acknowledged in February that it would be a \u201ctough challenge\u201d to meet the 17 remaining items from FATF\u2019s 22-point plan within the timeframe.<\/p>\n\n\n\n \u201cFATF has already recognized the material improvements that have taken place since when they gray-listed us, so definitely the worst is behind us, not in front of us,\u201d said Brown, who is due to step down as Nedbank CEO on May 31.<\/p>\n\n\n\n Elections Outlook<\/strong><\/p>\n\n\n\n Brown also said Nedbank was optimistic about next month\u2019s elections and expects the ruling African National Congress to keep power or form the majority in any coalition government, suggesting continuity for its policies. <\/p>\n\n\n\n These include efforts to resolve bottlenecks in the energy sector, in transport and logistics and in crime and corruption.<\/p>\n\n\n\n \u201cMost analysis says the energy problems costing us maybe 3% of GDP and the logistics problems probably also costing us 3% of GDP,\u201d Brown said in a separate Bloomberg TV interview. <\/p>\n\n\n\n \u201cSo if we are able to resolve those through things like public private partnerships, there\u2019s certainly a few percent of GDP growth extra, and South Africa growing at three or four percent is a very different economy than South Africa growing at one to 1.5%.\u201d<\/p>\n\n\n\n
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