South Africa’s Credit Safe Despite Greylisting, Reserve Bank Assures

Banks
  1. South Africa’s recent inclusion in the FATF’s grey list is not expected to immediately impact the nation’s credit ratings, according to a deputy governor of the South African Reserve Bank.
  2. The country has until January 31, 2025, to address its shortcomings in tackling illicit financial flows and terrorism financing, which includes stepping up corruption investigations and prosecutions.
  3. Credit rating agencies maintain a stable outlook for South Africa despite the greylisting, as long as the country demonstrates commitment to addressing the identified deficiencies and meets the set deadline.

South Africa’s recent addition to the Financial Action Task Force’s (FATF) grey list of countries with deficiencies in anti-money laundering and counter-terrorism financing measures is not expected to result in an immediate impact on the nation’s credit ratings, according to Fundi Tshazibana, a deputy governor of the South African Reserve Bank.

In February, the Paris-based global watchdog placed South Africa on its grey list due to shortcomings in addressing illicit financial flows and terrorism financing. The country has been given a deadline of January 31, 2025, to rectify these issues. Among the necessary actions, South Africa must increase corruption investigations and prosecutions, and ensure that authorities have timely access to accurate and up-to-date beneficial ownership information.

During an interview last week, Tshazibana explained the rationale behind the credit rating agencies’ decision not to view the greylisting negatively at this point. “The reason why the ratings agencies are saying that they’re not going to yet look at it negatively is that the nature of greylisting is that you are under enhanced monitoring” so remedial action can be taken, she said. She further emphasized that any negative consequences would only arise if South Africa were to miss its deadline, as it would indicate a lack of commitment to addressing the identified deficiencies.

Currently, the assessments of South Africa’s debt by the three major ratings firms, Moody’s Investors Service, S&P Global Ratings, and Fitch Ratings, stand at their lowest since the country first obtained credit ratings in 1994. Moody’s ranks South Africa two steps below investment grade, while both S&P Global Ratings and Fitch Ratings have it three notches below. However, all three agencies maintain a stable outlook for the nation.

The FATF’s greylisting comes in the wake of a period of widespread corruption in South Africa, locally referred to as “state capture,” which occurred under the rule of former President Jacob Zuma. Current President Cyril Ramaphosa has estimated that at least R500 billion (approximately $35 billion) of taxpayer funds were misappropriated during this time. Zuma, however, continues to deny any wrongdoing. South Africa’s efforts to address the FATF’s concerns and meet the 2025 deadline will play a crucial role in maintaining its credit ratings and attracting international investments in the coming years.

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