The Grey Mile

by Marianne Mokken | March 7, 2023

Winter is coming. The days are getting shorter and the sun is rising later. In Cape Town that also means more rainy and overcast days. Then there is load-shedding hovering between stages 5 and 6. That means more candlelit dinners, but the romance of it all was lost by 15 February. To add to the already gathered grey clouds, FATF announced on 24 February 2023 that South Africa, together with our African counterpart Nigeria, will be added to their list of countries under increased monitoring.

Greylisting has been a hot topic since the Financial Action Task Force (FATF) released its mutual evaluation report (MER) on South Africa in 20211. The MER identified a mix of technical and practical issues that are not in line with the FATF’s recommendations for an effective legal framework to combat money laundering, terrorist financing and proliferation financing2. The race was always going to be tight to demonstrate that we have addressed all the highlighted areas satisfactorily. Now that the greylisting has become official, the discussion has turned to what the effects of the decision will be.

The obvious effect would be a weakening of the rand as a result of reduced confidence and expected currency flows into the country. Most economists have indicated that the markets have priced the greylisting into the rate for a while now with the announcement reaction being fairly muted. However, the risk premium still reflects within the rate traded.

The biggest thorn in our sides at the moment is load-shedding. During the State of the Nation Address, the energy crisis was declared a state of disaster with the aim of exempting critical infrastructure, supporting businesses, and accelerating energy projects. The acceleration of these projects may be hampered by the greylisting. Being under increased scrutiny means that those countries wishing to transact with South Africa may be required to perform additional due diligence procedures in line with FATF recommendations. In practical terms this means that entities and individuals residing in South Africa may be required to provide additional information and supporting documents to, for example, prove a source of funds. What the exact additional compliance measures will be, will depend on your counterparty. This will mean additional compliance costs and delays in finalising transactions. Some counterparties may be so risk-averse that they choose to sever ties altogether.

Ultimately time will tell what the exact consequences will be. The time South Africa spends on the greylist will also make a difference in the impact it will have. The longer we take to address the remaining issues the greater the impact will be. Other countries may choose to restrict investments from South Africa, interest rates may increase and economic growth may be hampered.

The time a country spends on the greylist varies: Mauritius spent 18 months on the greylist and Cambodia was only removed now after their addition to the list in February 2019. Yemen has been greylisted since 20103. The Minister of Finance has set a goal of mid-2024 to address all the remaining concerns and have South Africa removed from the greylist4.

In the meantime, if you have to navigate the choppy waters of managing your exchange control risk, contact Dale Petersen at 021 819 7802 or at to arrange a helping hand from our team.


2. Proliferation financing is any activity that provides property, financial or other services or economic support to a non-state actor that can be used to finance the manufacture, acquisition, possession, development, transport, transfer or use of nuclear, chemical or biological weapons (Refer to Section 1 of the Financial Intelligence Centre Act).


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