Sithembile Ntombela
It is one positive development for South Africa to celebrate – and there are several others – but the recent announcement that Stellantis, the umbrella automotive group housing motor car brands such as Citroën, Jeep, Opel, Peugeot, and Abarth, is planning to develop a car manufacturing facility in one of South Africa’s Industrial Development Zones (IDZ), comes as a relief for the country. This is particularly so considering the country’s grey listing by the Financial Action Task Force (FATF), only a few weeks ago.
It is still unclear which one of South Africa’s eleven IDZ will be selected for this new development, but wherever that is going to be, jobs and other economic opportunities stand to be created, and much needed revenue will be injected into the fiscus over time. More importantly, if anything will provide impetus for the South African authorities to work harder at continuing the work already started to meet the requirements for removal from the greylist, and ensuring that the country never return to it, it is this newly announced long-term investment. Stellantis plans to manufacture and sell a million vehicles from the proposed plant by 2030, a move that would help it achieve a 70% regional production autonomy.
Greylisted; not blacklisted
It is noteworthy to distinguish between greylisting – which means the country is actively reviewing and remedying identified financial sector management gaps – and blacklisting, which refers to countries that are deemed to be noncompliant and are to be treated with suspicion by investors, as their systems have been shown to be open for abuse by launderers of funds for crimes such as terrorism, human trafficking, etc. South Africa has been greylisted.
South African has been aware of the imminence of possible blacklisting for at least two years, as the evaluation process takes a while before a final determination is reached. The authorities in South Africa, big business, and analysts, have followed the development from the start. While there have been concerns over what it would mean for South Africa, as one would expect for there to be, not even the current administration has denied the need for the FATF scrutiny the country has come under, given the well-documented effects state of capture and other forms of corruption, particularly where it concerns suspected movements of large funds out of the country in the period concerned.
South Africa is the only African country with full membership of the Financial Action Task Force and other global institutions with a mandate to look into issues of transparency, accountability, and policing. It has long taken the steps to join credible international and bilateral institutions precisely on a quest to demonstrate to its peers in Africa and around the world that it has created needed institutional foundations, since the end of apartheid in the mid-1990s, to drive clean governance. But it has also learned over the years that no systems created by humans are infallible, hence the current process to strengthen the countries laws and systems.
This is why our government sees the greylisting not as a threat but an opportunity for South Africa to strengthen the fight against financial crimes as succinctly articulated: “Since the dawn of our democracy, in 1994, we have sought to build strong, independent, institutions and implement effective laws to deal with complex financial crimes. We have also forged collaborative relationships with transnational entities and global bodies in the financial sector, including the Financial Action Task Force and Interpol. To date, we have made great progress in addressing the shortcomings identified by the FATF. Of the 67 recommendations emanating from the mutual evaluation, we have successfully addressed all but eight strategic deficiencies.”
To this end, government has already promulgated, in late 2022, the General Laws (‘Anti Money-Laundering’ and ‘Combating Terrorism Financing’) Amendment Act 22 of 2022 and the Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act No 23 of 2022, into effect. According to a recent daily Maverick report, the president hopes by going this route to have applied a broad sweep in amending five existing Acts governing property, non-profit organisations, companies, the financial sector, and financial intelligence.
We should be cautiously encouraged by early signs that “all hands are back on deck” as our government, collectively gets to work with organised business, labour, and other civil society structures to reverse the greylisting. The task will be hard and long, as some countries that have had to work their way out of a FATF greylisting in the past had to wait for up to five years before it could happen. One of the examples for South Africa to emulate is that of Mauritius, which managed to get off the greylist in less than two years. It did this by using technological advancements to tackle money laundering and terrorist financing, which helped it improve detection and the monitoring of virtual crimes.
The SA Government does not stand alone
Encouraged by the way our government has taken to the task, several South African business leaders hold a positive outlook on the economic impact of greylisting not being as severe as others had anticipated.
Said, Thulani Kunene, Investec’s Group Head of Compliance, “Our view is that the greylisting was largely anticipated and priced in by the financial markets, and therefore on its own does not represent a significant risk to the stability of the South African economy. There are other factors such as the low growth forecast and the energy crisis that make the timing of the greylisting unfortunate.”
“I think in the short-term the consequences will not be that bad and will be relatively immaterial,” added Richard Wainwright, the bank (Investec)’s CEO. “The impact will really be felt if we don’t get off this list by 2025”, he concluded.
The South African authorities and other economic players are quite aware that the FATF will spend the two -three years closely monitoring the country’s progress in implementing the plan that our government has put in place. If all goes well, South Africa should be in the clear before the end of 2025, even earlier. There is general appreciation of the adverse reputational impact on the country if it fails to get off the greylist before the end of 2025. This is the ideal time for the country to pause and reflect on more effective ways to strengthen our controls. South Africans are often described as a resilient nation. And they truly are. The same is said of their country, which has gone through several hundred years of colonialism and apartheid pains. But the country managed to come together when, in the period leading to the 1990s and soon thereafter, South Africans began to talk to one another.
Through all our collective efforts, this country can and will get through this hurdle. We have been through worse before.
Sithembile Ntombela is the Acting CEO of Brand South Africa, the official marketing agency of South Africa, with a mandate to build the country’s brand reputation to improve its global competitiveness.
This article was first published on The Daily Maverick website.
