03/10/2022 | By Busiswe Mavuso
There is much work being done to reduce the chance that South Africa will be grey listed by the Financial Action Task Force, the global anti-money laundering and terrorist financing body. The National Prosecuting Authority has worked hard to rack up the number of cases related to state capture, and institutions ranging from Sars to the Financial Intelligence Centre have been working to implement new measures to combat money laundering. The question that business needs to know, though, is whether it will be enough to convince FATF?
BLSA has commissioned research to answer this question that we will be launching with members and the rest of organised business on 11 October. Grey listing has potentially serious implications for the economy, increasing the cost of financial transactions with the rest of the world. It will make it harder to do business for anyone operating financial accounts abroad or dependent on foreign financial services providers. The implications for our integration into the international economy are clear. Some have compared grey listing to the loss of investment grade credit rating. There are similarities as counterparts all adjust their views of the risk of doing business with South Africa – this time it will be reputational risk whereas a downgrade shifts perceptions of credit risk.
Grey listing is largely a consequence of the collapse of commercial crime investigation and prosecution during the state capture era. We are facing the consequences for our inability to mount effective prosecutions for crimes like money laundering and terrorist financing.
FATF aims to support countries to meet its recommendations and expectations for the effectiveness of supervision, investigation and prosecution related to money laundering and terrorist financing. This is closely very much allied to the interest of business in seeing effective policing, investigation and justice for commercial crime. It is for this reason that BLSA has signed a memorandum of understanding to support the National Prosecuting Authority to access skills in the private sector needed for investigations and to develop cases. The stakes are high – apart from FATF grey listing, crime poses serious risks to our economy and country as a whole. A report by the Global Initiative Against Organised Crime last month said surging rates of murder, extortion and kidnapping pose an “existential” threat to South Africa.
The research will analyse the likely economic consequences of grey listing and how to mitigate these. Those consequences will depend in large part on how confident the world is that grey listing is a temporary phenomenon, one that will be ended swiftly as we move to establish effective institutions that successfully detect and ultimately eliminate money laundering.
There are important implications for businesses. They need to understand the consequences of grey listing and how to mitigate them. But there is a clear role for business to play in a national effort to deal with organised crime, which is connected to money laundering and terrorist finance. That national effort is going to need to tap on the skills that the private sector has in forensic investigation and evidence gathering. Apart from our engagement with the NPA, our subsidiary Business Against Crime works widely to support the criminal justice system. The FATF process provides more impetus for us to get our commercial crime-fighting system up to scratch.
I applaud the NPA also for charging consulting firm McKinsey over the Transnet locomotives deal, adding the firm to the indictment which includes former Transnet CEO Brian Molefe and the group’s ex CFO, Anoj Singh. This is the appropriate way to deal with corporate malfeasance related to state capture – where a case is made through a thorough investigation, companies should be charged and prosecuted in court. They should of course receive a fair trial and an outcome that ensures justice is done. As has been said often, corruption always involves a corruptee and corruptor. Where business has done wrong, it must be held accountable.
There’s a heap of pressure headed for the fiscus in the form of a batch of bond redemptions falling due over next two years, I write in Fin24. In his medium-term budget policy statement this month, Finance Minister Enoch Godongwana has to find a balance in producing an effective budget that does two things: enable the government to work effectively and provide services to our citizens, and deliver appropriate fiscal policy. But he must contend with applications for a range of funding including the SRD grant, public sector wages and rising debt service costs.
South Africans are no more or less corrupt than citizens of any other nation on earth, I write in Business Day. The extent of corruption in any country is almost always inversely proportionate to the strength of the institutions set up to prevent it. Basically, if people think they can get away with it, there is a higher chance they will steal. The weaker a country’s watchdog institutions, the higher the levels of corruption.
This is a weekly newsletter from BLSA CEO Busi Mavuso.
BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. In 2017, BLSA signed a contract with South Africa, committing business to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.
Johannesburg 29 February 2024 – Business Leadership South Africa (BLSA) welcomes the appointment of a permanent executive team at Transnet… continue reading
Finance minister Enoch Godongwane delivered a strong budget that commits government to appropriate spending levels given the weak economic outlook. … continue reading
BACSA confirmed as the primary point of contact for Business interaction with government on crime and corruption through government structures,… continue reading