Adriaan Pask | Chief Investment Officer | PSG Wealth | mail me |
With South Africa being added to the Financial Action Task Force’s (FATF) grey list, we do not believe markets will continue to react over negatively due to the greylisting, especially since a lot of this unwelcome news has already been priced in by markets.
It does, however, play into the current narrative, of the government struggling to manage its affairs, especially considering news around the electricity state of disaster, state capture and corruption.
Improving and strengthening current anti-fraud and money laundering legislation should be considered a plus for investors, as it provides foreign investors more protection and safeguards when they invest money in South Africa. Once all requirements are met, it also puts our country on par with international legislation found in other developed nations.
The impact
While the FTSE/JSE All Share Index closed down by 2.70% on Friday before the announcement, the majority of global markets closed in the red on Friday.
The Rand, however, weakened over 1%, trading at R18.47/USD, after the announcement at 18h00 local time. The SA 5-year and the 30-year bond yields fell to 8.64% and 11.44%, respectively, while the local 10-year yield rose to 10.13%.
Thungela, PSG Konsult and Textainer were the top performers in afternoon trade, while Motus, Anglo American and BHP were the biggest losers on the day.
The event
South Africa has been added to FATF grey list, which offers recommendations for combating money laundering and unlawful funding.
“When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed time frames. The FATF does not call for the application of enhanced due diligence measures to be applied to these jurisdictions,” the agency noted on their website.
In President Cyril Ramaphosa’s weekly newsletter he states:
“Since the results of the mutual evaluation were published in 2021, we have made great progress in addressing the identified shortcomings. Of the 67 recommended actions emanating from the mutual evaluation, we have successfully addressed all but eight strategic deficiencies.”
Click here to read the rest of the president’s letter.
Click here to read further about the FATF decision to place South African in its grey list
