| Godongwana: Law changes ‘critical’ to prevent greylisting | Godongwana: Law changes ‘critical’ to prevent greylisting

 Finance Minister, Enoch Godongwana. Photo by Gallo Images/Brenton Geach.

Finance Minister, Enoch Godongwana. Photo by Gallo Images/Brenton Geach.

  • Legislative changes will be a critical step in preventing South Africa from being greylisted says Finance Minister Enoch Godongwana.
  • It will be tough, but Godongwana believes South Africa can make significant progress before February 2023.
  • Government is currently collaborating with the financial sector to address shortcomings in fighting corruption, terror financing and money laundering.
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Changes to the law to bolster South Africa’s ability to fight money laundering, corruption and terror finance will be “critical” in avoiding a greylisting, according to Finance Minister Enoch Godongwana.

The minister on Wednesday was responding to questions in Parliament.

The African Christian Democratic Party’s (ACDP) MP Steve Swart asked about the steps Treasury is taking to avoid a greylisting by the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog.

A greylisting would raise South Africa’s risk profile which may affect corresponding relationships between South African banks and international financial institutions. S&P, however, recently indicated that a greylisting might not put these corresponding banking relationships in jeopardy, but it would raise the government’s cost of borrowing.

Godongwana is optimistic that South Africa can make progress in addressing shortcomings flagged by the FATP before its next plenary in February 2023.

“It will be a tough challenge to prevent a greylisting. It is my view we can make progress by February 2023,” he said.

There’s still hope

Should South Africa not “fend off” a greylisting, it is still possible to “minimise the remedial action” that must be addressed, Godongwana said.

He noted that a greylisting would have a “huge impact” on the financial sector. Treasury is working together with the financial sector, holding regular meetings with relevant stakeholders, Godongwana said. “We will continue to interact over the next few months until February.”

READ | Estate agents, lawyers and others face crackdown as SA tries to avoid greylist

The government is also looking to amend two bills that can strengthen the effectiveness of its legal framework to combat financial crimes and corruption. They are the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill and the Protection of Constitutional Democracy Against Terrorist and Related Activities Amendment Bill – both of which are before Parliament for consideration.

The latter is expected to be enacted by November 2022, Treasury said previously.

“If enacted in law, it will represent a substantial and critical step to prevent greylisting,” said Godongwana. The bills will signal to the FATP that Parliament is taking action, Godongwana emphasised.

Government is also looking to strengthen institutions – ensuring they have resources – to be effective in addressing financial crimes and corruption, he explained.

Inflation relief

Godongwana also spoke about the steps the government has taken to ease the financial pressures on consumers facing higher inflation rates.

Among the steps taken include the temporary cuts to the fuel levy and most recently, the suspension of chicken import tariffs to lower the prices for consumers.

Godongwana noted that inflationary spikes were linked to global events outside of South Africa’s control – such as the Russian-Ukraine war and even the Covid-19 pandemic – that affected supplies.

Government has been monitoring pricing trends, which are starting to come down, the minister noted. At the time the relief measures were implemented, prices were rising. “We have been monitoring those prices, and they are beginning to go down,” he shared.

August inflation, released earlier on Wednesday, eased to 7.6% from 7.8% in July. This is the first deceleration since January.

Analysts still expect a steep rate hike of 75 basis points at the South African Reserve Bank’s next monetary policy committee meeting.

For now, if any new relief measures are to be introduced – this will be made known in the Medium-Term Budget Policy Statement on 26 October, Godongwana said. “At the moment”, there are no changes as prices are going down, he said.

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