Government must pull up its socks if we wish to remain off the grey list

A strong and credible national economy that engages a large sector of the populace is a contributor to a nation’s ability to project power.

Our harsh lockdown rules during the Covid pandemic had a hugely detrimental effect on our economy, morale and ability to project economic power.

It devastated smaller companies, degraded our exports, resulted in massive unemployment and generally drove the country ever closer towards total bankruptcy.

Coupled to the mass institutionalised state corruption, we are now drifting in the economic doldrums. This has created a massive speed bump in our national trajectory and helped take us on a path of further national failure.

Whereas we have licit and illicit economies, we are deriving little to no benefit from our licit economy. On the other hand, our illicit economy appears to be booming.

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This is an unhealthy state of affairs. Our illicit economy is based on criminal activities, such as drug trafficking, car theft, the selling of stolen property and the import of cheap Chinese goods – many of them simply knockoffs of the original items.

It is also in this economy that money is laundered, much of it derived from corruption or acquired by illegal means. But there is a very dangerous factor lurking in the background – a factor few people want to mention.

It is a factor that threatens to position South Africa as a “no-go” state and place the country on the dreaded so-called “grey list” and on the Financial Action Task Force’s (FAFT) radar.

The FAFT is a global money laundering watchdog and South Africa is now firmly in its sights. A primary reason South Africa faces being added to the grey list is its inability to provide credible actions to combat the illicit economy, especially the country’s continued inability to counter money laundering and the financing of terror networks.

Although the FAFT has 39 international member countries, South Africa is the only African country that is a full member.

As a result of our country’s very poor performance related to financial regulation and oversight, we have been flagged by the FAFT. If the country continues to fail in meeting the FAFT’s required objectives related to money laundering and the financing of terror, we will be placed on the feared grey list.

This will have an even more devastating impact than the Covid lockdown rules and junk status combined. In a country already under siege by out-ofcontrol and rampant crime, and where the police department appears to live in a state of crime denial, we cannot afford to find ourselves grey-listed.

Had South Africa not been approached by FAFT to get its financial compliance and regulations house in order, we no doubt would have simply just allowed the lack of oversight to benefit the illegal gains of crime and corruption.

FAFT raised 40 major concerns relating to South Africa’s financial governance and oversight. The country received a very poor rating assessment in its mutual evaluation.

As a result, SA is now being forced to report more frequently to FAFT and investigate and rectify the many deficiencies and loopholes identified in our financial sector.

So now, the government is hard at work to table numerous amendment Bills as soon as possible to prove to FAFT and other international financial bodies that the country is capable of countering money laundering and other financial crimes – including acting as a funnel for financing terrorism.

Such is the seriousness of the matter that the government is planning to rush through a new Bill that will be known as the Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill, 2022.

But why do we first need to be warned before any actions are taken? Is it because the government has allowed these matters to become almost entrenched as “normal financial practices”?

Being placed on the grey list has, apart from scaring off investors, other major disadvantages. The integrity of our country’s banking system will be put at risk.

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Our main international trading partners may restrict their banks in transacting with South Africa’s banks. It can result in international economic sanctions – and international boycotts.

These restrictions are multiplied when considering how South Africa has become world-renowned for bribery, corruption, cybercrime, fraud, tax evasion, illegal investment schemes, a suspected hub for financing of terrorism and other related crimes.

The international community has become tired of our government’s continued mutterings of “good financial governance”, victimhood, “oversight” and such like.

Whereas we may have good financial regulations, we are simply unable to implement them. Our government had better pull up its socks if we wish to remain off the grey list. Getting off the list is easier said than done.

-Mashaba is a political advisor