New SARB report shows SA stock markets narrowly avoided backlash in 2023, but SA should prioritise getting off the FATF greylist amidst uncertainty over future greylisting impacts on JSE and the country’s instability
(Breaking: Read all about it: Namibia greylisted by FATF)
The South African stock market avoided any major disturbances due to SA’s greylisting in 2023, according to a new report by the South African Reserve Bank (SARB).
And, although the country’s borrowing cost rose and the currency weakened quite a bit, it wasn’t solely due to the greylisting news – corruption and load shedding seem to have had a bigger impact on these.
The report, however, did find that the longer South Africa remains on the greylist, the more severe the financial impacts on the country will be.
Key Findings on How Greylisting Impacts JSE & Borrowing
1. The stock market showed resilience in 2023
Surprisingly, the South African stock market showed resilience in 2023 following the greylisting news, likely due to the market knowing and anticipating that SA would eventually be greylisted at some point.
This suggests that the initial shock was mitigated by proactive market adjustments.
2. Market anticipation and response
A significant takeaway is that the market had already factored in the possibility of greylisting due to known AML deficiencies. This pre-emptive adjustment helped cushion the immediate impact.
3. Diverse financial sector impact
A little more worrying, the study found that major financial players, particularly banks and insurers, had a surprisingly varied response to the news of SA’s greylisting.
And, though this doesn’t directly imply any problems, it does highlight that the country’s most prominent financial institutions did not have the same foresight and expectation as what investors had. Their internal responses would also be quite varied.
This indicates that there might be something the report missed. Or, at least, that the report’s constrained window of measurement (it’s a very limited report, focusing only on a few months during a single year, 2023), could belie other, more serious and long-term impacts that could ripple through the entire financial sector and thus the country.
For this reason, the report has a very clear recommendation…
4. South Africa should prioritise AML compliance to get off the greylist ASAP
The study warns that the longer South Africa remains on the greylist, the greater the risk of negative economic repercussions. These include potential shifts in investor confidence and challenges in international trade relations.
The Urgency to Act & Pro-Active Steps
South Africa faces a January 2025 deadline to exit the greylist. Failing to meet this deadline could exacerbate the economic and financial challenges. And the country has already made some strides to exit the list.
In October 2023, South Africa unveiled a much more focused investigative approach. And, in another recent move, South Africa has begun imposing fines for non-compliance, including fining Grindrod Bak for non-compliance, showcasing its commitment to improving its AML framework.
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