What will the impact of greylisting be for South Africans?

While greylisting can limit access to international financial markets and increase the costs of trade, global markets largely pre-empted and priced in the high probability of potential greylisting. It is also unlikely that South Africa’s existing trade relations will be disrupted. 

 “Greylisting is not the end of the world for South Africa,” says Investec Chief Economist, Annabel Bishop, pointing out that financial markets had already factored it into their forecasts. “But it comes at an unfortunate time,” Bishop continues. “It represents more bad news heaped onto the worsening energy crisis and other critical failings in areas such as transport and water which are essential to a functioning economy. But the hope is that a concerted effort to cooperate with FATF in addressing failings in monitoring and controls, and getting off the grey list as quickly as possible, will be a positive step towards resolving the systemic problems that have for too long beset South Africa’s economy and its people.”

Investors may breathe a sigh of relief to know that, according to Bishop, “the greylisting in itself does not represent any necessarily increased chance credit rating downgrade/s from the key agencies.”

She explains that the credit rating agencies’ primary objective is to assess the creditworthiness of the borrower, adding that the recent Budget went a long way to reassure the credit agencies of the world that government has a planned debt relief for Eskom. 

The risk of a downgrade increases, however, the longer South Africa takes to get off the grey list, says Bishop.

Greylisting is not expected to negatively affect growth directly, however it will have some indirect consequences, she explains, including the potential reduction of portfolio flows and FDI. Mitigating this will depend on the speed and efficiency of the government’s resolve to implement AML/CFT reforms.