South Africa’s exit from the FATF greylist restores credibility and eases a costly drag on confidence, but lasting gains will depend on sustained fiscal discipline and deeper reform.
South Africa’s removal from the Financial Action Task Force (FATF) greylist marks an important step in restoring its reputation as a credible, compliant participant in the global financial system.
The IMF has long noted that it is difficult to isolate the effects of greylisting from a country’s wider economic woes – and South Africa had plenty of those. Yet, being greylisted did tarnish its image, raising compliance costs, slowing transactions and nudging up funding costs for both government and business.
Banks and investors demanded higher returns to compensate for perceived risk. International counterparties applied extra due diligence to South African transactions, often passing on costs to clients. Accessing green finance – critical for the energy transition – became trickier.
The result was a quiet but costly drag on capital flows and confidence. Coming off the list does not erase those scars overnight, but it strengthens the country’s financial defences and reinforces the foundation for renewed investment.
No credit for compliance
Those hoping this achievement might trigger a ratings upgrade will be disappointed. Fitch, S&P and Moody’s had already stated that the greylisting did not feature in their credit metrics. Its removal, therefore, will not move the needle on that front.
South Africa’s debt story remains the main concern of credit ratings agencies. Public borrowing has ballooned from 23.6% of GDP in 2008/09 to nearly 77% last year. It’s that escalation in borrowing that has pushed up bond yields and cost the country its investment-grade status.
South Africa’s benchmark bond yield has fallen to below 9%, from above 12% earlier in the year – a reflection of easing inflation, lower interest rates, declining US bond yields and improving fiscal metrics, rather than progress on anti-money-laundering or counter-terror-financing compliance.
The lesson is simple: governance gains help sentiment, but fiscal discipline still anchors the credit outlook.
Not a silver bullet
This is a significant but not a “signal” event. South Africa’s delisting joins a cluster of improvements since the formation of the Government of National Unity, including a sharp reduction in political risk driving substantial bond market strength and improved investor confidence.
Together, these steps paint a picture of momentum. Yet investors remain wary. Confidence builds cumulatively, one reform at a time, and only sustained delivery will turn optimism into capital inflows.
Markets’ muted reaction to the news speaks volumes. The rand and bond yields barely budged, suggesting investors had already priced in the change and are now watching for proof that the reforms stick.
Still on the radar
Greylisting was never designed to cripple economies. Its purpose is to push countries toward stronger anti-money-laundering and counter-terrorism-financing frameworks. But inclusion on the list automatically adds a country to the EU’s “high-risk third countries” and the UK’s “high-risk jurisdictions” lists – triggering stricter due diligence and higher transaction friction.
While South Africa’s removal from the FATF greylist is a key prerequisite, it does not automatically trigger delisting by the EU or UK. Each maintains its own high-risk jurisdiction list, with separate criteria and review timelines focused on assessing ongoing AML/CFT deficiencies.
As National Treasury itself cautions, delisting is “only the start of a broader process”. Government agencies and private institutions cannot afford complacency; the reforms that earned South Africa its reprieve must now be deepened and embedded.
Public-private collaboration will be essential to sustain momentum and to ensure anti-money-laundering and counter-terrorist-financing systems become more effective, not just more compliant on paper. The FATF notes that it will continue to monitor progress.
South Africa has regained its financial credibility, but maintaining it will demand discipline, transparency and follow-through. The clouds have cleared; the task now is to keep the horizon clear.
