For nearly three years now, South Africa has carried an uncomfortable badge of dishonour: inclusion on the dreaded Financial Action Task Force’s (FATF’s) ‘grey list,’ a register reserved for jurisdictions with ‘strategic deficiencies’ in their defences against money laundering (ML) and terrorist financing (FT). Last month, that stigma was finally lifted. The FATF, the Paris-based watchdog that polices the plumbing of the global financial system, announced that South Africa — alongside Nigeria, Mozambique and Burkina Faso — had satisfied all outstanding requirements and was being removed from enhanced monitoring. Fantastic!
For Pretoria, it marks the end of a bruising chapter that began in February 2023, when the FATF concluded that the country’s Anti-ML/Combatting-FT regime was riddled with enforcement gaps. Banks, asset managers and corporates were forced into costly compliance upgrades as the grey-listing tarnished South Africa’s reputation and raised the cost of doing business abroad.
The price of grey:
Grey-listing isn’t mere bureaucratic embarrassment — it has tangible economic costs. It triggers risk-aversion among foreign banks, prompts international counterparties to apply heavier due diligence, and raises funding costs. The International Monetary Fund (IMF) estimates that, on average, a grey-listed country can experience a 7–8% decline in capital inflows relative to GDP. For South Africa, that translated into a weaker Rand, a steeper sovereign-risk premium and more cautious investors.
In that context, the delisting is welcome vindication for policymakers who spent the past two years tightening regulation, empowering the Financial Intelligence Centre (FIC), and strengthening law-enforcement coordination. The Treasury and South African Reserve Bank (SARB) led a series of reforms that upgraded supervisory frameworks and improved transparency in beneficial ownership — the very reforms that the FATF had demanded.
A message to markets:
The market impact was not immediate fireworks, but it is meaningful. Removal from the grey list reduces the ‘friction cost’ for cross-border transactions, improves perceptions of South African counterparties among global banks, and should gradually narrow credit spreads on Rand-denominated debt.
For institutional investors, it also signals progress in Governance — a key pillar in Environmental, Social and Governance (ESG) frameworks that increasingly influence portfolio decisions. In the eyes of risk committees from London to Singapore, South Africa has just moved a notch higher on the credibility scale.
Still, this is no panacea. Our country remains encumbered by sporadic (albeit greatly reduced) power shortages, sluggish growth and fiscal pressures that even the cleanest compliance certificate can’t erase. Yet by closing one of the more embarrassing chapters in our regulatory history, Pretoria has at least removed a major structural drag on sentiment.
A broader African story:
The FATF’s decision also shines a light on a regional trend. Nigeria, Mozambique and Burkina Faso were delisted at the same meeting, suggesting that African regulators are becoming more aggressive in aligning with global standards. This matters: grey-listing has long been an unspoken barrier to investment in sub-Saharan Africa, reinforcing stereotypes of opacity and weak enforcement. Each successful delisting chips away at that nasty narrative.
For South Africa, whose financial sector acts as a gateway for much of the continent, the reputational benefits extend beyond its borders. Banks headquartered in Johannesburg facilitate a significant share of trade and project-finance flows across Africa; their enhanced standing will ripple through regional lending and capital-market activity.
Not out of the woods, but out of the shadows:
The FATF’s language was clear: delisting means progress, not perfection. South Africa will continue to be monitored through standard follow-up processes, and a full mutual evaluation looms in the next few years. Slippage could invite renewed scrutiny. But for now, the message to investors is simple — the direction of travel is positive.
In an era when geopolitical risk often trumps governance reform, it’s refreshing to see a story of institutional repair. South Africa’s step out of the grey is more than a regulatory milestone; it’s a reminder that credibility, once lost, can be earned back — albeit slowly, and only through hard, technocratic work.
The Rand did not soar overnight (although it did strengthen), and bond yields didn’t collapse (although they did start dropping), but the intangible dividend — restored confidence — will compound quietly in the background. After all, in markets as in life, being taken off a watchlist is always preferable to being added to one.