SOUTH Africa’s greylist status should top the agenda at this year's BRICS summit, experts said after the grading, which could deliver a “major blow” to the nation’s economy.
This after S&P Global unexpectedly lowered its outlook on South Africa’s junk-rated debt from positive to stable this week due to the country’s poor economic growth rate and increased load shedding.
Western credit ratings on emergency markets have been on the BRICS agenda previously and could return to the agenda of the summit that will be held in Durban in August.
Credit ratings express the rating agency’s opinion on the credit quality of an issuer’s debt.
A Gauteng-based agency, Sovereign Africa Ratings (SAR), launched late last year, aiming to provide an additional opinion on South Africa’s creditworthiness compared to the “big three” agencies – Fitch Ratings, S&P Global and Moody’s Investors Service – which make up 95% of the sector.
Global political and economical analyst Dr Dale Mckinley said the greylisting, which were imposed by the Financial Action Task Force (FATF), should “surely be discussed”.
“I think it will be discussed economically ... it may even be contested,” said Mckinley.
“I would imagine it would be used by Russia and China as an ideological weapon to attack or question the power of financial institutions or credit agencies. This is only because they want to create an alternative economic and financial system,” he said.
“The greylist status is a shot across the bows. There are serious concerns about money laundering while the terrorism aspect is not so convincing to me.”
The announcement that South Africa had been placed on the international greylist left numerous local politicians worried about the effects it's going to have on an already struggling economy.
According to Wouter Wessels, the Freedom Front Plus's spokesperson on finances, the government waited too late to take the necessary steps to avoid greylisting.
Among other factors was the General Legislation Amendment Bill (Combating Money Laundering and Terrorism-financing) that was only debated in Parliament at the end of last year.
“Given South Africa's current economic condition after the Covid-19 pandemic, the huge unemployment rate and the ongoing power crisis, the country could not afford to also end up on the greylist," said Wessels.
ActionSA's director of policy, Johann Krige, echoed Wessels' sentiments, saying he was concerned about economic growth.
He argues that South African companies will now face even more obstacles to growth.
“If analysts’ estimates are correct, South Africa can expect the economy to shrink by 1% to 3% per annum - something we can't afford,” said Krige.
President Cyril Ramaphosa previously said he knew what to do to get off the list.
“We are determined to do this as quickly as possible,” he said, adding that the situation is less dire than some people suggest.
“It is noteworthy that the strategic deficiencies identified by the FATF do not relate directly to the country’s financial sector. This means that financial stability and costs of doing business with South Africa will not be seriously impacted by the greylisting,” said Ramaphosa.
In the meantime, while China is brokering peace deals in the Middle East, the move is seen by geopoltical analysts as another move in the realignment of the global world order.
Weekend Argus