Greylisting starting to bite

South Africa’s greylisting is beginning to affect businesses and individuals who transfer money outside of the country and those transferring money into South Africa. 

This is according to Victoria Lancefield, director of expatriate tax and banking engagement at Financial Emigration, who spoke to eNCA about the impact greylisting has on South African businesses and individuals. 

The consequences are mostly felt by businesses and high-net-worth individuals as they are transferring large sums of money across borders. 

The South African Revenue Service (SARS) is behind most of the changes after it altered its process of clearing the transfer of funds outside of the country. 

South African tax residents can still take up to R1 million out of the country, no questions asked. However, any amount above that must go through SARS’ new Approval of International Transfer clearance process. 

This process is much more thorough and stringent than its predecessor, with more information required of applicants and additional documentation required. 

In effect, getting money into and out of South Africa is much more difficult. 

Commercial banks in South Africa are also increasing their requirements for individuals and businesses to transfer across borders. 

Banks are increasing the information required for companies and individuals to get a balance of payments code to transfer money from South Africa. 

According to Lancefield, this has two major impacts on businesses. It is more time- and resource-consuming, and it requires companies to keep more documentation on hand. 

Tiger Brands provides an example of how greylisting has impacted businesses, resulting in payment delays for exports from South Africa. 

The company produces its products throughout Southern Africa and exports them to 25 countries on the continent. 

CEO Noel Doyle said that while customers make their payments on time, they take much longer to reflect on Tiger Brands’ books. 

“It’s a timing difference, but it’s another complication in the export chain, particularly if you are exporting to another greylisted country. We never had those problems before … so it feels like everything is getting complicated at the moment.”

Getting off the blacklist will not be quick

Despite efforts by the National Treasury and other state institutions, South Africa is unlikely to get off the greylist within two years. 

Moreover, according to Lancefield, these changes from SARS and commercial banks will probably stay on after the country gets off the greylist. 

It is vital for South Africa to get off the greylist as soon as possible. The longer the country stays on the greylist, the greater its impact on economic performance. 

Lancefield says it is unrealistic to think South Africa will get off the greylist within two years. Mauritius managed to get off the greylist quickly, but its economy and financial sector are much smaller and less sophisticated than South Africa’s. 

The country will probably get off the greylist in five years, said Lancfield. Worryingly, the longer the country stays on the greylist, the closer it gets to being blacklisted. 

National Treasury is leading talks with government departments, the South African Reserve Bank and regulators such as the Financial Sector Conduct Authority.

This effort focuses on increasing capacity by hiring more people, developing supervisory expertise and skills, and deepening the stringency of its sanctions and penalties in line with FATF’s recommendations.