Government unwilling to get South Africa off greylist – FirstRand CEO

FirstRand CEO Alan Pullinger said the government is not prepared to do the hard work to get South Africa off the greylist. 

Pullinger made these comments following the release of FirstRand’s financial results for the year ended 30 June. FirstRand owns banks such as FNB, RMB, and WesBank. 

The company’s basic headline earnings per share grew by 12% to 655.3 cents per share, while basic earnings per share increased by 11% to 648.7 cents per share.

Pullinger expressed concern earlier this year at the company’s interim results presentation about South Africa’s relations with Russia and the negative consequences it will have for the country. 

He said South Africa’s banking industry faces a “profound geopolitical risk” from the government’s close ties with Russia. 

“Our government’s left-leaning enthusiasm for China and Russia is being noticed by countries vehemently opposed to the war in Ukraine,” he said at an investor briefing on Thursday.

The government’s indifference to the war and its friendship with Russia is “foolhardy in the extreme”, he said.

South Africa’s banking industry is dependent on access to international markets, global clearing and settlement, Pullinger said. The country risks consequences because of its stance on Russia, he said.

“Our collective access is a privilege; it is not a right, and it can be revoked with ease,” Pullinger said. “FirstRand does not share our government’s enthusiasm for Russia.”

At the company’s full-year results presentation, Pullinger said he was thankful the tension between South Africa and the West over the country’s relationship with Russia had calmed. 

However, he added that South Africa’s BRICS membership raises questions about the friends it keeps, and its support for the addition of new members, including Saudi Arabia and Iran, concerns him. 

 This “seems to show at a general government level, excluding the Treasury and the Reserve Bank, that people are not prepared to do the hard yards to get us off the greylist”, Pullinger said. 

The National Treasury is set to meet with the Financial Action Task Force (FATF)  soon to update the organisation about the country’s progress on the 22 recommended actions to get off the greylist. 

Greylisting starting to bite

South Africa’s greylisting by the Financial Action Task Force (FATF) is beginning to negatively impact the country’s businesses and the government’s ability to raise capital.

Business Day reported that Treasury director-general Duncan Pieterse said the country’s greylisting had increased the cost of its debt and its risk premium.

However, Pieterse said much of the impact of the greylisting was already priced into local assets before the FATF’s decision in February.

South Africa’s increased risk premium has also been exacerbated by the government’s widening fiscal deficit and growing debt burden.

Standard Bank CEO Sim Tshabalala said the negative impact of South Africa’s repeated missteps adds up and will make it more difficult for the country to grow.

Tshabalala singled out greylisting, in particular, as significantly impacting Standard Bank’s operations on the continent.

Greylisting makes it more challenging to do correspondent banking with global partners as “we are getting more and more questions”, Tshabalala said.

It has become more complex to do regular trade transactions as partner banks require more forms and more paperwork. This makes these transactions less efficient and more expensive for Standard Bank.

Correspondent banks are forced to ask more questions of South African banks and companies performing international transactions as regulation pushes them to gather more information now that South Africa is on the FATF’s greylist.

Issues such as greylisting “are a death by 1,000 cuts – they all add up”, Tshabalala said.

“Things that are negative about our country and diminish our status are happening slowly, but they add up. Greylisting is but one in a long list of things that create a negative perception of South Africa.”