FATF AML Deficiency List
US Dept of State Money Laundering assessment
Non - Compliance with FATF MER Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
South Africa is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards was undertaken by the Financial Action Task Force (FATF) in 2009. According to that Evaluation, South Africa was deemed Compliant for 9 and Largely Compliant for 14 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 2 of the 6 Core Recommendations.
US Department of State Money Laundering assessment (INCSR)
South Africawas last deemed a Jurisdiction of Primary Concern in the US Department of State 2018 International Narcotics Control Strategy Report (INCSR). The Overview from that report was as follows: -
South Africa’s position as the financial center of the continent, its sophisticated banking and financial sector with a high volume of transactions, and its large, cash-based market make it a target for transnational and domestic crime syndicates. The Financial Intelligence Centre (FIC), South Africa’s FIU, works closely with other governmental organizations on AML enforcement. The Illicit Financial Flows Task Team (FTT), composed of six agencies, including a U.S. law enforcement representative, coordinates a national approach to investigate and prosecute money laundering activities. President Zuma signed an amendment to the Financial Intelligence Centre Act, 2001 (FICA) in April 2017, and in October 2017, the FIC, in collaboration with the National Treasury, the South African Reserve Bank (SARB), and the Financial Services Board, published guidance to implement the new law.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 44
World Governance Indicator – Control of Corruption 60
South Africa suffers from widespread corruption, despite it performing better than regional averages across a number of key measurements. The country has simpler procedures, smoother interactions with tax officials and easier enforcement of commercial contracts than comparable regional countries. It has a robust anti-corruption framework, but laws are inadequately enforced. Public procurement is particularly prone to corruption, and bribery thrives at the central government level. The Prevention and Combating of Corruption Act (PCCA) criminalises corruption in public and private sectors, including attempted corruption, extortion, active and passive bribery, bribing a foreign public official, fraud and money laundering, and it obliges public officials to report corrupt activities. As it is a criminal offence to provide any form of "gratification" to an official if it is not lawfully due, companies are advised to refrain from giving gifts or exchanging facilitation payments. For further information - GAN Integrity Business Anti-Corruption Portal
South Africa is a middle-income emerging market with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; and a stock exchange that is Africa’s largest and among the top 20 in the world.
Economic growth has decelerated in recent years, slowing to just 1.5% in 2014. Unemployment, poverty, and inequality - among the highest in the world - remain a challenge. Official unemployment is roughly 25% of the workforce, and runs significantly higher among black youth. Even though the country's modern infrastructure supports a relatively efficient distribution of goods to major urban centres throughout the region, unstable electricity supplies retard growth. Eskom, the state-run power company, is building three new power stations and is installing new power demand management programs to improve power grid reliability. Load shedding and resulting rolling blackouts gripped many parts of South Africa in late 2014 and early 2015 because of electricity supply constraints due to technical problems at some generation units, unavoidable planned maintenance, and an accident at a power station in Mpumalanga province. The rolling blackouts were the worst the country faced since 2008. Construction delays at two additional plants, however, mean South Africa will continue to operate on a razor thin margin; economists judge that growth cannot exceed 3% until electrical supply problems are resolved.
South Africa's economic policy has focused on controlling inflation; however, the country faces structural constraints that also limit economic growth, such as skills shortages, declining global competitiveness, and frequent work stoppages due to strike action. The current government faces growing pressure from urban constituencies to improve the delivery of basic services to low-income areas and to increase job growth.
Agriculture - products:
corn, wheat, sugarcane, fruits, vegetables; beef, poultry, mutton, wool, dairy products
mining (world's largest producer of platinum, gold, chromium), automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, commercial ship repair
Exports - commodities:
gold, diamonds, platinum, other metals and minerals, machinery and equipment
Exports - partners:
China 11.3%, US 7.3%, Germany 6%, Namibia 5.2%, Botswana 5.2%, Japan 4.7%, UK 4.3%, India 4.2% (2015)
Imports - commodities:
machinery and equipment, chemicals, petroleum products, scientific instruments, foodstuffs
Imports - partners:
China 17.6%, Germany 11.2%, US 6.7%, Nigeria 5%, India 4.7%, Saudi Arabia 4.1% (2015)
Investment Climate - US State Department
With the most advanced, broad-based economy on the continent, South Africa offers investors a diverse and mature economy with a vibrant financial and service sector, as well as preferential access to export markets in the United States, the European Union and the southern Africa. Standards are generally similar to those in most developed economies, U.S. investors find local courts generally fair and consistent, and infrastructure is well-developed. South Africa’s democracy is well-established with transparent and contested elections, and an appreciation for the rule of law.
Despite this generally welcoming environment, there are serious and growing concerns among investors about the general direction of policy making and structural reform issues. Labor strikes have increased in recent years, even while union membership is declining. Two strikes in 2014 in mining and metalworking were noteworthy for their duration and intensity, and in 2015 there were significant strikes by municipal workers, miners and in transport. Given the labor situation, slow economic growth and policy uncertainty, one or more of the international credit ratings agencies are likely to downgrade South Africa’s credit rating in 2016.
Violent crime and corruption remain widespread. Security and corruption are common factors that investors have to address. Basic infrastructure gaps and poor government service delivery in low-income areas have increased the incidence of protests and crime in recent years. Access to electricity has become a significant concern with the advent at the end of 2014 of “load shedding” (planned, limited brownouts of sectors of a city), shaving 1% off estimates for economic growth. In the latter half of 2015, load shedding eased, due to reduced demand in mining and manufacturing. Unemployment is high, averaging 25 percent by standard definitions, but high-skilled labor is in short supply and immigration laws make importing labor a challenge that has frustrated many current investors.
The biggest concern for investors has become the direction of economic policy. The South African government has since 2012 increasingly proposed laws, policies and reforms aimed at improving the lives of historically disadvantaged, generally black South Africans, arguing that the transition from apartheid over the last 21 years has not produced the expected economic transformation in terms of employment and ownership of companies. There is also a sense that the ANC and the South African Government feel they cannot rely on the private sector to complete this transformation in a timely manner, and thus the state needs to take a more direct hand in driving development, particularly by promoting greater industrialization. The need to improve economic outcomes for the unemployed and historically disadvantaged is broadly recognized within the business community, and companies have invested significant time and money in developing their staff and in development opportunities in their communities. Recent initiatives have included tightening labor laws to achieve proportional racial representation in workplaces, performance requirements for government procurement such as ownership transfer and localization, and weakening commercial property rights. While some initiatives have gained the force of law, such as the updated 2013 Broad-based Black Economic Empowerment (B-BBEE) amendments, other initiatives remain the subject of debate, creating uncertainty about the future regulatory and investment climate. Sectors of specific concern have included the extractive industries, security services and agriculture.
Macroeconomic management was generally strong until the global economic crisis in 2008, with reduced levels of public debt, generally low inflation, and a positive rate of economic growth. Inflation remained within the central bank’s target range of 3-6 percent from 2010 - 2014, though it has pushed the upper limit since late 2012 and exceeded 6 percent in 2015. Growth has stalled, at 1.3 percent in 2015 and a forecast for 0.7 percent in 2016, and government revenue has been negatively affected to result in a projected deficit of 3.9 percent of GDP through March 2016. Sovereign debt remains barely investment worthy, with a sustained negative outlook. In October 2014, Moody’s downgraded South Africa’s credit rating to Baa2 from Baa1, and maintained a negative outlook. The rating agency still cited the government’s weakening institutional strength, lackluster economic growth despite low interest rates, infrastructure shortfalls, high labor costs despite high unemployment, and increased concern about political stability as the major factors for maintaining a negative outlook for South Africa. In 2014 Fitch downgraded South Africa’s sovereign debt to BBB with a negative outlook; Standard and Poor's downgraded South Africa to BBB- at the same time.
Despite policy uncertainty, South Africa is a destination conducive to U.S. investment, and should remain so as the dynamic business community is highly market-oriented and the driver of economic growth. South Africa offers ample opportunities, and continues to attract investors seeking a location from which to access to the rest of the continent.
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