South Africa is set to receive $8.5 billion (R150 billion) worth of investment from the international community to assist the country in its shift away from fossil-fuel – however, the country’s imminent greylisting could prove to be a major barrier.
The looming possibility that the country fails to prove that financial crime is under control – and is subsequently greylisted by the global finance community – complicates an already complicated situation, the Sunday Times reports.
Stuart Theobald, chair of research firm Intellidex, said that while the total amount of funding is likely to remain for a greylisted South Africa, the dispersal of the money may face headwinds with new requirements on how the money is managed to arise.
Due to the funds being brought together from several sources, including national development funds – particularly from the EU side – one can expect complications if South Africa is greylisted, he said.
Theobald said that, currently, the pledge by the foreign jurisdictions “is only an announcement of intention and not a signed agreement, meaning the greylisting can still impact (it).”
“South Africa will present an investment plan at Cop27 indicating what it intends to do with the funds, and only then will the formal process of signing the agreements regarding the specific loans start.”
Theobald added that, if greylisted, South Africa would receive further conditions in regard to the billion-dollar transaction.
International financial watchdog the Financial Action Task Force (FATF) found in October last year that major gaps in legislation mitigated money laundering and other financial crimes in South Africa.
The government has been working in a flurry to prove to the international group that they are taking into account its recommendations and making the necessary changes. South Africa has until the end of this month to prove itself, but it is not looking hopeful.
Despite efforts of the government in pushing through legislation in haste, the report published by Intellidex, commissioned by Business Leadership South Africa (BLSA), found that there is an 85% probability that South Africa will be greylisted.
A greylisting will impact the economy at large, making it harder to do business as more considerations would need to be taken into account when transferring funds domestically but especially abroad – this in turn will raise the price of doing business and tarnish South Africa’s brand as an investment hub.
Midway through this year, the president of COP27, Alok Sharma, announced that the green-lighting of the Just Transition Framework by President Cyril Ramaphosa under his Presidential Climate Commission unlocked the agreed-upon $8.5 billion from the UK, US, Germany, France and European Union.
Ramaphosa said the framework advocates for a massive expansion of renewable energy, battery storage, new energy vehicles, green minerals and the hydrogen economy.
Even prior to the possible greylisting, the promised funds have come under scrutiny with more terms and conditions than expected.
South Africa’s minister of environment, forestry and fisheries, Barbara Creecy said that there are several partners and development institutions involved, and they have their own terms and conditions based on their individual fiscal cycles – complicating the matter and retrieval of the funds.
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