South Africa and Nigeria, two of Africa’s largest economies, are highly anticipated to be removed from the Financial Action Task Force (FATF) “gray list” as early as this month. This potential delisting marks a significant change in fortune for the nations, signaling substantial progress in their fight against illicit financial flows.
Assessors from the Paris-based FATF recently completed on-site visits and noted significant progress in the action plans of both South Africa and Nigeria, according to sources familiar with the private deliberations. The positive momentum extends to two other African nations, Burkina Faso and Mozambique, all of whom are tentatively scheduled to be taken off the list during the FATF plenary session concluding on October 24 in the French capital.
Boosting Investor Confidence
The FATF’s gray list is closely monitored by global investors, who are typically wary of conducting business in jurisdictions flagged for shortcomings in anti-money laundering and counter-terrorist financing regulations. A 2021 report by the International Monetary Fund (IMF) indicated that gray-listed countries often experience a “large and statistically significant reduction in capital inflows.”
The anticipated removal is therefore seen as a strong endorsement of the reforms put in place. Nigerian government spokesman, Temitope Ajayi, hailed the expected delisting as a “culmination of the remarkable work the government is doing… making Nigeria more attractive to investors.”
Financial analysts agree that while the direct market impact might be modest, the confirmation of robust and sustainable reforms is crucial. Lauren van Biljon, a senior portfolio manager at Allspring Global Investments UK Ltd., noted that exiting the list “would certainly be good for sentiment” and serve as “confirmation that the reforms and measures put in place… are both significant and sticky.” South Africa’s FTSE/JSE Banks Index already saw gains following the news, reflecting cautious market optimism.
Regional Success and Ongoing Reforms
The progress is a regional victory. South Africa has reportedly completed all 22 action items required for removal from the list, having been placed under heightened scrutiny in February 2023. Mozambique confirmed it has completed the 26 actions required, with the delisting poised to occur at a crucial time as TotalEnergies SE anticipates resuming its massive $20 billion natural gas export project. Burkina Faso also reported implementing all 37 measures needed to exit the list.
The expected delisting of these four African nations underscores a broader commitment across the continent to meeting global financial standards, enhancing transparency, and building confidence among international creditors and investors.
