The decision of the Financial Action Task Force (FATF) to remove South Africa from the “grey list” is strongly positive for the economy as a whole and will also add impetus to housing demand and the recovery of the real estate sector.
That’s the word from Berry Everitt, CEO of the Chas Everitt International property group, who notes that whether they realised it or not, all South Africans have been negatively affected since SA was placed on the “grey list” in February 2023 and put under increased scrutiny by the FATF for anti-money laundering and counter-terror financing (AML/CFT) deficiencies.
“However, government and the business sector have worked hard to achieve the required improvements in areas such as beneficial ownership transparency, supervision of non-financial businesses and professions (including real estate agents) and legal and accounting trust frameworks.
“And what they have achieved with the removal of SA from that list is an improved risk profile and increased investor confidence in our financial system and its institutions, which will also affect all South Africans. For a start, it will mean lower borrowing costs for the government, SOEs, municipalities and other entities, and possibly the opportunity to negotiate lower rates of interest on existing debts. This should make it easier to restore and even improve vital trade infrastructure like railways, harbours and roads.
“Getting off the list should also encourage more direct local and foreign investment in SA, not just in bonds and equities but in new businesses, especially now that the African Continent Free Trade Area (AfCFTA) agreement is starting to gain momentum. Companies around the world are looking for ways to access the opportunities inherent in that agreement and in growth markets across Africa and are well aware that SA is one of the best gateways to those markets.”
Both infrastructure projects and the establishment of new businesses will, he says, lead to much needed job creation and significant new housing demand over time, “but even before that, lower national debt will reduce the need for government to raise corporate and personal taxes and help to improve housing affordability for the average household. We believe it will also improve consumer sentiment about the future of SA and are thus expecting the real estate market recovery to gather additional speed over the next few months”.
Turning specifically to foreign purchasing of SA real estate, Everitt says the delisting will result in international buyers seeing SA as a lower risk jurisdiction and improve the attractiveness of investment in local residential as well as commercial properties, which continue to offer exceptional value in global terms.
“International real estate transactions often involve cross-border capital, finance vehicles, trusts, and special purpose vehicles, and the delisting should reduce the costs of AML/CFT compliance while also improving access to finance. Local developers planning large projects such as new lifestyle estate should now also find it easier to structure investment and foreign capital inflows, and hopefully also reduce the ‘country premium’ or risk-adjusted cost of capital.”
However, he cautions, removal from the “grey list” does not mean that all AML/CFT risks vanish overnight. “As a member of the Leading Real Estate Companies of the World® network, which spans more than 70 countries, we are acutely aware that real estate remains a high-risk sector globally for money laundering, since it is a high-value physical asset and often involves opaque ownership.
“That is why it’s essential for both buyers and sellers not to ‘cut corners’ when it comes to real estate documentation, and to deal only with registered property practitioners who adhere to the highest standards of compliance with the Financial Intelligence Centre (FIC) measures which have been implemented specifically to make our financial system resistant to abuse by criminal elements.
“The FATF will be watching SA to see if it can sustain the improvements made over the past two years, and we all need to do our best to ensure that we don’t go back on the ‘grey list’, or we will all once again pay the price.”
Issued by
Chas Everitt International
For more information
Contact Berry Everitt
On +27 82 441 3601
Or visit www.chaseveritt.co.za
