South Africa has been removed from the Financial Action Task Force (FATF) ‘grey list’, following recent onsite reviews and progress on anti-money laundering reforms, but the problems faced by financial professionals confronting fraud and corruption are substantial and wide-ranging. William Saunderson-Meyer reports.
THE RECENT boardroom murder of Johannesburg insolvency lawyer Bouwer van Niekerk is a chilling reminder that South Africa’s anti-corruption professionals operate in harm’s way. At least six other financial investigators or forensic auditors have been assassinated in connection with their work in the past two years, causing Hendrik du Toit, the CEO of Ninety One, the country’s largest asset manager, to warn the authorities to rein in corruption and contract killings or risk capital flight as the rule of law wanes.
“Our law enforcement agencies are in a woeful state, but to date, our judicial system has held firm. For how long can it withstand the combination of lawlessness and the lack of urgency from the government to reform our law enforcement agencies?” he asked
Toit’s comments should be seen against the backdrop of the SA government’s Madlanga Commission, a judicial inquiry into criminality, political interference and corruption in the operations of the South African Police Service (plus municipal and specialist police forces), the National Prosecuting Authority (NPA) and the judiciary. Its early hearings have spotlighted claims of interference with police dockets and political meddling that stalled sensitive corruption and organised crime investigations, some of which include money-laundering charges.
But physical safety is only one part of the story. The larger detects, reports, investigates, prosecutes and confiscates the proceeds of complex financial crime, where there is room for slippage between theory and reality.
Regarding anti-money laundering (AML), on paper, reporting suspicious activities or transactions (SAR/STR) is straightforward. The Financial Intelligence Centre (FIC) Act obliges anyone “who carries on, is in charge of, manages or is employed by a business” to file such reports – typically within 15 working days – via the online portal of the FIC, which is SA’s financial intelligence unit.
Failure to file attracts heavy penalties, and alerting a client is a criminal offence. The regime spans cash threshold events, money-laundering risks, terrorist financing, targeted financial-sanctions breaches and cross-border funds transfers.
In practice, compliance is harder. ‘Suspicion’ is a deliberately low threshold, but professionals must weigh over-reporting and damaging client relationships and the criminal liability risk of under-reporting.
Thinly spread across a vast financial ecosystem, South Africa professionals must recognise what is ‘suspicious’ in a messy swirl of facts; proceed or pause without tipping off the client. They must capture the high-quality data that the FIC demands and accept the disheartening asymmetry that they will probably never learn the outcome of their report. For smaller firms outside the banking and financial services sector – law and accounting practices, estate agents, motor vehicle and luxury-goods dealers – these burdens often fall on lean teams or a sole proprietor.
Siviwe Dongwana, managing director of Johannesburg based restructuring specialists Adamantem, is confident that the human resources to keep SA off the grey list exist; it is more a matter of how they have been, and will be, deployed: “South Africa does not lack skills and expertise,” said Dongwana. Rather, part of the problem has been “an underperforming state” that has failed to draw “skilled and capable professionals into the civil service and other critical state institutions to counter corruption”. He explained: “Excellent professionals are pushed out of state institutions by corrupt politicians, political deployees, and pseudoentrepreneurs who are benefiting from state tenders.”
Albert van Zyl, manager of the Unit for Corruption and Integrity Studies at North-West University Business School, and is on the board of SA’s Institute of Commercial Forensic Practitioners, argued that the country’s financial institutions are “doing well” in adhering to the FATF regulations. SA’s commercial forensic profession has taken advantage of an opportunity to fill a vacuum: “It’s actually an example of society, the private sector, that stepped up.”
That said, so-called gatekeeper professions outside the banking sector, such as lawyers, accountants and precious metal and stone dealers, that may help move or hide dirty money – “there are some issues,” he admitted. These gatekeepers are now squarely on the hook, however. One new lever, introduced in 2023, is the Risk and Compliance Return (RCR) regime telling designated non-financial businesses and professions to assess their client-base’s AML and terror financing risk. Early returns hint at patchy adherence, according to experts, because of the onerous nature of these compliance regulations.
Overall RCR compliance is about 70 percent, with 76 percent for accountants, 66 percent for legal practitioners, 60 percent for high-value-goods dealers and 56 percent for real-estate agents, according to the FIC’s 2024/5 annual report.
Reporting volumes have surged as guidance and enforcement have sharpened. In 2024/25, the FIC received about 13.5 million regulatory reports, including 570,283 suspicious and unusual transaction/activity reports; banks filed 423,095 of those, and attorneys filed 2,859. The same year saw 50,644 cross-border funds-transfer reports and over 720,000 cash-threshold reports.
There is real movement, too, on investigations and prosecutions. Lesetja Kganyago, South African Reserve Bank governor, told the Financial Times that money laundering case outcomes had risen, with ‘verdicts’ in 98 matters in the year to March 2024, up from 65 three years earlier.
He did not specify how many of those verdicts were convictions and conceded that progress on complex commercial crime was disappointing, with convictions down about 10 percent to 333 over the same period.
Whether the state has rebuilt the capacity to tackle sophisticated fraud and money-laundering remains contested. Critics note the absence of prosecutions against senior politicians implicated in the state-capture era under former President Jacob Zuma. Current President Cyril Ramaphosa has put the direct cost of state capture at more than South Africa Rand ZAR500 billion – while broader economic-loss estimates run closer to ZAR1.5 trillion.
“Unfortunately, this is where our problem lies,” said Van Zyl. “The police are really inundated with complaints. They don’t have the necessary staff. They’re not properly equipped. And even more so when it eventually goes to the prosecutors and the NPA.”
Forensic accounting capacity is still thin in both the Directorate for Priority Crime Investigation (DPCI) and the NPA. Complex matters take years and are vulnerable to delay tactics, amid globalised money flows, layered corporate vehicles and the added opacity of crypto, although crypto asset service providers have been under FIC supervision since 2022.
This ongoing capacity gap shifts a greater burden onto South Africa’s private sector practitioners to assemble case-ready, ‘oven-ready’ dossiers that prosecutors can run with.
Looking ahead, Van Zyl warns that the problem in South Africa is “the political will to really address corruption”, adding: “You can have the best system, but if the political will is not there, we’re not going to succeed. If the political will is not there, there’s not going to be the parliamentary oversight, and there are going to be bad appointments. And that is the core of our problem. That is what needs to change.”
Dongwana said getting off FATF’s grey list would provide “much-needed” confidence that the government took seriously the need to avoid being a destination of illicit funding and practices.
He shares, however, the widely held view that the country is not yet out of the woods. For that confidence to translate into foreign direct investment flows requires “more work on structural economic issues, political stability and a demonstrable will to deal with corruption”, he said: “The biggest risks are an under-performing state, endemic corruption, and paying [only] lip service to good governance,” he warned.
Siviwe Dongwana, Bongani Nkasana and Fikile Mhlontlo, CFO at Delta Property Fund, joined Michael Avery to offer crucial advice for CFOs. Prioritise a comprehensive business health check to proactively address potential financial risks
Siviwe Dongwana joining SAICA in unpacking the 2025 SA Budget Speech
Published on Creamer Media’s Mining Weekly
The basic economic problem that confronts all businesses is limited resources for unlimited wants. For some smaller mining companies, the reality is particularly acute – not every business possesses the balance sheet strength required to fuel growth, thus making strategic leveraging vital.
However, debt is expensive and introduces specific risks that include fixed repayment schedules, collateral requirements, extensive reporting obligations to lenders, and severe consequences for default not to mention the management time to deal with such consequences. The weight of these obligations can quickly become overwhelming when market conditions shift unfavourably.
The inability to service debt obligations is amongst the leading causes of many business failures, often culminating in business rescue or liquidation. Unfortunately, by the time many companies enter business rescue proceedings, the damage is often beyond repair. What might have been salvageable with early intervention becomes terminal through delayed action.
Miners have additional complexities which include commodity price volatility that can rapidly change project economics, exchange rate fluctuations that impact both costs and revenues, capital-intensive development phases with delayed revenue generation and onerous payment terms from suppliers and contractors and rising financing costs in response to perceived risk. These sector-specific challenges can create a perfect storm when overlaid with standard business financing pressures.
Consider this health analogy of addressing illness. Successful treatment requires both the right medicine and sufficient time. Time can be more important than the medicine itself as having time allows exploration of various treatment approaches. Similarly, even the most effective financial restructuring cannot save a business if implemented too late. The window for meaningful intervention narrows as financial distress deepens.
Assistance from restructuring professionals offers significant advantages; however, many companies are reluctant to seek help. Some believe that they have the internal capability to resolve the problems by themselves, viewing external assistance as unnecessary or as an admission of failure. This perception often proves costly, as internal teams may lack the specialized expertise or objectivity needed to navigate acute financial distress.
External advice is generally sought after the intervention by bankers, lenders and in some cases on the advice of insolvency lawyers. By this point, options have typically narrowed considerably, and stakeholder confidence may have eroded beyond recovery. The delay frequently results in more drastic measures becoming necessary when earlier, gentler interventions might have sufficed.
Accepting that companies operate in an ecosystem of relationships, stakeholder engagement is vital for success and must be undertaken constantly. Of further equal importance is a recognition of the domino effect of failing to make consistent payments which can be dire to smaller suppliers who themselves may operate on tight margins. Often, relationships get strained and soured due to late or non-payment to trade creditors. To this end, the mending relationships and restoring trust is vital to maintain operational continuity during restructuring efforts.
Restructuring professionals understand the concerns and interests of all relevant parties. They professionally work towards aligning competing interests, preserving critical relationships and assisting with complex creditor negotiations while maintaining operational focus, through properly developed restructuring plans. Their experience across multiple situations provides valuable perspectives that purely internal teams typically cannot match.
It is for these reasons that early interventions are necessary to bring fresh eyes and approaches to resolve problems and potentially open different angles and other avenues to tackle the issues at hand including identifying blind spots that management teams, immersed in day-to-day operations, might miss.
In the cyclical mining sector, operational or balance sheet restructuring is certainly not an admission of failure but rather a strategic tool for navigating market volatility. It represents prudent management in an industry characterised by boom-and-bust cycles, where flexibility and adaptability are essential virtues.
Early intervention creates the time and space needed for thoughtful, comprehensive solutions that protect stakeholder value and position companies for future growth. For junior miners especially, timely restructuring can mean the difference between extinction and emergence as stronger, more resilient enterprises positioned to capitalize when commodity cycles inevitably turn favourable again.
Edited by Creamer Media Reporter
Bongani Nkasana, a panel member at the 2024 SARIPA Conference.
Topic of discussion: – Business rescue and insolvency practitioners each have a tool kit available to assist them in managing a wide variety of contractual relationships. The panel explored how these tools operate in a dynamic and increasingly complex restructuring environment.
We hosted a panel discussion at the Finance Indaba moderated by well-known financial journalist Michael Avery; providing a business distress alert!- Learn from others’ mistakes so you don’t repeat them.
Published on Moneyweb
The need for short-term funding for a mature business can become a lengthy and costly process for management to simply maintain the status quo, or it can be turned into an opportunity to fundamentally re-energise operations for growth.
In any mature business, there will come a time when an independent review is needed: a robust review of the core business, the operational structures and processes, quality of reporting ,including budgeting, forecasting and results management and a general assessment of decision-making processes and delegations. This process naturally looks at decisions that may have been made some time in the past and assess their continued relevance.
This review may be prompted by the discovery that the business, though well-functioning, needs additional short-term funding to maintain its operational activities. The reason for the short-term funding requirement may appear innocuous, for example, it may arise from a significant payment delay from a debtor or supply chain issues resulting in late delivery of components and so undermine sales.
These indicators should however be properly scrutinized. They are not usually stand-alone events and may have ‘history tails’ that could reveal some deep-seated flaws in the business.
Often, the need for funding is simply recorded in the board pack as an operational “speed bump” and the administrative process to secure the funding begins. Depending on the size of the short-term funding required, management turns its attention to setting up meetings with new or current debt originators, and redrafting cash flows and forecasts on the assumption that the requisite funding will be secured. The exercise may involve applying for short-term bridging facility, or requesting a reprieve from a long-term payment plan or a payment holiday on an existing debt facility and including revised payment arrangements with creditors. Management may even consider liquidating a non-core asset to generate some cash flow in the short term.
The cash flow injection over the short term is often not the panacea that management may believe it is. Funding rarely arrives on time or in full and new short-term loan terms are likely to be more onerous than for existing facilities. It is also not uncommon that a request for short-term funding triggers a broader review of all the company’s debt facilities and an assessment of its continued ability to repay. The exercise usually involves further costs, including on lawyers, accountants and covenant reviews and, importantly, it distracts management from its operational focus.
This could be the right time to consider an independent review of the business by competent and experienced restructuring advisors. The need for funding over the short term may well be an operational issue that is part of a legacy system that has not been reviewed or changed over time. The independent business review should provide insights on the business including its pricing, product or service range, the competitor landscape and the economic environment and, more importantly, an objective assessment of how all these issues affect the company’s working capital.
The power of an independent review of the business lies in the fact that the restructuring advisors have no allegiance to the management or the board of the business, ensuring that report backs are objective and robust. The report often reveals that a problem that initially manifested as a requirement for funding over the short term to ‘maintain’ the business could be turned into an opportunity to fundamentally restructure the business for growth.
The conscious, deliberate, focussed and robust review of the business’s operations could be an opportunity to review costs, the staff complement, cut a product line or even exit a market.
In fact, the exercise may move from a “maintain” requirement to a “growth” opportunity, as a change in strategy becomes the focus. The initial requirement for funding over the short term may turn out to be the beginning of a whole new era for the business, if management and the board provide the opportunity for a structural shakedown.
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