Earlier this year, President Trump made headlines by suspending foreign aid to South Africa through an executive order issued in February. This decision referenced Pretoria’s “aggressive stance against the United States and its allies,” particularly highlighting accusations against Israel in the International Court of Justice and the country’s strengthened ties with Iran, including military and nuclear arrangements.
Interestingly, the order failed to acknowledge South Africa’s troubling reputation as a global center for corruption and illicit finance. This omission stands out. Under Nelson Mandela, South Africa was seen as a beacon of tolerance, but it has since attracted adversarial groups, including China, Russia, Iran, and Hamas. These entities view South Africa as a favorable location for laundering money, trafficking weapons, and undermining the United States’ geopolitical interests.
If Trump wishes to continue applying pressure on Pretoria, he’ll need to explore all possible avenues. This includes utilizing American influence in organizations like the Financial Action Task Force, which monitors money laundering and terror financing. Being placed on a “gray list” tends to increase financial risks, causing banks and businesses to proceed with caution, often reducing investments in those nations.
In 2023, South Africa made the gray list due to notable shortcomings in combatting illegal finances. The country’s struggles in prosecuting complex cases of money laundering and corruption have only fueled global financial system risks.
Next month, the task force will decide whether to remove South Africa from the gray list, and the answer should definitely be no. Removing it would send a disheartening message that the international community tolerates the very failures the task force seeks to address: inadequate prosecutions, political meddling, and unchecked corruption.
South Africa was included on the gray list as a means to push for reforms within its notoriously corrupt governmental and financial structures. The Zondo Commission report has illuminated numerous individuals and organizations linked to corruption since Jacob Zuma’s presidency from 2009 to 2018, but significant changes remain elusive.
Despite identifying 95 high-ranking officials from the ruling African National Congress implicated in corruption, none have faced substantial legal repercussions. Local authorities struggle with complex financial prosecutions, even with damning evidence at hand.
This pervasive corruption not only facilitates cross-border crime but also contributes to economic disparities, including youth unemployment, which exceeds 60%. Meanwhile, types of crime like organized and white-collar crime are said to have significant impacts on the economy, with estimates suggesting potential losses up to 10% of South Africa’s GDP due to crime-related issues.
The Financial Action Task Force’s gray list aims to exert pressure on governments dealing with such systemic problems, yet in South Africa, reforms have largely been just superficial adjustments.
In the country, crime takes on various forms. There’s illegal mining that contributes to a vast shadow economy, drug trafficking networks utilizing South African ports, and criminal organizations from countries like China and Nigeria taking advantage of existing weaknesses. The task force warns that organized crime can prompt increased scrutiny, yet South Africa urgently lacks in addressing these concerns.
Pretoria has also been negligent regarding terrorist financing. The close ties between the African National Congress and Hamas allow for unrestrained operations of groups linked to terrorism, raising funds without consequence. Earlier this year, a figure connected to the Islamic State attempted to establish a political party in South Africa.
Weak regulations and inadequate oversight have rendered South Africa a haven for extremist organizations seeking to launder money and fund terrorism—issues that fall squarely within the Financial Action Task Force’s purview and need serious governmental reform before any recommendations for removal from the gray list can be considered.
Moreover, South Africa’s institutions are not adequately set up to tackle these challenges. Prosecuting authorities and financial oversight entities lack the necessary resources and political backing. Banks involved in money laundering encounter negligible penalties, and courts are swamped and often politicized. Recently, for instance, the police minister was suspended, and an investigative unit focused on political murders was disbanded, highlighting the risks faced by local government officials attempting to expose corruption. Tragically, about 150 local government employees have been murdered since 2018, many of whom were whistleblowers. Furthermore, five prosecutors have also been killed in the last five years, signifying a dangerous environment for those seeking accountability.
While South African officials may tout their efforts to satisfy the task force’s criteria, removing the country from the gray list now would essentially reward corruption, organized crime, and terrorism.
This situation underscores Trump’s leadership. He has previously demonstrated a willingness to cut aid and enforce accountability for Pretoria’s relationships with Iran and Hamas. It’s now vital for him to utilize the task force to further tighten measures and safeguard the global financial system from escalating risks emanating from South Africa.
