News in South Africa 11th August:

1. Worries over SA being ‘greylisted’:

The possibility of South Africa being greylisted by the Financial Action Task Force (FATF) could make doing business with the country even tougher.

Worries over SA being 'greylisted'
Image taken by: Tima Miroshnichenko

Rebecca Thomson, a senior associate at Allen & Overy, told CapeTalk that if the country is deemed a high-risk jurisdiction to transact, anyone wanting to do business with South Africa will need to jump through an additional layer of compliance hoops.

Thomson said that it could also lead to an overall decline in GDP – as seen in Mauritius when they were greylisted, and GDP dropped by 1% in the first year of its listing. She added that South Africa could see the export and import of goods becoming more difficult.

A report from the FATF, an international watchdog, recently identified significant weaknesses in parts of South Africa’s financial regulation. Shortfalls resulting in high cases of money laundering and terrorism funding were uncovered.

According to Nedbank’s Interim Results presentation for 2022, the government has before October of this year to demonstrate that it has a credible plan to address its deficiencies – failing to do so would result in the country being greylisted in February of next year.

Nedbank noted that greylisting could have adverse economic consequences for trade and transactions and possible restrictions on international banks transacting with domestic banks.

Mike Brown, the CEO of Nedbank, said that it is not up to the Treasury to tackle the possible greylisting alone.

Brown said that ten out of the eleven areas that concerned the FATF require the government to show that the local environment, laws and work done by investigating authorities and courts to clamp down on money laundering as well as corruption have improved, reported News24.

Brown said that the effect of a greylisting has already been priced in by markets, adding that it is not as damaging as a credit rating downgrade.

Standard Bank group chief executive Sim Tshabalala, however, said that a possible greylisting classification could be worse than a credit rating downgrade and risks South Africa being kicked out of the global financial system.

Tshabalala noted that being flagged by the task force would effectively lead to South Africa being blacklisted by both the United Kingdom and the European Union.

Not only would this make borrowing more expensive, but it will likely also have several knock-on effects, said Tshabalala.

“The rand will weaken, inflation will spike, interest rates will go up, it will be more expensive to buy food, pay for petrol, buy homes, buy cars. The country can’t afford it.”

2. Lawsuit against Meta:

The first test of Daniel Motaung’s lawsuit against Meta, the owners of Facebook, will be when a Kenyan court decides if it has jurisdiction to hear the case against the group at all.

Motaung, a South African and a former employee at Sama, a Kenyan-based company, which moderates content on behalf of Facebook, is suing both Sama and Meta. He alleges his working conditions resulted in him getting post-traumatic stress disorder (PTSD) from the type of content he moderated.

He also alleges they tried to bust his attempts to organise workers into a union.

The case, which is being heard in the Employment and Labour Relations Court in Nairobi, is far-reaching because it has the potential to bring the issue around the working conditions for content moderators to the fore, says Phumzile van Damme, a former DA MP and an anti-misinformation activist.

“It will lift the lid on content moderation, and just how badly the staff are treated that do that work.”

The treatment of content moderators by Meta has become a controversial issue for the social media group. Moderators have said they have been traumatised by some of the content they have been asked to adjudicate and have accused Meta of not doing enough to help them through it.

Moderators in the US were successful in getting Meta to settle with them in 2021, when they got the company to agree to pay them $85 million to 10,000 of them. The group did not admit wrongdoing as part of the settlement.

It will be difficult

Will Motaung get want he wants through the Kenyan courts?

“It will be difficult,” says Lucien Pierce, a director at PPM Attorneys.

The first issue is that Kenyan courts tend to follow what happens in UK courts very closely, which for their part, are very conservative when it comes to deciding on issues like jurisdiction.

Motaung’s attorneys will, in essence, have to convince the court that Meta has operations or assets in Kenya.

Aside from jurisdiction, Pierce says Motaung will also have to prove a direct connection between himself and Meta. With Sama as the intermediary between him and Meta, this will be a tough case.

Pierce says what Motaung is asking for is the equivalent of a security company being hired to secure your home, the company appointing a guard to do this job, and then the said guard holding you accountable for injuries he sustained while on the job.

The courts will have to decide on what decision on your part led to the guard’s injuries.

The case will resume on 22 September 2022.

3. Nersa tariff rush job:

The Minerals Council South Africa on Wednesday (10 August) advised energy regulator Nersa to stop its “unwise” and rushed overhaul of the way electricity tariffs are determined in South Africa.

Addressing a Nersa panel on the proposed new methodology that it is currently consulting stakeholders on, Minerals Council technology analyst Christian Teffo said it is not ready for implementation, and it is unfair to expect stakeholders to accept an incomplete methodology on the basis of principles only, without knowing what the impact will be.

It would be better to improve the current multi-year price determination methodology (MYPDM) incrementally while the electricity supply industry is in flux and until the current revision of the policy and legislative framework has been completed, he said.

The Minerals Council and the Energy Intensive User Group (EIUG) made a joint presentation to the public hearing Nersa hosted about the methodology. The regulator published a consultation paper on its proposal at the end of June and has set 30 September as the target date to have it finalised.

‘Impossible, inappropriate’

The three principles underpinning the proposal are activity-based costing, type of use tariffs and marginal pricing, which according to Eskom are not regulatory principles at all and wholly inappropriate.

Eskom severely criticised the Nersa proposals in a document submitted to the regulator and published on the Eskom website.

Among other things, it refers to “the impossible; the inappropriate and the violation of policy, legislation, regulatory rules and codes” contained in the proposed methodology.

4. Green energy project failures:

The first part of an Our Burning Planet investigation reveals that R56m meant to uplift the rural Eastern Cape communities of Molteno and Sterkstroom near the Dorper Wind Farm has been ‘wasted on failed projects’.

In contracts awarded to independent power producers, a certain percentage of spend must go to community development. However, as South Africa accelerates its nascent green energy transition, these residents and their doleful stories can be seen as a warning about how things can go wrong, leaving communities worse off.

5. Ace appeal dismissed:

The Constitutional Court has dismissed Ace Magashule’s challenge to his suspension from the ANC.

Magashule wanted the party’s step-aside resolution to be declared unconstitutional – however, the country’s top court said his appeal had no prospect of succeeding.

Magashule is currently facing fraud and corruption charges relating to a R255 million rand asbestos tender awarded during his time as Free State premier.

He refused to step aside as ANC secretary general and was suspended in May 2021.

All information sourced from articles posted by: BusinessTech, Business Insider, Moneyweb, Daily Maverick, and ENCA.

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