As South Africa continues to navigate its way off the Financial Action Task Force’s greylist, small business funders say SMMEs will have to ensure they are on the right side of compliance with the Financial Intelligence Centre Act (FICA) as it has lengthened the time that it takes to approve loans.
Geddes CEO and co-founder Brent Geddes told TimesLIVE Premium that as a result of the greylisting, the work firms have to do with FICA has increased substantially, and that it was now “absolutely essential” for SMMEs applying for loans to have all FICA information and keep it up to date.
“It is more difficult at the end of the day. [The] enhanced FICA [compliance] that people have to go through is here to stay. It’s not going to change or get better, even if we get off the greylist, which I am sure we will. The requirements will stay the same and businesses will have to keep their FICA packs and ensure they are up to date.”
Geddes advised entrepreneurs and SMMEs to keep their business structure as simple as possible, adding that a complex structure makes it hard for lenders to understand the details of a loan and unclear if they can sustainably lend to a business.
Small companies must keep financial records and ensure that their annual financial statements are signed off soon after the end of the year and that the process is much easier and much quicker
— Geddes CEO Brian Geddes
“Small companies must keep financial records and ensure that their annual financial statements are signed off soon after the end of the year and that the process is much easier and much quicker.”
On the impact of monetary policy and the repo rate, he said while South Africa has not seen a rate cut since November of 2021, he believed there was relief on the way and light at the end of the tunnel.
“Inflation is obviously very difficult. We as an alternative lender are lucky because our rates are higher than those of the banks anyway. So we have a lot of room to keep our rates the same in rising interest-rate environments. When interest rates are high, we are more competitive relative to the banks.”
Financial Intelligence Centre MD for compliance and prevention Christopher Malan said business obligations regarding the FATF requirements and meeting the provisions of the FIC Act in no way impede business development or progress, or financial inclusion.
“The FIC is not aware of any formal concerns raised by the credit provider industry regarding this, or any constraints placed on lending services by credit provider entities, arising from the greylisting or the application of the FIC Act.”
He said credit providers must know their clients and comply with legislative requirements as the services of credit providers may be abused by criminals as a vehicle for money laundering.
“The FIC Act requires accountable institutions to apply a risk-based approach to their clients, and it is only in respect of the higher-risk clients that greater oversight is required.
“Conducting proper customer due diligence is not a new concept to the credit provider industry, as credit providers are generally very diligent in obtaining information about the credit consumers, including SMMEs.”
He said the FIC continues to engage with nonbank credit providers to ensure they are fully compliant with the FIC Act including registration with the FIC, timeous filing of regulatory reports, as well as completing their risk management and compliance programmes.
Nedbank sales and enablement executive Alan Shannon said the National Treasury noted there are no items in the action plan that relate directly to the preventive measures in respect of the financial sector, which reflects significant progress in applying a risk-based approach to supervising banks and insurers.
“In 2023 our small-business bankers supported 305,000 business clients, assisting with their transactional, payment, investment and financing needs. Our specialised services extend to sectors such as medical, franchising and agriculture. We are proud to have facilitated R4bn in asset payouts for small-business development in 2023.”
South Africa was greylisted by the FATF in January 2023 over deficiencies in rules relating to fighting money laundering, terrorism financing and proliferation financing. The country has set a January 2025 target to get off the grey list.
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