Massive blow as major lender cuts funding to Eskom, Sanral and other SOEs: report

·31 Aug 2016

Futuregrowth Asset Management, South Africa’s largest private fixed-income money manager, is to stop lending money to six state companies because of governance and transparency concerns.

Bloomberg reported that the lender is concerned about how the state entities are being run in the wake of several public spats with Treasury.

The rand declined 1.75% to R14.74 against the dollar shortly after 17h00 on Wednesday.

The media group reported that Futuregrowth, which boasts R170 billion in assets, halted plans to lend more than R1.8 billion to three state companies on Tuesday, citing CIO Andrew Canter.

The SOEs include:

Eskom Holdings
Transnet
South African National Roads Agency (Sanral)
The Land Bank of South Africa
The Industrial Development Corp
Development Bank of Southern Africa.

“We’ve observed recent reports that strongly hint of conflict between branches of South Africa’s government, the possible machinations of patronage networks and a seeming challenge to the National Treasury’s independence,” Canter told Bloomberg.

“Any material risk to the state-owned entities’ governance, budgeting and approval processes for spending or lending must impact on our forward-looking credit assessments. It is difficult to make reasoned and defensible decisions to continue providing state-owned companies with additional funding using clients’ money.”

The government announced last week that president Jacob Zuma will lead a new panel to oversee all state-owned companies to ensure they help develop the country – a role previously delegated to Gordhan and other ministers.

Canter told Bloomberg that such a decision lacks clarity and context and creates uncertainty about who the companies will answer to.

“It is certainly not our desire nor intent to undermine their developmental missions, nor disrupt their ability to deliver,” Canter said. “But we want to send a message that we can’t provide finance unless the governance and decision-making of the state-owned entities improves and becomes more transparent.”