Futuregrowth Asset Management has conceded that its public announcement to halt funding of state owned companies in SA attracted unanticipated attention, and led to a range of unfortunate and possibly damaging misinterpretations.
South Africa’s largest private fixed-income money manager, announced at the end of last month that it had stopped lending money to six state companies because of governance and transparency concerns.
The company’s decision was met with outcry from the state companies involved.
The funding suspension applies to Eskom, rail and ports operator Transnet, South African National Roads Agency, the Land Bank of South Africa, the Industrial Development Corporation of South Africa and the Development Bank of Southern Africa.
Futuregrowth CIO, Andrew Canter, said in a note on Thursday that the firm came to an investment decision that, as fiduciaries for investors’ savings, “we could not provide additional finance to some of the largest SOEs without having deeper sight of, and comfort around, their governance, decision-making and independence”.
He said that Futuregrowth further decided, with internal unanimity and no external discussions, that it should make its views public.
“While such public airing of investment views is an everyday thing (in print, on-line and on-air) this announcement garnered completely unanticipated attention, as well as a range of unfortunate and possibly damaging misinterpretations. The unintended consequences on others’ has been such that it demands some reflection on our part,” he said.
“Notwithstanding a range of good reasons for a speedy dissemination of our view, in light of the fallout we must frankly concede that a more measured approach of direct consultation with each SOE, before contemplating public comment, would have been a fairer process.
“I would like to personally apologise to each of the SOEs concerned, and their respective government Ministers, for my failure to ensure a fair, one-on-one engagement,” Canter said.
He said that the company was pleased that most of the relevant SOEs have already engaged and shown a willingness to have deeper discussions about their governance, decision-making and connectivity to spheres of government.
“Most of the SOEs, at their own discretion, are taking the lead by engaging with investors quickly and proactively. Futuregrowth is actively continuing our engagement and governance assessment process with the SOEs.
“For others who feel aggrieved by our public stance, please accept that our intentions were sound and fiduciary, and the decision was ours alone,” Canter said.