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Sanlam continues to support SOEs

Sep 11 2016 06:04
Godfrey Mutizwa, City Press

Ian Kirk, the group chief executive of Sanlam. Picture: Supplied

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Sanlam has no plans to follow Futuregrowth Asset Management by withholding investment in state-owned enterprises (SOEs), as long as they meet its investment criteria.

CEO Ian Kirk told City Press that while he understood the issues raised by Futuregrowth, Sanlam, which has invested about R8 billion in parastatals over the years, would examine each transaction on its merits.

“We will not follow what those guys did,” Kirk said after presenting the financial services company’s first half-year earnings, which showed a 7% drop in headline earnings a share.

“We will look at each deal case by case. We won’t generalise it, and that’s our approach,” he said.

Futuregrowth, a fixed-income fund manager owned by Old Mutual, stunned government last month when it announced it would not invest in six SOEs, including Eskom and Transnet, because of governance concerns and sustainability
of returns.

Government, through Public Enterprises Minister Lynne Brown, dismissed Futuregrowth’s concerns, saying its oversight structures remain unchanged, and the establishment of the State-Owned Enterprises Coordinating Council in the presidency would not change or interfere in the oversight role played by her department.

Analysts had raised concerns that the council, which would oversee the reform, strategies and new policy proposals of SOEs, would be controlled by President Jacob Zuma.

Brown emphasised that the SOEs file quarterly and annual reports to her office, are audited and comply with the Public Finance Management Act, the Companies Act, the King 3 report and other state requirements on governance.

In reply to questions from City Press, MMI Holdings said that any change in the governance of SOEs would be of concern, and would affect their pricing and the appetite to invest in them.

“State-owned companies’ governance processes, the value of government guarantees, political risks and the sustainability of these entities are taken into account in the credit risk assessments and governance processes within MMI,” said spokesperson Anneke Hanekom.

“Any environment of uncertainty would be of concern, and would have a bearing on pricing and risk appetite to acquire such investments.”

Analyst Mark Ingham said he understood the thinking behind Futuregrowth’s move, given the growing perception of increased risk in the country. It wasn’t directed against government per se, he said.

“It sends a strong message about the debt capital providers need to get a payback on their money.

The days when you could lend to a state-owned company solely on the back of a government guarantee are gone,” Ingham said.

“There has been slippage over a number of years. Futuregrowth is the canary in the coal mine.”

On the standoff between Finance Minister Pravin Gordhan and the Hawks, Kirk said Sanlam fully backed the minister.

“We have a finance minister who knows the issues very well, who understands the industry,” he told analysts at the results presentation.

“We don’t have a choice. We have to support the finance minister.”

sanlam  |  state owned enterprises
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