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Cape Town - The ANC has moved to quell fears after Futuregrowth Asset Management, which has about R170bn in assets, took an unprecedented decision to halt loans to key state-owned enterprises (SOEs).
Futuregrowth Asset Management, South Africa's biggest private fixed-income money manager with about R170bn in assets, expressed concern over the governance and decision-making of certain SOEs.
It was also worried about the sudden announcement that President Jacob Zuma will lead a new panel to oversee SOEs. This decision caused panic as there is already a mechanism in place giving this role to Finance Minister Pravin Gordhan and other ministers.
Read: Rand slumps as Futuregrowth suspends loans to state firms
After Futuregrowth said it would stop granting loans pending a review of the decision, the rand dropped to the weakest level in more than seven weeks and South African bonds also fell.
Futuregrowth and the asset management industry are substantial funders to Eskom, Transnet, the South African National Roads Agency, the Landbank, the Industrial Development Corporation and the Development Bank of Southern Africa via direct loans as well as capital and money market instruments.
"We cannot provide finance without having clearer sight of, and comfort around, the governance and decision-making of the SOEs," it said on Wednesday.
'Erroneous and unfortunate'
"The generalisation that corporate governance challenges beset Eskom, Transnet, South African National Roads Agency Limited (Sanral), the Land Bank, Industrial Development Corporation (IDC) and the Development Bank of South Africa (DBSA) is erroneous and unfortunate," said ANC spokesperson Zizi Kodwa in a statement.
Read: No panic at Eskom as debt manager halts loans
“People who lend each other money, it’s because of a number of variables and it’s a voluntary exercise,” Eskom spokesperson Khulu Phasiwe told Bloomberg by phone. “If they disclose now that they’re not going to lend us money, then I suppose it’s fine, we will go elsewhere.”
Transnet said it has enough funding to continue a $26bn infrastructure investment programme.
The firm said it had already funded its full borrowing requirement for the 2016/17 financial year, and that it a "healthy liquidity position" of R22bn.
"Transnet is available to engage with all its lenders and investors, including Futuregrowth, to address any concerns they may have regarding the company’s business activities," it said in statement.
The Treasury said in an emailed response to questions that it could not comment on Futuregrowth’s business decisions.
"Land Bank was advised by Futuregrowth on Tuesday, 30th August 2016, of their decision to suspend lending activities to state-owned entities including the Land Bank," the Land Bank said in a statement.
Although Futuregrowth indicated it will first engage with the investment industry before taking its concerns to the SOEs, the ANC encouraged the asset manager to start discussions with parastatals.
"It is our hope that Futuregrowth will engage with the relevant ministries and parastatals to discuss the concerns they have, and together find a solution in the interest of the economy and country."
Kodwa pointed out that interventions have already been made to strengthen SOEs, including the establishment of an Inter-Ministerial Committee which is chaired by Deputy President Cyril Ramaphosa.
Read: Futuregrowth’s Andrew Canter sparks a financial revolution – or not
"Accordingly, we believe that Futuregrowth, or other any investor, should await the outcome of these interventions before taking any preemptive stance."
The ANC said it believes SOEs are key instruments that play a critical development role in driving growth and inclusiveness.
"Our commitment to ensuring they are models of good corporate governance, independence and sound technical capacity is not in doubt."
No confidence in Zuma
The DA said in a statement that Futuregrowth's decision to withhold funding to SOEs is a clear vote of no confidence in Zuma.
"This is a clear swipe at Zuma and his project of state capture, with Futuregrowth indicating that they would only reconsider funding the SOEs once 'proper oversight and governance' have been restored at the companies," said DA leader Mmusi Maimane.
"South Africa’s SOEs are in a dire state costing the country billions as government continues to prop them up despite their immense losses. At the root of their mismanagement is large-scale corruption that feeds an ANC patronage network headed up by Zuma," he said.
Maimane said restoring confidence would require Zuma not only to affirm Treasury's independence, but also to desist from his attempt to centralise control over SOEs in himself.
"Decisions relating to SOEs must be made in the best interest of the economy and the wellbeing of the people of South Africa, something the president is incapable of doing."
Old Mutual on Futuregrowth
Meanwhile, Old Mutual Emerging Markets CEO Ralph Mupita emphasised in a statement on Thursday that Futuregrowth's comments do not represent the broader views of Old Mutual.
Futuregrowth is one of a number of so-called asset management boutiques owned by Old Mutual, but its mandate is to make independent investment calls on behalf of its clients, according to Mupita.
Mupita said that, although Futuregrowth is one of its asset management boutiques, it respects the independence fund managers need to deliver investment performance for clients. This is because Old Mutual believes a more constructive model of engagement is needed to build and increase socio-economic development and drive financial inclusion in SA.
Mupita said Old Mutual undertakes to engage the fund manager around these issues.
"We value the broad and deep relationships we have developed with SOEs over many years. These relationships have been key in building and increasing socio-economic development and driving financial inclusion in South Africa," said Mupita.
He added that in Old Mutual's view, public-private partnerships are critical for what it deems much-needed and shared growth in SA, and it wants to continue to play a part in enabling that.
"Old Mutual remains committed to our existing commercial relationships and public-private partnerships with SOEs and will continue playing a constructive and value-adding role in capital markets, in both listed and unlisted investments," said Mupita.
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