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SOEs already talking to Futuregrowth

Sep 01 2016 19:11
Carin Smith

Cape Town - It is important to see the decision by Futuregrowth Asset Management to halt any further loans to certain key SA state-owned enterprises (SOEs) as an investment decision, Dave Macready, chief executive of Old Mutual SA, told Fin24 on Thursday.

Futuregrowth is SA's biggest private fixed-income money manager with about R170bn in assets. It is one of a number of so-called asset management boutiques owned by Old Mutual.

Futuregrowth decided earlier this week to halt further loans to six key SOEs, namely Eskom, Transnet, the SA National Roads Agency (Sanral), Landbank, the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa (DBSA).

As far as Macready is aware, two of these SOEs have already met with Futuregrowth on Thursday for discussions.

On Thursday Denmark’s Jyske Bank AS became the second money manager to say it won’t lend to Eskom. 

Futuregrowth said earlier its decision to halt further loans was because of concern over the governance and decision-making of the six SOEs. It is also worried about a sudden announcement that President Jacob Zuma would lead a new panel to oversee SOEs - despite an existing mechanism giving this role to Finance Minister Pravin Gordhan and other ministers.

Macready emphasised that Futuregrowth is one of Old Mutual's independent investment boutiques and as such its mandate is to make independent investment calls on behalf of its clients.

Old Mutual Emerging Markets CEO Ralph Mupita echoed this in a statement earlier on Thursday, saying that Futuregrowth's comments do not represent the broader views of Old Mutual.

READ: FULL STATEMENT: Why Futuregrowth won't grant loans to SOEs

Not pulling loans

"Futuregrowth basically said it will suspend any additional loans. It is not a case of pulling their existing funding. It has a very important fiduciary responsibility and a very important role from a stewardship point of view to act in the best interest of its clients," explained Macready.

"These kinds of decisions are long term calls and dependent on the merits at a time."

READ: Treasury battles SOEs amid Gordhan probe

According to Macready, Old Mutual has a wide range of relationships with SOEs.

"They play a very important role from that perspective. We are at pains to emphasise that what Futuregrowth did was an investment decision," said Macready.

"Futuregrowth's CEO made it clear that he needs clarity in terms of governance and oversight, especially regarding procurement. From Old Mutual's point of view, though, we are trying to be proactive in facilitating interaction."

Macready pointed out that ratings agencies have been clear about the importance of effectiveness and good governance of SOEs.

"There is, therefore, an important role to be played to avoid a downgrade of SA," said Macready.

"It is very important from South Africa's point of view to make sure that, in order to boost investors’ confidence, aspects related to uncertainty at SOEs are reduced."

In his view, it is certainly possible for SOEs to reach a satisfactory level of clarity and governance.

"Old Mutual remains committed to our role as a participant with the public and private sector, government and labour, to have constructive dialogue," said Macready.

"The role of SOEs is critical in terms of SA's economic growth and stability. Therefore, we want to continue playing a role of constructive engagement."

ALSO READ: Another lender pulls plug on Eskom

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