Money manager Futuregrowth pulls the plug on state companies

Eskom is one of the six state entities that Futuregrowth Asset Management has decided to stop lending money to, for now, citing political uncertainty.

JOHANNESBURG – In-fighting between South Africa’s Treasury and state-owned enterprises had led Futuregrowth Asset Management to freeze lending to the country’s parastatals.

It says it is concerned about how these are being run.

Economist Dawie Roodt said the move was a vote of no-confidence in the governmment. 

Other lenders might follow suit and the rand, already under pressure, would contiunue to weaken, he said.

Future-Growth --  Africa's biggest private fixed-income money manager with about R170-billion of assets --  said it had already shelved plans to loan R1.8-billion to three state-owned entities this year.

The companies it is cutting off  -- for now -- are Eskom, Transnet, the South African National Roads Agency, Land Bank of South Africa, the Industrial Development Corporation of South Africa and the Development Bank of Southern Africa.

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The company said the decision would not immediately affect lending to the government and other state bodies such as water boards and municipalities.

“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,” chief investment officer Andrew Canter was quoted as saying by Bloomberg news.

"Into this already unsettling environment, we note the recent and sudden announcement that the Presidency would chair a 'council' to directly oversee the state-owned entities," a Futuregrowth statement said. "The meaning, timing, and intent of this announcement ... is entirely unclear – and, lacking clarity and context, we feel compelled to view this announcement with concern. 

"As rational and fiduciary investors we must adapt our views and investment strategies when circumstances change."

Futuregrowth said it would resume offering loans and rolling over existing debt only once it sees signs of proper oversight and governance.

Earlier this month Future Growth disagreed with Eskom CEO Brian Molefe's stance on renewable energy.

 

 

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