South African languages Afrikaans Xhosa Zulu

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Africa’s largest ‘money manager’ will stop lending to SA’s State Owned Enterprises

South Africa’s six largest SOE’s have been cut off by the continent’s largest private fixed-income money manager, citing concerns with how our parastatals are being managed.

South African languages Afrikaans Xhosa Zulu

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Threats against Treasury – aka Pravin Gordhan –, government infighting and the way in which south Africa’s SOE’s are being run are just some of the reasons Africa’s largest money manager has decided to stop lending them cash.

With somewhere in the region of R170 billion in assets, Futuregrowth Asset Management has put a hold on more than R1.8 billion worth of funding intended for three of South Africa’s parastatals; according to its chief investment officer, Andrew Canter.

According to the firm, they will only resume financing once they are convinced that proper management procedures at the SOE’s have been set in place.

The parastatals being cut off from funding are:

  • Eskom
  • Transnet
  • South African National Roads Agency
  • Land Bank of SA
  • Industrial Development Corporation
  • Development Bank of SA

While the decision to freeze lending won’t impact on government straight away, it’ll eventually filter through state departments.

“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,” Canter said.

“Any material risk to the state-owned entities’ governance, budgeting and approval processes for spending or lending must impact on our forward-looking credit assessments. It is difficult to make reasoned and defensible decisions to continue providing state-owned companies with additional funding using clients’ money.”

Read the full report on Fin24.