Johannesburg - The decision by fund managers Futuregrowth Asset Management and Jyske Bank AS to stop extending credit to some of South Africa’s state-owned companies is a “useful lesson”, said Finance Minister Pravin Gordhan.
South Africa must “not think that the world is not watching us in some of the things that might be happening in some” state companies, Gordhan said in a televised interview with the South African Broadcasting Corporation on Friday. “Those people are not obliged to lend us money. If we do the right things, we will certainly attract more money.”
Futuregrowth, with $11.7 billion in assets, shelved plans to lend more than R1.8 billion ($111 million) to three South African state-owned companies including Eskom and Transnet on concerns about how they are being run, the nation’s biggest specialist private fixed-income money manager said August 31. Sasfin Asset Managers and Aeon Investment Management expressed support for Futuregrowth while stopping short of saying they won’t lend to state enterprises.
Rune Hejrskov, who helps manage about $1.3 billion at Denmark’s Jyske Bank, said on Thursday he moved to being underweight from mediumweight in power utility Eskom’s bonds.
Prudential Investment Managers was “deeply concerned by the accusations of poor governance and corruption” at some state-owned companies, even as it has not made a decision to stop lending to specific companies, the group said in a statement on Friday.
“It is a very concerning development,” Gordhan said. “We as the Treasury have been warning both political figures and people running some of our institutions, ‘be careful and show the right kind of integrity, make sure that your governance is right’.”
Gordhan and the National Treasury are engaged in open conflict with key state-owned companies over their management and spending plans. The Treasury issued a statement this week saying Eskom is resisting a review of its contracts and is threatening court action to stop a joint venture in Asia by arms company Denel. Gordhan has also refused to sign further loan guarantees for South African Airways, the national carrier.
* With assistance from Mike Cohen, Xola Potelwa and Liezel Hill
BLOOMBERG