Durban - A European bank has joined Africa’s biggest specialist fixed income manager in announcing it will stop lending money to state-owned enterprises (SOEs), sounding an “unusual” warning to the government and signalling that other lenders are worried.
So said economist Dawie Roodt, commenting today on Denmark’s Jyske Bank shock announcement yesterday amid concern over governance.
“They could have simply stopped funding Eskom without making a public announcement. It’s a brave move, not necessarily wrong, but a brave move in support of the finance minister,” Roodt said.
However, Roodt said the move would put Pravin Gordhan under pressure as state-owned enterprises like Eskom would come to him if they could not get funding elsewhere.
“Other funders are also making sounds - although they have not officially announced - but they are making critical sounds that they are not really happy with the way state owned enterprises are managed,” said Roodt.
“This is a completely new ball game. Traditionally the private sector has been fairly quiet on criticising government on issues of governance, which makes this move this unusual.”
The solution to this “crisis in terms of image and trust”, needed to be a political one, he said.
Political economist, Dr Azar Jammine, also warned there were indications the move by the bank would create a domino effect with other international funders joining the fray.
“This leaves the government with itself as a funder. If the government uses its own funds to bail out state-owned enterprises that would result in government debt soaring and credit rate agencies would feel compelled to downgrade the rand. Inflation would soar forcing interests rates upwards,” said Jammine.
“We pulled the plug,” Rune Hejrskov, a senior money manager at the bank, said yesterday. “We see issues on lending going forward and more governance issues.”
The Treasury has also clashed with Eskom about its efforts to review coal supply contracts with a company linked to the Gupta family. Questions over governance at Eskom might increase, Hejrskov said.
The other SOEs affected by the lending freeze are the Development Bank of Southern Africa, the Land Bank of South Africa, the Industrial Development Corporation and the South African National Roads Agency.
DAILY NEWS