On Tuesday, the Ministry of Public Enterprises released a statement on behalf of Minister Lynne Brown in response to investment manager Futuregrowth’s announcement on August 31, that it will no longer lend money to six of South Africa’s largest State companies due to concerns around how they are being run, government infighting and threats to the independence of the finance ministry
Africa’s biggest specialist fixed-income money manager, which has about R170 billion in assets, said it will only resume offering loans and rolling over existing debt if it sees proper oversight and governance at the State companies, according to Bloomberg.
Read the full statement by the Ministry of Public Enterprises below:
Statement on Futuregrowth’s withdrawal from SOC funding (Eskom and Transnet)
As Shareholder Representative of Eskom and Transnet, the Department and the State Owned Companies (SOCs) have reflected on the decision of Futuregrowth Asset Management to withdraw investments into Eskom and Transnet for the future.
Futuregrowth Asset Management has direct exposure of about R10-billion in Eskom and Transnet, while both have collectively raised over R470-billion from other financial institutions. The Futuregrowth Asset Management investment is indeed important; however, as Shareholder Representative on behalf of Government and the South African State, the announced decision of Futuregrowth Asset Management was made without consulting Government, myself as the Executive Authority and Shareholder Representative of Eskom and Transnet, including both these SOCs.
We have noted Old Mutual`s statement that the announcement and decision of Futuregrowth Asset Management does not represent the views of Old Mutual, thereby distancing itself from the decision of its subsidiary company.
For public record and information to the citizens, the Department annually receives four Quarterly Reports and an Annual Integrated Report that includes an unqualified and clean Audited Annual Financial Statement for the financial years. These reports comply with the Public Finance Management Act, the Companies Act, the King III Report, the Memorandum of Incorporation, the Shareholders Compact, the Strategic Statement of intent and the established Legislation of the two entities. These reports demonstrate good economic and financial governance, prudent strategic and operational management, and having in place appropriate institutional structures.
Capital markets and multilateral institutions continue to show confidence in Eskom and Transnet’s corporate, economic and financial governance systems, their investment decisions, as well as these companies’ long term viability and sustainability. Both Eskom and Transnet have NOT DEFAULTED payment of loans and other on credit facilities. The rigour and robustness of the business plans of these companies have seen funds being approved from AAA rated multilateral institutions such as the African Development Bank and international funding institutions like the BRICS Bank.
We take note of the fact that Old Mutual has distanced itself from its subsidiary and the potential implications to our domestic financial markets and future investments into SOCs. Old Mutual has to date not instructed Futuregrowth Asset Management to retract both the decision and the statement.
We also note a principle position taken by the Association for Savings and Investments South Africa (ASISA), where they caution Futuregrowth Asset Management against inviting other Fund Managers to support its decision, as doing so will be deemed collusive or restrictive behavior in terms of the Competition Act.
Government is committed to engage all affected parties as well as improve channels of communication to avoid these unfortunate actions. I have agreed to a meeting on Thursday 8 September 2016 with the CEO of Old Mutual and the Chief Executive of Futuregrowth Asset Management.
Issued by Ministry of Public Enterprises