‘More expected’ to join SOE lending freeze

JYSKE BANK: EXPECTS OTHERS TO CUT FUNDING TO PARASTATALS AS OLD MUTUAL STANDS ASIDE Concerns about governance at state-owned entities has resulted in another lender deciding to find business elsewhere.

Denmark’s Jyske Bank says it has joined local income manager Futuregrowth in cutting lending ties to Eskom amid concern about governance at state-owned enterprises (SOEs). And it expects more to follow. “We pulled the plug on Eskom, too, yesterday,” Rune Hejrskov, senior money manager at Jyske said yesterday. “I could easily see more lenders follow suit.”

Wide swathe

Futuregrowth’s lending freeze is not restricted to Eskom, but to all local SOEs.

Hejrskov, who helps manage about $1.3 billion (R19 billion) at Jyske Bank, said he moved to being underweight in power company Eskom’s bonds from mediumweight.

Futuregrowth Asset Management, with $11.7 billion in assets, said on Wednesday it had shelved plans to lend more than R1.8 billion to three state companies this week, citing concerns about how they were being run.

Finance Minister Pravin Gordhan has been at loggerheads with President Jacob Zuma over the minister’s call for the firing of the nation’s tax chief, Tom Monyane, for insubordination and the replacement of the board of the loss-making state airline SAA.

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 may increase, said Hejrskov. “I see no other way, with the discord between Zuma and Gordhan; more governance issues showing up; and the Gupta family having a much larger influence than previously expected.”

Yields on Eskom’s $1.25 billion of bonds maturing in 2025, which jumped by the most since February on Wednesday, dropped four basis points to 7.17% yesterday.

Government last week said Zuma would lead a new panel to oversee all SOEs to ensure they help develop the country, a role previously delegated to Gordhan and other ministers.

Gordhan refused a request to report to police for questioning as part of an investigation by a special unit into alleged irregularities at the SA Revenue Service, which he ran from 1999 to 2009. While Gordhan has denied any wrongdoing, there is speculation he may be arrested and removed from his post.

Old Mutual Plc, South Africa’s biggest private money manager and owner of Futuregrowth, said the unit’s decision did not represent the broader views of the company.

“We respect the independence that fund managers need to deliver investment performance for clients and believe a constructive model of engagement is needed and necessary to build and increase socioeconomic development and drive financial inclusion in our country,” Ralph Mupita, the CEO of Old Mutual’s Emerging Markets unit, said. “Old Mutual remains committed to our existing commercial relationships and public-private partnerships with state-owned enterprises.”

‘Erroneous generalisation’

The ruling ANC said it was concerned by Futuregrowth’s actions and that the generalisation that SOEs were beset by corporate governance challenges was erroneous and unfortunate.

“Where there are challenges, these have been identified and, among others, interventions made to strengthen these institutions,” ANC said. “We believe Futuregrowth, or any other investor, should await the outcome of these interventions before taking any preemptive stance.”