South African Minister, Old Mutual to Discuss Funding Freeze

  • Meeting with Public Enterprises Minister and CEOs Sept. 8
  • Futuregrowth’s exposure is $703 million in Eskom and Transnet

South African Public Enterprises Minister Lynne Brown said she will meet the heads of Old Mutual Plc and its fixed-income unit Futuregrowth Asset Management on Sept. 8 to discuss the unit’s decision to halt new loans to six state companies.

Futuregrowth announced the lending freeze on Aug. 31, saying it was concerned about how the state companies were run, government infighting and threats to the independence of the National Treasury, and that it couldn’t place clients’ money at risk. The following day, Old Mutual said the unit’s decision didn’t represent the broader views of the company.

The “government is committed to engaging all affected parties, as well as improving channels of communication to avoid these unfortunate actions,” Brown, who oversees power utility Eskom Holdings SOC Ltd. and Transnet SOC Ltd., the port and rail operator, said in a statement Tuesday. She noted that Old Mutual hadn’t instructed its unit to retract its decision, which was taken without consulting the government.

Eskom and Transnet have directly borrowed about 10 billion rand ($706 million) from Futuregrowth and another 470 billion rand from other financial institutions, the minister said. The other companies affected by the funding freeze are South African National Roads Agency SOC Ltd., the Land Bank of South Africa, the Industrial Development Corp. of South Africa and the Development Bank of Southern Africa.

No Notification

Futuregrowth, which took investment decisions independently, never notified Old Mutual of its plans to halt loans, Ralph Mupita, the chief executive officer of the company’s emerging-markets unit, told reporters in Cape Town on Tuesday.

“The way it was done was regrettable in terms of raising those questions in the press, rather than raising those questions with the state-owned enterprises,” he said.

The day after Futuregrowth announced its decision, Denmark’s Jyske Bank AS said it had also stopped extending credit to state-owned companies.

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