Gordhan Says Debt Managers Gave S. Africa Firms ‘Useful Lesson’

  • Fund managers not obliged to lend money to state companies
  • Country will attract more funds if it does the right things

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,” Finance Minister Pravin Gordhan said.

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 Corp 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 1.8 billion rand ($111 million) to three South African state-owned companies including Eskom Holdings SOC Ltd. and Transnet SOC Ltd. on concerns about how they are being run, the nation’s biggest specialist private fixed-income money manager said Aug. 31. Sasfin Asset Managers Ltd. and Aeon Investment Management Ltd. 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 SOC Ltd. Gordhan has also refused to sign further loan guarantees for South African Airways, the national carrier.