Futuregrowth's SOE stance under fire

Cape Town - Futuregrowth, the asset manager which withdrew funding to six of South Africa’s state-owned enterprises (SOEs), should have raised their concerns directly with these entities and not gone to the media, said Ralph Mupita, CEO of Old Mutual Emerging Markets.

Futuregrowth is a subsidiary of Old Mutual and manages fixed interest funds on behalf of the financial services giant. Last week, Futuregrowth issued a statement, explaining its decision to halt loans to Eskom, Transnet, the South African National Roads Agency Ltd (Sanral), the Land Bank of SA, the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa.

It cited reports of possible conflict between branches of government, and a challenge to the independence of Treasury as some of the reasons for its decision. 

READ: Rand slumps as Futuregrowth suspends loans to state firms 

“It’s unfortunate that Futuregrowth raised this through the media,” Mupita said during a roundtable discussion hosted by the Association of Savings and Investment South Africa (Asisa).

According to Mupita, Futuregrowth didn’t inform Old Mutual of going public with its decision to withdraw funding for the entities. 

Leon Campher, CEO of Asisa, however, emphasised an investment manager, such as Futuregrowth, has a fiduciary responsbility to ask questions about the soundness of its investments.

“If they have concerns about the governance of SOEs they have the right to question it. What we’re debating over here is that it’s unfortunate that Asisa’s name was mentioned in their statement.”

In its media statement announcing the withdrawal decision, Futuregrowth explicitly mentioned Asisa, saying: “We intend to engage pro-actively with our industry colleagues through Asisa so that key concerns can be communicated to the SOEs in a joint manner by the investment industry.”

Campher said the fact that Asisa’s name was mentioned created the impression that it was a decision that Asisa orchestrated. “And we can’t do that. It’s illegal. The fund manager’s business is the fund manager’s business. They mentioned they’d deal with this through the Asisa structures. It was inappropriate and illegal if it had happened.”

According to him a number of fund managers that invest in SOEs have asked similar questions about the governance of SOEs, but they take it up directly with SOEs. “We question the way in which it was done,” Campher said.

Public Enterprises Minister Lynne Brown on Tuesday noted the position of Asisa cautioning Futuregrowth against inviting other fund managers to support its decision to suspend funding to SEOs.

Brown said she will be meeting on Thursday with the chief executive of Futuregrowth and the CEO of Old Mutual.

ALSO READ: Futuregrowth’s Andrew Canter sparks a financial revolution – or not

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