Brown slates loan ban on Eskom, Transnet

Lynne Brown
Lynne Brown

Cape Town - Public Enterprises Minister Lynne Brown, who moved swiftly to soothe fears over the financial standing of Eskom and Transnet, will be meeting with Futuregrowth Asset Management.

The two state-owned enterprises (SOEs) were part of the six companies Futuregrowth Asset Management, South Africa's biggest private fixed-income money manager with about R170bn in assets, suspended loans to.

The other SOEs are the SA National Roads Agency, Landbank, the Industrial Development Corporatio and the Development Bank of Southern Africa.

READ: FULL STATEMENT: Why Futuregrowth won't grant loans to SOEs

Denmark’s Jyske Bank AS became the second money manager to say it won’t lend to Eskom.

"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 (state-owned companies)," said Brown in a statement on Tuesday.

"Government is committed to engage all affected parties as well as improve channels of communication to avoid these unfortunate actions."

The minister reiterated her stance from last week that Eskom and Transnet have strong credit fundamentals as evidenced by their respective credit profiles.

Brown noted that her 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, she said, 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," said Brown.

"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."

Brown said Futuregrowth has direct exposure of about R10bn in Eskom and Transnet, while both have collectively raised over R470bn from other financial institutions.

She said the rigour and robustness of the business plans of Eskom and Transnet 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 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."

Dave Macready, chief executive of Old Mutual SA, told Fin24 last week that it is important to see the decision by Futuregrowth to halt any further loans to SOEs as an investment decision.

"We also note a principle position taken by the Association for Savings and Investments South Africa, 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," said Brown.

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

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