Eskom CFO Anoj Singh
Photo by: Duane Daws
State-owned electricity utility Eskom and freight logistics group Transnet insisted on Thursday that their immediate liquidity was not threatened by the announcement by Futuregrowth Asset Management that it was suspending additional loans to six State-owned companies (SoCs), including Eskom and Transnet
CFO Anoj Singh said that, as of the end of August, Eskom had available liquidity of about R38-billion and had secured more than 57% of its borrowing requirement of R69-billion for the 2016/17 financial year. “Consequently, the announcement by Futuregrowth Asset Management does not place Eskom’s funding plan at risk and I am confident that the funding for the year will be raised.”
Transnet, meanwhile, said it had already funded its full borrowing requirement for the 2016/17 financial year and had a “healthy liquidity position, with R22-billion available”.
Eskom also noted that Futuregrowth had not raised its concerns during a recent roadshow in August, when Eskom met with various local asset managers, including Futuregrowth Asset Management. “Eskom will, however, continue to engage with Futuregrowth Asset Management and the broader investor community to understand the recent concerns raised regarding current and future investments into Eskom.”
Transnet has noted with regret reports about Futuregrowth’s position and said it was “available to engage with all its lenders and investors” to address any concerns they might have regarding the company’s business activities.
“It is regrettable that Futuregrowth, which represents about 1.25% of our total borrowings, opted to overlook the channels of communication available to them. Transnet unfortunately learnt of their decision to halt loans to SoCs through the media.”
Transnet said it viewed itself as a “credible and reliable borrower” with strong credit fundamentals and an investment grade credit rating. “We are also committed to maintaining the highest standards of good corporate governance and adhere strictly to internal policies and procedures.”
In a statement announcing the suspension, Futuregrowth highlighted that the domestic asset management industry was a substantial funder of SoCs such as Eskom, Transnet, South African National Roads Agency Limited, the Land Bank, the Industrial Development Corporation and the Development Bank of Southern Africa.
It said the decision initially included the suspension of new loans and rollovers of existing debt to the six entities and announced that it had suspended negotiations on over R1.8-billion of debt finance to three different SoCs.
This decision, it said, was driven by growing concerns about the governance and decision structures of the SoCs and would remain in place pending a review.
“Futuregrowth takes this step with dissonance: We have very long-term relationships with these very same SoCs and for decades we have considered ourselves to be their partners in South Africa’s development. It is certainly not our desire nor intent to undermine their developmental missions, nor disrupt their ability to deliver on-the-ground impact for the country. But in the current environment, our message is clear: we cannot provide finance without having clearer sight of, and comfort around, the governance and decision-making of the SoCs.”