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S. Africa: Concern grows as Futuregrowth mulls to freeze funding to state firms

Xinhua, September 2, 2016 Adjust font size:

The decision by Futuregrowth Asset Management to withhold additional funding to a number of South African state-owned enterprises (SOEs) is a clear vote of no confidence in the government, the opposition Democratic Alliance (DA) said on Thursday.

Futuregrowth, Africa's biggest private fixed-income money manager with about 170 billion rand (about 12 billion U.S. dollars) of assets, announced its decision on Wednesday to freeze lending to the country's parastatals due to in-fighting between South Africa's Treasury and state-owned enterprises.

The decision came just weeks after the cabinet decided to place President Jacob Zuma in charge of overseeing all SOEs.

Futuregrowth said it would only reconsider funding the SOEs once "proper oversight and governance" have been restored at the companies.

"This is a clear swipe at Zuma and his project of state capture," the DA said.

Restoring confidence requires that Zuma desists from his attempt to centralise control over SOEs in himself, and affirms the independence of the Treasury, DA leader Mmusi Maimane said.

South Africa's SOEs are in a dire state, costing the country billions as the government continues to prop them up despite their immense losses.

Futuregrowth said it had already shelved plans to loan 1.8 billion rand to three state-owned entities this year.

There have been concerns that other lenders might follow suit and the rand, already under pressure, would contiunue to weaken.

On Thursday, the ruling African National Congress (ANC) moved to quell fears over Futuregrowth's decision, saying that the generalisation that corporate governance challenges beset some SOEs is "erroneous and unfortunate".

The ANC said it believes SOEs are key instruments that play a critical development role in driving growth and inclusiveness.

Interventions have already been made to strengthen SOEs, including the establishment of an Inter-Ministerial Committee which is chaired by Deputy President Cyril Ramaphosa, ANC national spokesperson Zizi Kodwa said. Enditem