Land Bank, Transnet, Eskom respond to S.A's largest debt manager loan suspension - CNBC Africa

Land Bank, Transnet, Eskom respond to S.A's largest debt manager loan suspension


by Eskom, TP Nchocho* and Bennie van Rooy* 0

Photo: Wikipedia

Eskom's statement 
Eskom notes the comments by local asset manager Futuregrowth Asset Management regarding investments in certain State Owned Companies (SOCs) including Eskom. Local asset managers provide considerable support to the funding of SOCs and the general local bond market.

READ: Why Futuregrowth is suspending loans to S.A's state-owned enterprises

Eskom regularly engages with asset managers and other relevant financial institutions and will continue to do so. To this end, Eskom completed a domestic road show to meet with local asset managers in August 2016, including Futuregrowth Asset Managers, and current concerns were not raised. Eskom will however, continue to engage with Futuregrowth Asset Managers and the broader investor community to understand the recent concerns raised regarding current and future investments into Eskom.

“As at the end of August 2016, Eskom has available liquidity of approximately R38 billion and has secured more than 57% of its borrowing requirement of R69 billion for the financial year 2016/17. Consequently, the announcement by Futuregrowth Asset Managers does not place Eskom’s funding plan at risk and I am confident that the funding for the year will be raised,” said Anoj Singh, Eskom’s Chief Financial Officer. 

Transnet statement

Transnet continues to pursue its R340-R380 billion infrastructure investment programme – the Market Demand Strategy (MDS), aimed at strengthening the country’s railway, ports and pipelines infrastructure.

To support the successful execution of the MDS, Transnet raises funding through domestic and international debt capital markets, on the strength of its financial position with no government guarantees since 2005. Transnet has already funded its full borrowing requirement for the 16/17 financial year and has a healthy liquidity position, with R22 billion available at present.

Transnet has noted with regret reports about Futuregrowth’s position on lending to state-owned companies (SOCs). 

The company engages with the investor community on a regular basis through road shows and one-on-one interactions with lenders. The objective of these engagements is to provide updates on our financial and operational performance, and to facilitate transparent conversations, whilst fostering a healthy relationship.

Transnet is available to engage with all its lenders and investors, including Futuregrowth, to address any concerns they may 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 views itself as a credible and reliable borrower with strong credit fundamentals as evidenced by its stand-alone credit profile and 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.

Transnet has a diversified funding approach through a number of sources, depending on market conditions. These include the Domestic Medium-Term Note programme, Global Medium-Term Note programme, Export Credit Agencies, Development Finance Institutions and other financial institutions.

Issued on behalf of Transnet SOC Ltd

By:Molatwane Likhethe, Spokesperson

Land Bank statement  

Land Bank was advised by Futuregrowth on Tuesday, 30thAugust 2016 of their decision to suspend lending activities to State Owned Entities including the Land Bank.  The Bank understands and respects Futuregrowth’s decision as a responsible lender and investor that has responsibility to evaluate and manage risk in their business activities.  However, it is our considered view that if Futuregrowth had specific concerns about governance and risk related matters pertaining to the Land Bank, the appropriate course of action would have been to raise those concerns with the Land Bank and obtain formal clarification and response prior to the decision. 

We would like to place the following facts on record in respect to the governance and performance of Land Bank:

  1. National Treasury is the Executive Authority of the Land Bank.
  2. An independent Board appointed by National Treasury consisting of an independent non-executive Chairman and nine individual non-executive members provides independent oversight.
  3. An independent Credit and Investment Committee consisting of an independent non-executive Chairman and four individual non-executive members supports the independence of credit granting decisions.
  4. A policy on lending to Politically Exposed Persons has been approved by the Board.
  5. A strong domestic AA credit rating assigned by Moody’s Investment Services earlier this year.
  6. The Bank has received an unqualified audit opinion since FY2012.
  7. The Bank has received clean audit report awards from the Auditor-General for three years running.
  8. The Bank generated strong financial results in the last financial year.
  9. The Bank has a strong balance sheet supported by a number of Basel II and III risk and capital measurement tools.

Regarding the matter of the SOE Council, the Land Bank as an institution has not yet been notified whether or not it is included amongst the groups of entities that will fall under the authority of the envisaged SOE Council.

From an operational perspective, Futuregrowth has historically been a strong supporter of Land Bank and we look forward to continuing this relationship.  Irrespective of Futuregrowth’s decision, Land Bank has access to sources of funding to ensure that it can continue with its lending operations into the future. 

Land Bank plays an important role in supporting the agricultural sector and its role in the South African economy. The Bank will continue to source funding to support the execution of its mandate.  We will continue to engage with Futuregrowth and all other funders to transparently exchange relevant information relating to the Bank’s governance, operations and funding position. 

*TP Nchocho is the Land Bank's Chief Executive Officer and Bennie van Rooy Chief Financial Officer