Rashaad Tayob also said Abax, which has 80 billion rand ($6 billion) under management, was concerned after the cabinet said a new committee would be formed to oversee State-Owned Enterprises (SOEs) that would be headed by President Jacob Zuma.

READ: Why Futuregrowth is suspending loans to S.A’s 

The presidency has defended the new plan after analysts said it would limit the finance minister’s control over state firms.

READ: Second money manager halts funds to Eskom – CNBC Africa 

“We have significantly reduced our level of SOE purchases over the last three years due to credit concerns,” Tayob said.

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

Fixed-income asset manager Futuregrowth last week said it would stop lending to six state firms in Africa’s most industrialised economy citing governance concerns. The asset manager also cited Zuma’s new role overseeing the state firms as a concern for investors.

Despite its concerns, Tayob said Abax would not impose a blanket lending freeze similar to Futuregrowth.

“Like Futuregrowth, we were also very alarmed by the announcement that President Zuma would head up a committee overseeing SOE’s. In our opinion this has the potential to cause further credit deterioration and stall the reforms that are needed in the SOE sector.”

Slow economic growth was also partly to blame for the weaker performance of some state-owned companies, Tayob said. He also cited cost overruns at state firms, including power utility Eskom’s delay in building power plants.

The central bank has said South Africa will record no growth this year.

Eskom, which said on Thursday it had linked up unit five of its Medupi coal power station to the grid, had initially planned to complete the entire plant by 2015 but has said it is now expected to be fully operational by 2020.

Futuregrowth said it had cut lending to among others, Eskom and logistics company Transnet. Both Eskom and Transnet have said their finances would not be affected by Futuregrowth’s decision.

($1 = 14.3935 rand)

(Editing by James Macharia)