For a taste of what is to come, look no further than the decision yesterday by one of the continent’s biggest private lenders to stop granting loans to some of South Africa’s problem parastatals.
A report by financial news service Bloomberg quoted Futuregrowth Asset Management’s chief investment officer Andrew Canter saying the latest round of political ructions had created undue risk for clients’ money.
As a result, the fund manager had decided to suspend any further lending to Eskom, Transnet, South African National Roads Agency Ltd, the Land Bank of South Africa, the Industrial Development Corporation and the Development Bank of Southern Africa. This moratorium included R1.8-billion in new loans for three of these state-owned entities, the specifics of which Canter refused to disclose.
“It is certainly not our desire nor intent to undermine their developmental missions, nor disrupt their ability to deliver,” said Canter.
“But we want to send a message that we can’t provide finance unless the governance and decision-making of the state-owned entities improves and becomes more transparent.”
If President Jacob Zuma or any of his bootlickers needed a lesson in how risk averse capital can be, then this is it.
And, if they fail to seize the notion of how sentiment feeds into fear or greed, then they may be in for a shock when others like Futuregrowth start following suit. The rand is always a good indicator, and sadly it is already showing signs of investor trepidation. Likewise bonds.
None of this would unduly concern us if it was not for the fact our investment rating is already on a junk-bond knife’s edge. With further reviews to come in December, our fate appears sealed.
Hypothetically, the departure of Zuma may be enough to swing sentiment. Tragically, though, a more extensive purge would be needed, given his deeply embedded network of scroungers.
Their actions are broadly on display right now, concerned only with showing fealty to their sponsor, a man who abandoned principles long ago and now watches the destruction of a nation from afar.