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Ratings agencies cast doubt on governance at SOEs

Ratings agency Moody’s has warned that it could cut the ratings of five State-owned agencies (SOEs), including Eskom as a result of funding risks.

Moody’s placed Eskom, Sanral, the Industrial Development Corporation (IDC), the Land Bank and the Development Bank of Southern Africa (DBSA) under review.

It raised concerns over the decision by some local institutional investors to stop lending to parastatals.

Economist Dr Iraj Abidian explains that the prospects of cash flow from SOEs are not robust enough to give assurance to lenders and investors.

Asset manager Futuregrowth announced this month that they have cut lending to several State-run firms due to political uncertainty and governance issues.

Those who are running the institutions have, themselves, created doubt about their own credibility by being under a long string of political manipulations.

Dr Iraj Abidian, Economist at at Pan-African Capital Holdings

Listen to the full conversation from CapeTalk's Breakfast with Kieno Kammies:

At the same time, financial expert Sikonathi Mantshantsha warned against the the power struggle between President Jacob Zuma and Finance Minister Pravin Gordhan over spending at State-owned companies.

Zuma announced that he would have oversight over a newly formed presidential SOE coordinating council.

That means he would make all the decisions concerning these SOEs. It's like the fox guarding the chicken coup that we paid so many millions for at Nkandla.

Sikonathi Mantshantsha, Deputy Editor at Financial Mail

Listen to the full conversation from CapeTalk's Breakfast with Kieno Kammies:


This article first appeared on 702 : Ratings agencies cast doubt on governance at SOEs


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