JOHANNESBURG, Sept 14 Moody's may cut the
ratings of four South African state-owned firms, including
utility Eskom, it said on Wednesday, citing funding risks after
some local institutional investors said they had stopped lending
to some parastatals.
Asset manager Futuregrowth, which manages client assets of
about $12 billion, and rival Abax Investments said this month
they had reduced or stopped lending to several state-run firms
due to political uncertainty and governance issues.
Moody's said in a statement it was putting Eskom's Ba1
rating on review for downgrade on the grounds its funding needs
were exacerbated by the rising cost of buying power from
independent producers, as well as its spending to revamp and
build new power stations.
Eskom is building new plants and transmission lines to
augment a power grid that nearly collapsed in 2008 and forced
the company to implement controlled blackouts, or load shedding,
early last year that dented economic growth.
Chief Financial Officer Anoj Singh called the review
"unfortunate" and said Eskom would meet Moody's to resolve its
"The review by Moody's is unfortunate given the progress
made towards improving the company's financial profile,
successful implementation of the operations turnaround plan and
Eskom's healthy liquidity position," Singh said in a statement.
Moody's is also reviewing the ratings of three other
state-controlled entities: the Development Bank of Southern
Africa, the Industrial Development Corporation
and Land Bank.
"Today's review for downgrade ... primarily reflects the
increased risk of funding and liquidity challenges, following
some signals of increased risk aversion by funding
counterparties owing to market concerns regarding the governance
of South African state-owned enterprises," Moody's said.
Many of South Africa's 300-odd state-owned companies,
including South African Airways, are a drain on the government's
purse and rating agencies have singled out some as threat to the
country's investment grade rating.
South Africa's President Jacob Zuma last month defended
plans to give his office supervision over state-controlled
companies after allies of under-fire Finance Minister Pravin
Gordhan said it was a tool to limit his control.
Analysts have said Zuma's team and the Treasury under
Gordhan have disagreed about government spending, including on
loss-making state firms, such as South African Airways.
Gordhan has pledged to rein in government spending to limit
rising inflation, narrow a gaping budget deficit and appease
ratings agencies considering cutting South Africa to "junk"
status in reviews expected by December.
(Reporting by Tiisetso Motsoeneng; editing by David Clarke)